The big news of the day is the $165,000,000 in bonus payments made by the insurance giant AIG. It seems that just about everybody (except the people who got the bonus payments) is steamed about the payments.
I am simply boggled by those "bonuses." The bonuses in question went to people in the financial products division of AIG. To all reports, that is the division most responsible for the virtual collapse of a company "too big to be allowed to fail."
Once upon a time, I had a job (a real one, not this freelance business) in which I had hiring and firing authority. If one of my employees had caused serious damage to the business, I would have had to fire that person—probably without severance pay, much less a bonus! In the instance of AIG, I think the people responsible for allowing the people who made the disasterous decisions that brought AIG down should also be made to walk the plank along with the people who actually made the decisions.
The AIG top brass have made the claim that the bonuses were necessary so that the company could retain "the best and the brightest."
Looks to me more like those people were the worst and the dimmest! Besides, who would hire them? When Wall Street is doing well, people can easily change jobs. But with the mess the market's in today, not many companies are hiring at all. Much less hiring people who caused so much damage on their last job. This has every appearance of being a case of greed. Pure and simple, greed. No matter the damage caused to everybody else, they got theirs.
If the TARP money had the right strings attached to it from the beginning, instead of no conditions, the situation wouldn't have arisen. There's sniping back and forth between the Democrats and Republicans about who's to blame for the debacle. Fortunately, some more level heads in Congress are saying this isn't the time for that, that we need to concentrate on solving the problem—and some even point out that the Republican Administration and Democratic-run Congress that wrote, approved, and signed the original bill are equally to blame—and there's plenty of blame to go around.
I guess it seemed reasonable at the time to expect the bankers to follow the spirit of the law. We know better now. Unfortunately.
We're in for a period of muddling before this situation gets straightened out. But it will get fixed, I'm sure of it. In the meantime, hang on.
Put aside that many people paid so much more than the houses are now worth. If they could afford to make the payments on a $400,000 mortgage, but the house is now worth less, and they can still afford the payments, that's only a problem if they intend to roll the house soon instead of live in it for years to come. The problem is the mortgages with the suddenly much higher interest rates, and monthly payments that they can no longer afford.
Surely the mortgage holders could see this coming. In today's market, with today's exceptionally tight lending, houses are extremely hard to sell. What I don't get is, why are banks foreclosing? They should have begun proactively renegotiating interest rates. Sure, the monthly interest payment would be lower, but the mortgage holders aren't getting that interest anyway from people who can't afford the payments. So there they are, holding properties they can't sell, and they aren't making any money off them.
Doesn't it make more sense to take a lower interest rate and continue to make money rather than foreclose and not make any money at all?
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