The more important point of outrage behind the AIG bonuses

Yes, yes, by now, we've all heard: AIG paid $165 million in bonuses to many of its workers, including some who are suspected of being behind the products that are a major cause of AIG's meltdown. Some people got multi-million dollar bonuses, including some that no longer work for AIG. The company claims it was legally obligated to do so because the bonuses were contractually guaranteed.

I will spare you a long tirade about my outrage that these bonuses are being paid to the greedy morons who got us into this mess by average folks, many of whom no longer are employed or have faced significant cutbacks in income due to the economic fallout of this debacle. It's not that I'm not outraged; it's that almost everyone is outraged, and thus, you (and all the rest of us) have all heard it before.

There is, however, something even more outrageous than the fact that these bonuses were paid. It is the fact that they were paid due to contractual obligations.

We need a major reform of contract law in this country. Today, it is set up to favor the strong and wealthy over the weak and poor (or relatively poor). This system is unfair and unsustainable.

Take for example UAW. The Big 3 need federal bailout funds, but one of the conditions being imposed upon them is to "renegotiate" labor contracts in order to obtain wage cuts, benefit cuts, and most of all, cuts to benefits promised to past workers.

But wait. UAW had a contract, right? It's impossible to break contracts, right? Apparently not, so long as the parties taking it in the shorts due to the contract break are the average worker bee, and not a "genius" derivatives trader.

A contract basically consists of the following:

-Mutual Consent
-Offer and Acceptance
-Mutual Consideration
-Performance/Delivery
-Good Faith
-No Violation of Public Policy

Now, think about the last time you got an (unsolicited, likely) offer from Citibank or some similar company for a loan. The back of the check probably said something like "By cashing this check, you agree to be bound by our Terms." If you were lucky, they may have including their "Terms" in the same solicitation, and told you what interest rate they would charge, what fees they'd assess, whether or not they would force you to give up your Constitutional right to a trial by jury for civil matters, etc. If you weren't lucky, you were told that you'd get the terms AFTER you agreed to them by cashing the check.

Now, think about the reverse. Let's say you send a check to Citibank, and you write on it "By cashing this check, you agree to lower my interest rate to 2%, assess no further fees on my account, and agree that arbitration is voluntary, not mandatory." Would your "contract" be held up in court? No. Large corporations are not held responsible for reading the terms presented with a check from an individual consumer. Without being responsible for reading the terms, the corporation is assumed not to have agreed with them when cashing the check.

This is not fair. Either a contract is a contract is a contract....or it isn't. If the average citizen cannot enforce contract provisions, then frankly, the whining about "allowing bankruptcy judges to restructure mortgage terms would deal a fatal blow to contract law" needs to stop.

The Big 3 made wage and benefit agreements, and then purposefully chose to not fund them at the time of the agreements. Now they don't have enough money to do so profitably. Big shocker. If I made an agreement to pay $X to someone in the future, I better start saving for that future date now. Waiting until the day it's due and saying "Oh no, you guys are at fault for my poor financial situation" is bunk. Paying a CEO 800 times the average worker, and then demanding that the average worker take even more pay cuts is bunk. Paying a CEO 800 times the average worker and then demanding that the worker accept wages and benefits comparable to a company where the CEO is paid 8 times the average worker is bunk. And these bunk excuses do not warrant a mandated breaking of the UAW contract. The contract was negotiated and agreed to by both parties. The contract meets all the terms of a contract. The contract should stand.

An open letter to the America's corporate executives

Dear Executives,

With the exception of this paragraph, this letter is not intended for those executives that managed their companies in a sustainable and responsible way. I don't know how many of you there are out there, but I choose to believe there must be some. To you, I say thank you, and I am sorry you have to deal with the economic crisis dealt to all of us by "conservative" deregulation and unfettered avarice.

For the rest of you, but most especially those that are engaged in any of the following:

• Claiming to desperately need TARP money until a cap on executive pay is required, then deciding you don't really "need" a government bailout, or
  
• Taking TARP money and then raising interest rates on the same taxpayers who are bailing you out, or
  
• Taking TARP money and then paying bonuses to executives, or
  
• Sending your spouse to withdraw $15.5 million out of your illegal Ponzi scheme before your arrest.

I have one word for you:

Asshole.

You know the thing that most disgusts me in all this? It's not that your greed and mismanagement is resulting in millions of Americans losing their jobs, and then their credit ratings, their vehicles, their retirement savings, and their homes. It's not that your greed and mismanagement have resulted in an economic crisis which is global in nature. It's not that your greed and mismanagement have resulted in the American public, including as-yet unborn members of the American public, having to pay to bail your sorry asses out.

Don't get me wrong: all that makes me sick.

But the worst part is that you are the same assholes that, a year after this economic crisis have passed, will be funding groups that launch wars against the poor. You and your cronies will rail about "welfare moms driving Cadillacs and eating steak." You will drive wedges between the poor and the middle class in order to distract us from the looting and pillaging that you have resumed.

A special place in hell has been reserved for you.

Carly Fiorina - Looter Baroness defends the Barons

Why on earth is anyone listening to Carly Fiorina? Seriously.

In a commentary on cnn.com, she expressed misgivings about President Obama's plan to cap executive compensation at $500,000.

Instead, she says that CEOs that run institutions asking for bailout money should be forced to resign as part of the deal.

I suppose that might seem harsh to some, but when you consider that without a cap, these executives walk away with golden parachutes when they resign. You'd think that Ms. Fiorina would remember that, having drifted away from HP with a $20 million+ severance package, after overseeing the layoffs of 15,000 people, aggressively lobbying for the H1-B visa program to replace highly-skilled American workers with highly-skilled foreign workers, and setting up HP for another 25,000 layoffs after she left.

She says: "In this country, the opportunity to be rewarded for taking prudent risk is fundamental to our economic vitality and strength."

I'm not sure what she's objecting to here. Could it be that she's against "punishment" for taking excessive, reckless risks? These executives had the opportunity to be rewarded for taking prudent risks. They blew it in a fit of unbridled greed. (By the way - for anyone that thinks $500,000 a year is punishment - let's trade jobs.)

Although not directly stated in her commentary, I've also heard the argument that pay caps will lead to a "brain drain" and force talented bankers/executives to go elsewhere for the pay they deserve. Umm...yeah. So talented they led us right into a financial crisis second only to the Great Depression. Please, go elsewhere. And get your bailout money from "elsewhere" too.

There is a huge sense of entitlement in this country. Contrary to popular belief, the most damaging sense of entitlement isn't from welfare recipients and credit-card-carrying youngsters. The most damaging sense of entitlement is displayed by executives, bankers, and other high-rollers in the private sector. The sense that they "deserve" outrageously large compensation packages. The sense that they should be able to do anything they want with no consequences. The sense they "deserve" unfettered access to lawmakers. The sense that they "deserve" hero worship and praise for their "unique" abilities and skills.

Not everyone has the skills or talent to be an executive at a large company. But far more than enough people do. If the crop of executives that helped get us to this crisis are unwilling to work for $500,000, fine. Let them leave. They can join their failed business's other creditors in waiting for their severance package. I guarantee that there will be someone in that company who's more than happy to have the opportunity to run it for $500,000 and restricted stock options.

House Republican Leadership supports sulking

The Republican House leadership couldn't exercise leadership and keep their promise to bring half their caucus to vote for the bailout bill...and somehow, it's Pelosi's fault?

Apparently she's made the first partisan speech in the history of Congress? Frankly....I don't care if Pelosi said bad things about their mamas. You don't punish the entire country (and the whole world economy) just because your feelings are hurt. This has got to be the lamest excuse for a leadership failure I have heard.

Just who is it that is leading the Republican party? Is it Bush? McCain? Apparently not, since they can't get their share of the votes on the bailout bill they support.

You know, I'm not happy about the bailout bill either. The idea that we should fix the results of the unchecked greed and speculation on Wall Street on the backs of the poor, the middle class, and our children really makes me angry.

However....

The market dropped about 777 points yesterday. Now, for me, from a retirement perspective, that's probably not as bad as it seems to be. I have a long time before retirement. Some people, particularly those close to retirement and those already retired, are taking a brutal hit due to inaction. For those people, this isn't a loss on paper. This is a "do I have to start subsisting on cat food?" kind of loss.

From a job market perspective, the market drop yesterday is horrible. Many companies, and in particular, financial services companies, make much of their profits through investments. When their investments aren't making money....they lay off employees in an attempt to reduce expenses to boost their profit margin. Unemployment was already high prior to this mess. The more unemployment there is....the more foreclosures and bankruptcies there will be. The more foreclosures and bankruptcies there are, the more home prices will drop and the credit market will freeze up.

And if you are lucky enough to not lose your job, perhaps you just won't get paid in a timely manner.

This bill, or something like it, needs to pass, and it needs to pass very soon. Sulking is not acceptable.

Coleman's new "don't blame me" ad

Jeff Rosenberg at The Twin Cities Daily Liberal has a hysterical post about Norm Coleman's latest ad. You can see the post, and the ad, here.

I couldn't decide what was funnier - the sappy guitar music in the ad, or the "please don't attempt to assign blame (to me) pleading in Norm's voice.

Regulation did not cause the sub-prime crisis

I've recently read a lot of chatter on the blogosphere that implies that, somehow, regulation was the cause of the sub-prime crisis. Usually, the blame is shifted on the Community Reinvestment Act (CRA), which was originally enacted in 1977. The basic goal of the CRA was to require banks to stop the practice of redlining. (Basically the practice of refusing to offer credit to, or increasing the cost of credit to, individuals and businesses located in poor or minority neighborhoods.) The CRA did not require that credit be offered to un-credit-worthy individuals - just that credit be offered to credit-worthy individuals even if they lived in a poor or minority neighborhood.

The idea that the CRA caused the sub-prime crisis is completely false. Robert Gordon wrote an excellent article about this issue on April 7, 2008. It's called "Did Liberals Cause the Sub-Prime Crisis?"

Some key points from the article:

• About 50% of the sub-prime loans made were made by independent mortgage companies that are not required to follow CRA guidelines.
• Another 25-30% of the sub-prime loans made came from bank subsidiaries and affiliates, and they do not have to fully follow CRA guidelines.
• Institutions that do not have to comply with CRA made sub-prime loans at twice the rate of CRA-compliant institutions.

Conservatives need to recognize that deregulation is what got us into this mess. CRA has been around since 1977, and in fact, a study published in January of this year suggests that

• CRA deterred irresponsible lending,
  
• CRA institutions sold fewer of the sub-prime loans they did make onto the secondary market,
• Sub-prime loans made by CRA institutions were not as damaging (i.e., had lower interest rates) as sub-primes loans made by non-CRA institutions, and
• Foreclosure rates were lower in metropolitan areas with higher concentrations of CRA lenders.

Quite frankly, conservatives need to QUIT BLAMING THE POOR AND MINORITIES for the results of the greed of the wealthy. They need to take a little of the "culture of personal responsibility" for themselves.

Rant on the bailout

For weeks, I've been seeing blogs and posts about how

* "all those deadbeats don't pay their bills" and how
* "no one forced people to take out those mortgages" and
* "you have to be stupid to think you can afford X on an income of Y" and
* "what happened to personal responsibility" and so on.

Well, the investment banker/Wall Street types were SUPPOSEDLY the most savvy people out there, but now we're all supposed to bail them out because it's the middle class' fault for defaulting on sub-prime mortgages?

No way.

This truly is class warfare - more of the same. The savvy and wealthy get the middle class to bear the burden. The top 20% own 84% of the wealth and pay only 64% of the total tax burden. Then they get middle class nuts (who continually vote against their own interests) to repeat their talking points that they pay so much more of the income tax burden than they earn in income. (Of course, they don't earn income. They earn capital gains, etc. Or, I mean, their shell corps. in the Caymans earn that money. Don't tax them! That would be socialist!)

Then, when the wealthy get what they want (deregulation), they rev up the system for short- term gain, loot the system via their annual bonuses and options, and then, when it comes crashing down, you and me, and worse yet, our kids and grandkids, will get to pay for it.

And if we complain, we're just "jealous" or "class warfare-mongers." Darn right I'm jealous. I work and pay my bills and my taxes. I don't get the government to pay my bills, and I don't get to shelter my money from taxes with all kinds of schemes. And I'm going to end up paying for their greed. So yeah, I'm jealous. And it's pretty rich (pun intended) to accuse the middle class of tax warfare when you've been lobbing grenades since the Reagan years.