(From http://bit.ly/F5py )
"Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., recipients of more than $100 billion in U.S. rescue funds, criticized congressional proposals to tax Wall Street bonuses."
As my dear friend Peggy used to say, "Poor baby. I feel so bad for you."
"Banks, worried that the proposals are distracting employees, are trying to reassure staff and keep them focused on clients. Lewis said the taxes could cause “unintended harm” and delay the recovery of the financial system."
That's as opposed to the unintended harm that killed the financial system in the first place?
" “I am very concerned about our ability to retain some of our most valuable associates,” Lewis wrote in his memo to employees obtained by Bloomberg. “The very best performers on our team will always have offers from competitors.” "
Like who? Your competitors are broke, too!
" “People are very anxious about this getting too widespread, this notion that no one on Wall Street or in banking deserves any money,” said Seamus McMahon, a consultant with Booz & Co. in New York, who works with financial firms. "
Uh....Seamus? Here on Earth, $250,000 is a lot more than "any money". It's a big, fat pile of money.
" In a separate e-mail to his own employees, Jes Staley, head of JPMorgan’s asset-management unit, said that the bank is “working hard on all of the challenges we are currently facing.” "
Just as hard as you worked to cause the challenges?
Look, you broke the world. You BROKE IT. And you expect us to trust you to fix it? Screw you.
You seem to be blaming the banks entirely for this mess. Don't get me wrong, they deserve a big, heaping pile of blame right on their doorstep. That being said, it strikes me as simplistic to lay the blame entirely at the feet of the financial services industry. There is blame to go around. Repulican leaders did not demand enough oversight of new, exotic financial products. Democratic leaders pushed quasi-government agencies to lower lending standards on mortgages so that people who could not actually afford to pay them would qualify. The Federal Reserve, under Allen Greenspan, kept interest rates articially low, creating too-easy credit, that artificially inflated home prices, encouraging real esate speculation, leading to the real estate bubble that has burst. And then there is our culture, which is more credit-based than savings-based. Turns out we should have borrowed less and saved more.
ReplyDeleteI'm okay with being mad at bonuses being paid out to the very people who were instrumental in creating this crisis. But who exactly do you think has the talent, experience, and knowledge to get us out of this mess? Do you understand how a Credit Default Swap is created, traded, and settled? Because I sure as heck don't...And I'm pretty sure we're going need some people who do to fix this mess.
I know this sounds like a defense of bankers, and it's not. I'm just saying, they didn't do it alone.
Sure, they had a well fed Congress aiding and abetting their every move.
ReplyDeleteBut as Barney Frank pointed out, there are quite a few unemployed bankers out there. Paying retention bonuses to the same people who broke the system, who don't even STAY IN THE COMPANY PAYING THEM THE BONUS?
Talking about how we got here doesn't really help. Bankers objecting that they won't be able to keep "the best people", when they are demonstrably NOT the best people, is delusional behavior at best.
Didn't Frank vote in the first place for a bailout that specifically had no strings attached?
ReplyDeleteHe also resisted stopping the Freddie-Mac/Fannie-Mae mess that caused this whole thing.
I don't agree with your assessment of Frank's role, or Fannie Mae's role, but that is neither here nor there.
ReplyDeleteThe point is, we DONT NEED THESE PEOPLE-THE BANKERS. They are obviously not skilled at what they do, and there are plenty of others who could replace them. That's what Frank was saying, and he is inarguably right.
I'm not sure of Barney Frank's stance on the bailout, but would tend to trust dmarks assessment.
ReplyDeleteDmarks is right that Barney Frank pushed Frannie and Freddie to accept and in fact encourage risky mortgages. He is one of the many who are to blame.
President Obama said last night on 60 minutes that the government must work with the private sector and the banking industry. Today, Timothy Geithner said the same thing - the governmetn NEEDS hedge funds and other investors to help fix this mess. That means analysts, traders, the whole lot.
In this environment, if you are good at what you do at Company A and you don't get the compensation you were CONTRACTUALLY OWED, you would check out positions in the government or competitors. And yes, they are hiring if you know what you are doing. And yes, some bankers know what they are doing.
It isn't as black and white as you make it. I strongly encourage you to check this out: http://online.wsj.com/article/SB123776600113009243.html.
It is a compelling op-ed piece by a potential victim of the 90% bonus tax. I found him a compelling example of the people who might be affected who did not cause this mess. This kind of angry legislation intended to target a small number of people always ends up having unpleasant, unintended consequences. The Alternative Minimum Tax is a great example of this.
You're right to the extent that a tax on a certain slice of mankind is stupid and regressive. The tax code makes distinctions all the time, of course, but to chase this small group, however richly deserving, is a useless feelgood measure. Something which Congress is excellent at.
ReplyDeleteBut I think your Wall Street Journal friend doth protest too much. First of all, even if this bill passes and Obama signs it, some pretty smart people argue that it is utterly unconstitutional, and won't survive the meekest court challenge.
And second of all, his company went belly up-or would have if you and I didn't save their bacon. It stinks that he didn't have anything to do with it, but that's the all important churn of capitalist competition that the Wall Street Journal loves to crow about whenever it is poor people who lose the money. If your firm took TARP money, then you lost-you shouldn't pay out ANY bonuses, because you don't have any profits to divide up.
And no, simply asserting that you can get hired if you're good enough doesn't make it so. Do you really think employers are going to be impressed when they see "Citi" or "AIG" on a resume? There are lots and lots and lots of unemployed bankers out there.
And why wasn't the Wall Street Journal up in arms about the sacredness of contracts when it was GM workers and, oh yeah, public sector workers, who were complaining about changes in their contracts?
And isn't it funny that Frank is getting all sorts of attention for the housing crisis, when he was not a chairman of anything until January 2007? And Obama was not the President until 2009? And yet they are somehow to blame?
Okay, so we agree that taxing the bonuses is a bad, downright uncontitutional idea. See, common ground?
ReplyDeleteYou ask why the WSJ wasn't "up in arms" about GM and public workers'
contracts being changed. I'm not sure what you are refering to. Could you be more specific - when were GM and public workers' contracts changed by the government without the agreement of the unions?
You suggest in your final line that I blame President Obama for this mess. I never said that. I don't believe that.
As far as Barney Frank. I don't think he is mostly to blame; I think he is partly to blame. The only reason we are still talking about him is that you seem to think he is totally guiltless. We could put the whole Barney Frank disucssion aside if you would stipulate that he bears just a little of the blame (along with the financial services industry, individuals who have lived beyond their means, our cultures addition to debt, Fed policy in the 90s, etc.).
" GM needs labor and debt holder concessions of more than $28.5 billion as part of an agreement with the U.S. Treasury to keep $13.4 billion in loans. GM is also trying to convince President Barack Obama’s auto task force to free up as much as $16.6 billion more to keep the largest U.S. automaker out of bankruptcy. "
ReplyDelete(from http://bit.ly/iqFU4)
If GM wants our money, they (the company and the unions) have to make changes to the contracts. An AIG contract is sacrosanct-you can't possibly alter that. But a GM contract? You just toss those out, because it's only working class people who get affected. They don't matter.
I'm suggesting that, if you want our money, then you change your contracts to suit the interests of the taxpayer and the government. If you don't like it, you can give the money back.
Similarly, I think Frank has made some unfortunate statements right before Fannie and Freddie went under-and he has said so. But everyone jumping up and down and getting hysterical about the actions of people who have been in power for a little over two years (Frank) and a little over two months (Obama), while not being similarly outraged about those who drove the car off the road during the last 20 years.
It's not productive-we need to fix it more than we need to divide up the blame pie-but it's just funny to me that Frank's name keeps coming up in these discussions, whereas the deregulation has been going on for more than a decade, applauded by both parties.
Yet it's Barney Frank we keep talking about.
It's not just rearranging the deck chairs on the Titanic, it is arguing about the shape of the oil slick that the Titanic left after slipping under the water.
Fannie Mae and Freddie Mac are also outfits where the people are doing a bad job, and being paid millionaire wages to do it.
ReplyDeleteWhat makes it worse than the AIG thing is that these have always been government agencies.
If I'm reading that Bloomberg article correctly, the union agreed to contractual changes BEFORE the government approved bailout money. That is a completely different situation from AIG, where the government wrote legislation to do the bailout, explicitly allowed the bonuses (per language inserted by Senator Dodd), and then when the public went ape, said, "Opps, we didn't do that very well. What can we do to rid ourselves of these pesky contracts? Ah, the tax code..." If the government approved a bailout of GM, gave them the money, and THEN tried to use the tax code to change exisiting contracts with UAW workers, both I and I wager the good people at the Wall St. Journal would be incensed. They are different situations. Before a bailout is the time to demand contractual changes.
ReplyDeleteI actually think assessing blame is important. How else will we avoid the same mess in the future? If we don't fully understand what happened, and who is to blame, in all it's complexity...well, you know what they say about history.
I'm going to go make a baseball comment now. Something we can all agree on.
I don't read the Bloomberg article that way.
ReplyDeleteThe concessions are a condition of the loan. Ergo, no concessions, no loan-or no concessions, give us our money back.
My point is that if you take our money, you take it on our terms. You're not a private company any more. You don't get to make your own decisions. Tough s&*t if you don't like it. That should apply to AIG and to GM equally.
Yes, we're rewriting your contracts. Too bad. Don't like it? Sue us. Explain to the judge why your functionally broken company should pay you a bonus with tax money.
And Fannie and Freddie were NOT GOVERNMENT AGENCIES. Everyone assumed they were, and everyone acted as if they were, and it turned out we were going to back them up like everyone assumed we would, but that doesn't make it true.
Their presidents and top executives should obviously be fired and probably jailed. They won't, because people who shower before work don't pay the price for mistakes in this country any more.
You and I read the Bloomberg article correctly, and the same.
ReplyDeleteYou sum it nicely, "no contract change, no loan." That was the deal with GM. Everyone agreed, the bailout went through.
The government went through a similar process with AIG. You want a bailout, here are the guidelines. Everyone agreed and the bailout went through, just like with GM. But, Congress appoved the legislation with language that allows the bonuses. If you are going to be mad about the bonuses, be mad at Congress, who allowed them.
You seem to make no distinction between changing rules/contracts BEFORE bailout legislation is passed (GM) or AFTER (AIG). It's the role of the Congress to look out for the taxpayer's best interest. That's what they did in the GM scenario. It is most definitely not their role to pass bailout legislation too quickly and then try to use the tax code to go after a small group of people (even if they are evil, rich, capitalist bankers) because they want the take advantage of populist rage to cover the fact that they, in fact, signed the legislation allowing the bonuses into law.
Are you really okay with the government using the tax code to go after one small group of people? Or to cover for their own hastiness in passing legislation? Would you be okay with it if Republicans were in charge of the executive and legisltative branches and the group of people they were going after were union organizers?
The GM strings attached make sense, We need more of these with other bailouts. GM/etc overpaying workers way above the market value of the work to make cars much worse than average is not sustainable.
ReplyDeleteFannie Mae and Freddie Mac are government agencies, operating under a special charter of Congress as a "GSE". This means that they are a type of government agency.
However, like the BBC is in relation to the British government, these two have a special relationship to the government that makes them a different type of government agency, than, say, the FDA.
"Their presidents and top executives should obviously be fired and probably jailed. They won't"
They won't because they are in very tight with Barney Frank, Barack Obama, and the rest of those in charge.
Jeanne said "Are you really okay with the government using the tax code to go after one small group of people?"
There is already a precedent: the death tax. The Democrats harp on how few people it affects. However, I do not agree with it. To be fair, there should be no death tax for anyone. And it is not like the people being clobbered by it did anything wrong.
I find it a lot different than the AIG situation, where the people being clobbered by it did a very wrong thing, and it looks to be a way to get the money back without breaking a contract
I don't make a distinction between changing contracts before legislation is passed or afterwards. Everyone knew-and Congressmen made sure to say, in language dripping with condescension, that GM had to change its labor deals-legal, valid contracts negotiated in good faith. I don't have a problem with that-it was high time that both sides of the US auto industry made adjustments to the fact that it isn't 1969 anymore.
ReplyDeleteBut we then turn around and scream in horror because Congress couldn't possibly "abrogate" a "valid contract"? Nonsense. It's only wrong to change a contract when it's bankers who lose. I just object to the fact that contracts are somehow more sacrosanct when banker sign them then when union people to.
The 90% tax is a nonstarter. From what I have read, it's unconstitutional, the Senate is going to kill it anyway, and even if they don't the courts will. I will be shocked if it actually becomes a law, or, if it does, if it lasts long enough to affect anyone. It was cheap grandstanding, which is something, as I think I said, Congress is good at.
Changing the tax code to go after anyone, however richly deserving, is wrong and won't work. However good it feels.
"The GM strings attached make sense, We need more of these with other bailouts. GM/etc overpaying workers way above the market value of the work to make cars much worse than average is not sustainable."
ReplyDeleteI don't think there is much factual support for any of these statements, although you are right that we need strings attached to every bailout-if we pay the piper, then we call the tune. I don't think US autoworkers are that overpaid-in fact, I read an article at the time suggesting that some US automakers would have to give their workers a raise in order to match foreign ones. And the cars aren't a whole lot worse than others-I just sold a Ford that treated me very well for close to a decade. Although, in all honesty, I now own two Hyundais.
"Fannie Mae and Freddie Mac are government agencies, operating under a special charter of Congress as a "GSE". This means that they are a type of government agency."
Again, I'm with you until the last sentence. I couldn't buy stock in the FDA, but, until recently, I could in Fannie Mae. That's not a government agency.
"They won't because they are in very tight with Barney Frank, Barack Obama, and the rest of those in charge."
There's Barney Frank again. I quote him to prove a point about unemployed bankers, and you beat me over the head with him. They gave lavishly to both parties, and, once again, Barney Frank has been in control of legislation since January 2007. If you want to talk blame and being protected from oversight, there's a lot more to go around.
"There is already a precedent: the death tax. The Democrats harp on how few people it affects. However, I do not agree with it. To be fair, there should be no death tax for anyone. And it is not like the people being clobbered by it did anything wrong."
The estate tax? Really? Someone works hard all of their life, accumulates a big pile of money, and the government takes a piece of it after they pass on, in return for all the roads, schools, food, drugs, laws, and enforced contracts the person used all those years? And that's a big problem?
"The estate tax? Really? Someone works hard all of their life, accumulates a big pile of money, and the government takes a piece of it after they pass on, in return for all the roads, schools, food, drugs, laws, and enforced contracts the person used all those years? And that's a big problem?"
ReplyDeleteOne major problem: when that dead person earned that money (whether through work or income on some investment), they paid taxes on it. They already paid their share for the roads, schools, etc. Taxing them a second time, just for dying, seems a bit harsh.
An example to consider: My husband and I bought relatively large life insurance policies when we had our two kids. Why? Obviously because we're lazy, rich jerks who want to set up our kids to be lazy, rich jerks like us.
Or, maybe it is because my husband and I are both the eldest in our families. We were in the financial position to have children, but the people we would choose to raise our children if we weren't around, our younger siblings, were not. They are amazing people who happen to be in their twenties, renting, just starting out in their careers, etc. They were willing to raise our children for us, but had no way of financially supporting two young kids. The large life insurance policies we bought would cover the cost of buying a decent home, full-time daycare, education, summer camp, and the general feeding and clothing of our two kids. It would allow the people raising our kids to be very comfortable, but not much more. For the next twenty-two years. When you do the math, that's a lot of money. It pushed us into "estate tax" range.
Since my husband and I don't have a ton of money, buying life insurance seemed like a good way to protect our kids, so their aunts and uncle could raise them without fear of the financial distress that would cause.
If my husband and I both die, the estate tax would take MORE THAN A THIRD of the life insurance we left to our kids.
In this scenario, my two small kids have lost both their parents and are being shipped to relatives to raise them. Are you sure you're okay with the government taking MORE THAN A THIRD of their inheritance, which came almost entirely from life insurance policies designed to provide them housing, food, and an education?
The estate tax punishes my family because my husband and I are trying to be responsible parents.
Actually, an individual can leave up to 3.5 million dollars to heirs without paying any estate tax whatsoever. And apparently there are ways to make this amount even larger. (http://bit.ly/Yt9C)
ReplyDeleteObviously, you are doing the right thing by providing for your children in the unlikely event that you pass away. No one would dispute that. I would expect nothing less from someone as intelligent as you and your husband. (I assume he is intelligent, because, well, he married you.) :-)
I just don't see the estate tax as a big problem. Most people think it affects them and, based on what I read, it doesn't. It's a stalking horse for general "I hate government/taxation is theft" talk. In my humble opinion.
(N.B-Any universe in which someone like you dies before someone like me is not a universe I want any part of.)
Okay, you got me. Back in 2002 when we were doing our estate planning, we actually did bump into the caps. At that time, they were much lower. The caps have been expanding slowly year by year to their current level, which as you point out, is well above our "estate" levels.
ReplyDeleteIn fact, if what I'm reading online is correct, the estate tax will be repealed completely in 2010 (yeah!). However, without Congressional action, it will revert BACK to 2001 levels in 2011. This means that if my husband and I are to die together, we had better hope to do it before 2011.
As the law currently stands, if my husband and I die together in the next year-and-a-half, our kids inheritance will be untouched. If we die after Jan. 1, 2011, the kids will lose more than a third of their inheritance. Seriously, the way we legislate in this country makes me want to cry. It's financially better for my kids if we die sooner rather than later. That can't be right.
I know that while the estate tax may not affect the majority of the people, the question is one of fairness. I look at my situation, and I don't find it fair. There are a small number of small businesses that are affected, but it can be devasating for them. As in, "I have to close up my Dad's business that I wanted to take over because I can't afford the estate tax." Just becuase it only affects a few, doesn't make it okay.
As to the compliments, thanks. But don't expect me to go any easier on you when you are so, so wrong on so, so many things:) As I recall, you enjoy a good debate.
As for this thread, I'm done. I'm tired. I'll comment the next time you post an angry, liberal rant. I'll respond will cool, calm reason. Like water for fire.
I'm kind of tired of this line of argument, too.
ReplyDeleteI didn't mean to express or imply that there is some proper amount of life insurance for you to leave behind. It's deeply none of my bloody business at all. Here's hoping the question never, ever needs to be answered.
I'll stand by my comment, though, that any God that takes you and leaves me behind has some serious explaining to do.
I'll keep ranting, you keep commenting. I don't mind a good debate, especially from a mind as sharp as thee.
Peace and love to all.
Yeah. Peace man. Sounds good.
ReplyDelete