Help me understand bailouts

[Meister]

AIG receives a $ 150 billion bailout, the government now owns 80% of it. What does AIG decide to do? They hand out retention bonuses in the millions to its employees.

I have the following questions:
Why do these guys get bonuses with taxpayers money, some guys got up to 4 million?
And if the company got into trouble through risky deals why reward them, ontop of the bailout they got?
And why do you need to pay big bucks to retain employees when there are tons of unemployed financial guys on the street?

I would advocate, let the failing financial institutions go out of business in true capitalistic fashion. Then Canadian TD can move in and sweep up and become a powerhouse. Viva Canada!! Long live capitalism.

All this tells me is that Wall Street, the Federal Reserve and Washington are protecting themselves. The hell with the rest of the country. It's beyond me what kind of hearings, voting more hearings, discussions, grilling and other crap the auto guys had to go through just to go bankrupt anyways while the money pushers get a blank cheque.

 

[crystalpalace]

Considering Henry Paulson and his ex-Goldman team put this together I'm not surprised. Can't wait for this idiot of a treasury secretery to get the hell out and take the goonies with him.

 

[red]

bailout. when there is water in the bottom of the boat- you pick up a pail and you bail it out.

 

[Liber Pater]

Considering Henry Paulson and his ex-Goldman team put this together I'm not surprised. Can't wait for this idiot of a treasury secretery to get the hell out and take the goonies with him.

That's all fine, but the new Treasury Guy is formerly Goldman as well. They all are.....

 

[elmo]

Bailouts are the new black. Basically you can create a huge inefficient company that is completely over leveraged in terms of it's debt and then watch it collapse. Because there are a lot of jobs at stake, you justify the fuck up in terms of the overall economy. The next step is the best...take the cash and bonus all you senior people as you used to do. Basically you can get billions and have the same life as before...you can live to fuck it up again...nice deal if you can get away with it.

 

[S.C. Joe]

The bank employees wear suits and neck ties to work, the auto workers wear blue jeans and work boots...the only difference I can see.

BTW...the dumbies in the White House are now thinking of backing down and using part of the 700 billion to help the automakers....that is why the union would not back down last night on wage cuts....

 

[Keebler Elf]

Basically you can create a huge inefficient company that is completely over leveraged in terms of it's debt and then watch it collapse.

You mean, just like most of the American general public? So you want to sit back and watch Rome burn, is that it?

Dumb.

 

[elmo]

You mean, just like most of the American general public? So you want to sit back and watch Rome burn, is that it?

Dumb.

Rome has been burning for years. Do you believe that handing out money to companies and people and not having them to change their behavior will yield a different result? For the record, the American general public isn't who I'd put the hopes for economic recovery on...too greedy and too stupid.

 

[Gyaos]

I have the following questions:
1) Why do these guys get bonuses with taxpayers money, some guys got up to 4 million?
2) And if the company got into trouble through risky deals why reward them, ontop of the bailout they got?
3) And why do you need to pay big bucks to retain employees when there are tons of unemployed financial guys on the street?

1) The person giving the bailout via a 3-page document is formerly from Goldman Sacks, uses former Goldman Sacks employees and also, personally, invested and did these shady deals, collapsing the economy, so he's paying the money out, without any oversight, so the bonuses happen with no one stopping it. Many complain, no one stops it as those tradings inside Wall Street and the stock market continue (to get that money for the bonuses). That's why you see ~800 point swings on calls and shorts.

2) Because the Republicans with these bumbs and with help from The Bush Jr. Administration and Alan Greenspan, had CONGRESS change the laws when the times **looked** rosy, but debt was increasing huge. Additionally, the Bush Jr. Administration weakened the US Dollar too quickly, too fast, when in fact it was to be strengthened. Mark-to-market stuff, etc. It's the same world as Herbert Hoover. It will change very fast under a Democrat (very near) super majority, so "enjoy" the unregulated period before January 20, 2009 at 11:59pm. After that, the Obama pen starts signing. He's going to be into the morning non-stop turning many bills from January 6, 2009 onward into laws, executive orders, reversing all of Bush Jr's anti-American laws, a big change is "a" coming!

3) Okay, so get a $1.00 an hour guy a $100,000,000 guy today? I'm sure you will fly economy to get him removed while he's in First Class on Singapore Airlines. Money talks, BS takes a walk. All true. You could use your Frequent Flier Miles, so steal his caviar when he's reading a magazine.

Gyaos Baltar.

 

[crystalpalace]

That's all fine, but the new Treasury Guy is formerly Goldman as well. They all are.....

Humm, AFAIK, Timothy Geithner, has never worked for Goldman or any other wall street firm. He's been working for the government in various positions.

 

[Kilgore Trout]

When I screw something up no one ever offers me a bailout. I've got to dig my own way out of jam I got into.
But I guess if you have a Harvard MBA and work for big investment banks then your ass is special and you're entitled to bailout benefits.

 

[WoodPeckr]

LOL!
Only if you are well politically connected to the right guys in the White House....

 

[fuji]

Here is why the bailout is important:

A tanker loaded with wheat arrives at a sea port intending to unload its cargo, but instead the wheat rots on the ship because the company contracted to unload it has run out of money and has been unable to achieve any sort of financing--it cannot make payroll.

A grocery store with $1mil in reliably inventory faces an unexpected cost and has to shut the doors, the inventory goes bad, and the store goes bankrupt--because it was unable to acheive overnight financing to make payroll.

A new condominium building going up, which has got near 100% units sold, stops construction even though the project is still highly profitable--because the company cannot renew its credit facilities and therefore cannot make payroll.

These are the sorts of crazy things that turn a nasty recession into a great depression.

When the economy breaks down to the point where shipping stalls, profitable stores fold, the outputs of people's labours are wasted because the logistics system is not working, you have a REAL problem.

There have only been a few anecdotal cases of that sort of crazy stuff happening so far, but if the whole banking system folds those sorts of crazy things will become commonplace and the economy--and people--will really suffer.

 

[Meister]

There have only been a few anecdotal cases of that sort of crazy stuff happening so far, but if the whole banking system folds those sorts of crazy things will become commonplace and the economy--and people--will really suffer.

What's wrong with a bank going out of business? It's not all the banks having trouble. The stronger banks will survive and become stronger. That's capitalism, no? Joe Forklift will loose his house, so what? He took on too much debt in the first place. He will move back into an apartment living within his means.
When I bought my first house I had over 25% down, I bought a cheap starter house. I think these guys need to learn this before buying a house.

 

[Cinema Face]

If you want to understand what's wrong with bailouts, google search Massey Ferguson and Bricklin.

 

[landscaper]

the original idea behind the bail outs was to use the portion of teh 700 billion congress agree to in the TARP program to purchase the bad mortgages that the banks had been giving out . Those mortgages were repackaged into a financial product along with some " good " debt car loans credit card debt etc and sold as asset backed mortgage securities to conpanies that needed a place to put short term money. ( airlines that tack a deposit on your flight months down the road have to hold that money in trust for your flight This is 1 example there are others). The companies buy these things for a couple of months and then resell them takeing in interest from transaction. When the mortgage bubble exploded nobody knew where the bad mortgages were and the banks stopped loaning each other money so they did not get stuck with these things. That froze up the entire banking system world wide nobody wanted to take a chance with the money so they sat on it. This stopped most business that depend on shrt term money for theings like payroll buying materials etc.

When this hit the govt in the states set up ap fund of 700 billion dollars to buy up these things . Ones they were of the banks books in theory business would carry on. However in the rush to appear to be doing something they kicked out about half the money and after the fact realized they had no way of tracking where it went or what it was used for. This resulted in retention bonuses , Conventions and other uses of the money that were not foreseen by the regulators, the banking system in the states is still locked up and banks are failing.

The misuse of teh fund is one reason the big three are getting such a hard time in congress and the senate right now.

Where it goes from here nobody knows, some senatores are tring to stop the other half of the 700 billion until they can get some strings on it.

 

[Gyaos]

Humm, AFAIK, Timothy Geithner, has never worked for Goldman or any other wall street firm. He's been working for the government in various positions.

Current President of the Federal Reserve Bank of New York. He's going along with the flow to keep the markets collapsing 1000 points, like today. The Big 3 get $0.00 and the market went up 50. Should have collapsed 800.

It'll collapse when they find out The White House rescue after the Senate said no, is bogus.

Gyaos Baltar.

 

[WoodPeckr]

It'll collapse when they find out The White House rescue after the Senate said no, is bogus.

Gyaos Baltar.

Dubya doesn't want the Big 3 to collapse on his watch so he will prop them up enough so they collapse when Obama gets in.
This way they will blame Obama for it....

 

[S.C. Joe]

Why aren't any banks who got part of that 700 billion bail out money loaning some of the money out now? Why not them loaning the money to the auto company's? That is what we were told about the bail out, the money was to be used for loans to get the car and home sales going again. What happen to all that cash?

 

[Meister]

Why aren't any banks who got part of that 700 billion bail out money loaning some of the money out now? Why not them loaning the money to the auto company's? That is what we were told about the bail out, the money was to be used for loans to get the car and home sales going again. What happen to all that cash?

They used it to:
- buy stakes in other banks,
- lavish retreats
- bonuses (merrill lynchmob ceo wants 10 million bonus for doing such a wonderful job last year)