Sorry to go all non-poker on you but I read this article in the Financial Times and beer came out of the beer coming out of my nose.
Banker fury over tax ‘witch-hunt’
By FT reporters
Published: March 20 2009 19:39 | Last updated: March 20 2009 23:32
Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.
Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.
Okay, normally when you say someone is striking back it means they’re actually doing something. All these pansies are doing is making empty threats. And poor ones at that. Does anyone really think that if every investment banker in the US fell off the face of the earth that Harvard, Stanford, and the rest of the asshole factories that churn out these guys couldn’t replace the entire industry almost instantly?
There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.
“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”
We’re not AIG, we’re some other company that hedged ourselves beyond all reasonable levels and needed tax payers to bail us out. Why shouldn’t we be able to keep our six and seven figure bonuses?
If this country begins to penalize failure by moving responsibility from people stupid enough to take our biased advice and putting it on those of us who gave it, it might be the end of finance as we know it.
The banker added: “It’s like a McCarthy witch-hunt…This is the most profoundly anti- American thing I’ve ever seen.”
Second only to a capitalistic society using public funds to bail out a company that gambled its way into financial ruin. The fact that your firm isn’t being liquidated and you are not out looking for work is what is un-American.
Vikram Pandit, Citigroup’s chief executive, told employees in a memo that some anger about executive compensation was “warranted”. But he hit out against the idea of a special tax. “The work we have all done to try to stabilise the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees,” he wrote.
Those silly peoples. It’s almost like they expect us to suffer for the bad decisions we made.
Some policymakers expressed concern that banks may try to break out of the government’s embrace by paying back public capital even if the price is a more severe credit squeeze.
They also fear that financial institutions may decide not to take part in public-private partnerships to finance credit markets and acquire toxic assets.
No, say it’s not so. You mean if we take back your bonuses you might try to find a way to make your companies work without massive injections of taxpayer money? Not that. Anything but that.
The outcry followed Thursday’s approval by the House of Representatives of a bill that would impose 90 per cent tax on bonuses to employees whose gross income exceeded $250,000 at bailed-out firms.
Next week the Senate will also consider a hefty tax on bail-out bonuses amid calls for an investigation into who was responsible for allowing the pay-outs. Some senators are calling for a committee hearing on a bill that would impose a 70 per cent tax at bailed-out institutions, half paid by employees and half by companies, arguing that a delay would help cool political anger.
“There are three big industries where the US has global leadership: financial services, media and technology. Introducing this 90 per cent tax is like taking one of those industries out the back and shooting it,” said a top Wall Street executive.
Well, other than the part where the other two industries didn’t almost bankrupt the entire US economy because they were too greedy to do what was right instead of what gave them the biggest bonuses . . . bonuses which Congress is trying to take away from them. My goodness, it’s all so interconnected. It’s almost like cause and effect.
Guys, it’s very, very simple. A bonus is for good performance. If your company is now accepting billions of dollars of tax payer money just to keep the doors open, uh, hate to tell you this dude but that’s not bonus worthy performance.
In Frankfurt one employee at a US investment bank said the new tax measures would “send [the US] back to the stone age”.
“Commodity traders are already moving to companies like BP where they can make as much money as they used to,” said another banker at a US firm.
Bankers at Deutsche Bank said it could benefit from the proposed legislation by poaching its US rivals’ most talented employees.
Please don’t tell me that that it’s this easy to export our most egotistical and ethically corrupt.
What they don’t tell you is that this is a one time tax in order to penalize companies that took buttloads of taxpayer money and yet still found reason to reward people in their company for doing such a fine job. The tax is only aimed at people making over $250,000 a year in salary so don’t get the handkerchiefs out for the poor cleaning lady who won’t get her bonus. The only people getting hit are already earning a quarter of a million a year before bonuses.
Yeah, we have much to fear. Like most of these guys won’t come running back when the economy improves and they can actually get jobs back in the US.
Anybody who works for a company that has taken public funds and has the balls to complain that they might not get a bonus should be punched in the face. Seriously. Maybe that’ll snap you back into reality.
Reporting by Lina Saigol in London, Julie MacIntosh and Saskia Scholtes in New York, Tom Braithwaite in Washington and James Wilson in Frankfurt
You call that reporting?
photocred to David Paul Ohmer
Here’s a good rebuttal to that idiot Jake DeSantis that had his resignation letter published by the NYT.
I think one of the key points is when DeSantis is taken to task for his statement that he agreed to work for $1 salary. No, he agreed to work for $1 salary plus $1.2 million bonus. Now he’s pissed he won’t get his bonus.
Like I said in a previous comment, had AIG not attempted to screw the public without lube most bonuses on Wall Street would have gone unnoticed. It was AIG’s arrogant insistence that paying out millions in bonuses with public funds was a sacred right that raised the ire of both the public and Congress. That brought the spotlight on all bonuses. So I think it’s wrong to say that it’s populism but more of a deserved kick to the balls of an industry that sank the entire economy into a crisis and then had the nerve to give the taxpayers a big f-u. Sure, innocent people are caught up in the doling out of justice but every day laws get passed that have unintended consequences on innocent people. Sorry if you don’t get your million dollar bonus this year but . . . hey, life suck, doesn’t it?
The picture I have is these are contractually agreed retention payments, to keep the organization intact enough to wind down in orderly fashion, and that the Administration people are not complete patsies. I could be wrong.
The top guys who made the bad decisions to get into this mess you fire and pursue criminal sanctions if there was fraud.
The middle management who have to clean up you pay with incentives, contingent on a successful cleanup and getting the assets and risks out of taxpayer hands. I’m assuming that’s what was done to the extent possible under the circumstances.
Failing to live up to your end of the deal is penny wise and pound foolish. It’s kind of like telling the Iraqi Army to bugger off and not get paid and go home with their weapons.
@curmudgeonly troll: I agree on several points however one also needs to consider the fact that it’s a world wide crisis which means people generally aren’t hiring. That was another point of my frustration with that article. The journalists didn’t even think to point out that investment bankers are getting laid off across the globe. There will always be a small minority that are in such demand they can go anywhere but the vast majority of the pissers and moaners should be thankful that they even have jobs. There is no magical better job waiting for them in the financial districts of London, Frankfurt, Paris, or Hong Kong.
The one point where I disagree with you is your statement:
you have no choice but to pay a meaningful amount of money based on performance
That is what is what people find offensive. If your firm is going bankrupt how do you justify paying a bonus paid on performance?
All of these companies could have avoided this mess simply by announcing they were going to pay only the legally required minimum bonuses for all staff and those who were involved in the mortgage backed divisions would receive no bonus. Most people would be able to wrap their head around legally required bonuses.
And why can’t the government demand that? AIG was essentially bankrupt had the government not stepped in. In effect, all we’re seeing is a form of receivership except obviously AIG thought it could defy receiver. They were playing with the fact that in an effort to create less market panic the government stepped in taking a somewhat unique legal role.
In the end, AIG and the industry bluffed and got called. Had the CEO’s of the other investment banking firms raked AIG over the coals in public for it’s stance they might have been spared but for the most part they kept quiet. They could have heaped on the pressure on AIG while making token gestures like revamping their own bonus structures. Instead, via their silence, they stood united with AIG and are really architects of their own plight.
Bill
OH! You’re my new favorite blogger fyi
@curmudgeonly troll: I agree on several points however one also needs to consider the fact that it’s a world wide crisis which means people generally aren’t hiring. That was another point of my frustration with that article. The journalists didn’t even think to point out that investment bankers are getting laid off across the globe. There will always be a small minority that are in such demand they can go anywhere but the vast majority of the pissers and moaners should be thankful that they even have jobs. There is no magical better job waiting for them in the financial districts of London, Frankfurt, Paris, or Hong Kong.
The one point where I disagree with you is your statement:
you have no choice but to pay a meaningful amount of money based on performance
That is what is what people find offensive. If your firm is going bankrupt how do you justify paying a bonus paid on performance?
All of these companies could have avoided this mess simply by announcing they were going to pay only the legally required minimum bonuses for all staff and those who were involved in the mortgage backed divisions would receive no bonus. Most people would be able to wrap their head around legally required bonuses.
And why can’t the government demand that? AIG was essentially bankrupt had the government not stepped in. In effect, all we’re seeing is a form of receivership except obviously AIG thought it could defy receiver. They were playing with the fact that in an effort to create less market panic the government stepped in taking a somewhat unique legal role.
In the end, AIG and the industry bluffed and got called. Had the CEO’s of the other investment banking firms raked AIG over the coals in public for it’s stance they might have been spared but for the most part they kept quiet. They could have heaped on the pressure on AIG while making token gestures like revamping their own bonus structures. Instead, via their silence, they stood united with AIG and are really architects of their own plight.
Bill
Bellyaching may be unseemly but…and, I do find it offensive that a bunch of AIG jokers made a lot of money by making bets that would pay them a couple of billion a year if times were good, and cost the taxpayer $170 billion if times were bad… and even more offensive to pay the same jokers millions of dollars to clean up the mess.
Nevertheless, the only remaining business decision is how to clean up the mess at the lowest possible cost. And if that means paying the jokers a few million to salvage a few billion, instead of having them quit AIG, work at hedge funds, and negotiate against patsies like Geithner from the other side of the table, then it may well be the right thing to do.
Your point about it being relatively easy to hire people to replace these guys may be true. But the financial system is a complex set of interdependencies and relationships built up over a long time. To compare with the Internet, even though MIT turns out plenty of brilliant engineers, I’m not sure it would make a lot of sense to bail out the major telecoms, then handcuff them and let them implode and have the same people try to get it back up and running while working for Deutsche Telekom.
While it may seem offensive to the naive, if you want the smartest person to make risky decisions involving large sums of money, you have no choice but to pay a meaningful amount of money based on performance. Otherwise they either take the least risky decisions that will do well enough to let them keep their job…or more likely take another job with someone who will pay a lot of money based on performance.
The tar and feathers approach feels good, to stick it to them on a personal level, but it’s a bad business decision that will cost the taxpayer a lot of money.
You’re crippling the companies you just bought major stakes in. Any private investor who might get involved in Geithner’s bank asset sale with hopes of making a buck now risks a public flogging and changing the rules in the middle of the game. Foreign investors now see how populist pressure can sway the US to incredibly counterproductive and foolish policies.
It reminds me of Iraq – first building them up, then fighting the wrong war at the wrong time in the wrong way for the wrong reason.
Riggs,
I think you may be reading me wrong here. I also get bonuses at my work and you know what happens if the company doesn’t meet its revenue goals? No bonus. I may play by the rules and I may have done everything that could have been expected from me and more. But if we miss the numbers, we miss the numbers. That’s just how the bonus system is supposed to work.
But the part that would then make me deserving of a punch in the face would be to go complain about not getting a bonus at the goodbye party for people getting laid off.
They can all go off and piss and moan behind closed doors all they want but don’t send out company memos and bitch about it in the press. That simply goes beyond being insensitive.
Bill
“Anybody who works for a company that has taken public funds and has the balls to complain that they might not get a bonus should be punched in the face. Seriously.”
This certainly is a tenuous situation. But I think the issue at hand here is that you feel that everyone that was entitled to a bonus is a bad guy. Individually they may or may not be. As people that is. But they are only using their talents to perform in an industry that set the rules on how that performance is measured.
No one really saw the damage that could be had until it was too late. This is not the fault of any one person, any one party, or any one company. These products, such as cdo’s and derivitives were not put together to harm anyone. They were put together to provide another way of reducing risk and maximizing ROI as an investment product. The problems were that the numbers didn’t actually work because more people defaulted on loans which made the investments worthless.
As Americans, or people rather, we always try to blame the folks who we think should have known better, or sometimes, those who we think make to much, or are wealthy, or smarter.
They only played the rules the way they were set. Obviously, down the line, someone or some groups realized it was going wrong and could have or should have done something about it. But again, that’s not how the system works. It’s every man for themselves. Protect MY family, then everyone else.
It really is unfortunate, but Astin was right. they are being punished for being capitalists. Which is the arena they trained to work in.
That being said, given the circumstances, I believe that there should be some sort of compromise on how much they should get, if anything at all.
Got to feel you’re snorting beer all over a dead hand. Read CC and Astin’s view that are pointed to along with me mentioning the damage you are poo-pooing.
http://blog.pokerperambulation.com/2009/03/20/come-right-this-way-it-is-bargin-day.aspx?ref=rss
Thank you.