quote:

Originally posted by occrider Dude who cares about Manhattan real estate. This bill is sooooo stupid on so many more levels. Allow me to outline a few salient points: Considering AIG alone, who do they think is going to do their business of winding down their portfolio? I don't know how they're going to be able to operate. Certainly NO ONE else is going to leave their jobs to go work for AIG. Anyone who does is probably a moron. Outside of the AIG issue, the Treasury department FORCED the top banks to take TARP money as a part of its CPP program. This populist backlash will now impact ALL of the Feds other programs designed to stimulate private investment in partnership with the government because who is going to want to participate in these federal programs that are going to be subjected to this level of scrutiny and punitive damages?

From the article you posted "It wouldn’t apply to foreign workers of U.S. companies"

Um, where the fuck do people think those working in the AIG Financial Products division that got these retention bonuses (the ones that everyone is outraged about) live? In London!!! The idiocy of our Congress, especially the House, never ceases to amaze me.

And why wouldn't people want to work for AIG? I mean, who wouldn't want memos sent around about heightened securiy, uniformed officers patrolling, death threats involving their families being executed with piano wire, etc. I mean, what's not to love?

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quote:

Originally posted by occrider Dude who cares about Manhattan real estate. This bill is sooooo stupid on so many more levels. Allow me to outline a few salient points:

Totally agree--it was just an article that crossed the tape while I was writing that.

In a similar vane, Tom Gallagher had a great quote the other day when he said, "Investors feel like they are being deputized to form a posse today, only to be arrested for being vigilantes tomorrow."

One can only hope that Obama rises above the collective "wisdom" of our Congress and does the right thing here.

quote:

Originally posted by Groundhog Boy And why wouldn't people want to work for AIG? I mean, who wouldn't want memos sent around about heightened securiy, uniformed officers patrolling, death threats involving their families being executed with piano wire, etc. I mean, what's not to love?

... AIG employees are now being harrassed by people outside their own homes. A dishonest electorate, out of their own incompetance, has drummed up this anger against individual citizens at their own homes now. While this is happening, Obama is fillig out NCAA brackets and going on Jay Leno... and Barney Frank for no good reason won't tell the AIG CEO that he won't release the names of the individuals receiving bonuses to the public thus ensuring their safety. The protests should be in Washington, not at the homes of private citizens.

At first, I was 100% against any bonuses at AIG. Then after Liddy's testimony, I understood the rationale behind them, and I am against the 90% tax.

I doubt any in Congress have even considered the ramifications or unintended consequences of this "legislating by anger" route that they're pursuing.

This tax now disincentivizes institutions from accepting TARP money (not to mention the ones that were compelled to take the money by the government). These institutions will now reject TARP money and will have to try to raise equity capital from private investors so they don't have the government micromanaging their operations. All of the private money could thus be diverted away from the TALF, which was one of the Fed's most hopeful programs to re-start the securitization process to get capital and credit flowing again...

Not to mention the clearly questionable constitutionality of the legislation these buffoons in Congress are trying to pass. The people who received the bonuses did nothing illegal. They had LEGAL binding contracts in place and now the government is trying to negate contracts which shakes the very core of legitimate business practice. We don't have to like the fact that bonuses were paid, or that they were insultingly large, but we don't need to take action that threatens the sanctity of our economic foundation.

Article 1, Section 9, Clause 5 - United States Constitution
"No bill of Attainder or ex post facto law shall be passed."

Congress has stepped waaaay over the line. As BO said, they need to focus on closing the door before the horse is out of the barn. That may be well and good, but the AIG horse is already out of the barn. All I see Congress doing is adding fuel to the raging inferno of public opinion right now. This does not help an already difficult situation.

quote:

Originally posted by Shakka I doubt any in Congress have even considered the ramifications or Article 1, Section 9, Clause 5 - United States Constitution "No bill of Attainder or ex post facto law shall be passed."

While I am opposed to this 'tax' on bonuses, I don't think it violates the constitution, and in my opion definitely not the clause you cited. An ex post facto law refers to a law that is enacted to change the legal status of an already completed activity. In this case, the activity that was completed was the issuance of a bonus. The legal status of that activity would not be changed - i.e., AIG would still be permitted to pay and the employees would be permitted to receive the bonuses. The fact that it is being taxed at a higher rate doesn't change the legal status of the bonus.

Tax laws often apply retroactively. In most cases they apply retroactively so that market participants don't modify their behavior before the effective date of the law (e.g., a change in the capital gains rate would likely apply retroactively so that people wouldn't sell off their assets prior to the rate change - usually within the same year though). For example, a change in the capital gains rate would be introduced in a bill in June 08, with a retroactive effective date beginning January 08 to prevent a sell off of capital assets prior to the bills passage. The policy behind retroactive application is to prevent distortions in economic behaviors because of changes in tax laws.

A bill of attainer is much more specific than the pool of people to whom this law would apply. The most obvious bill of attainer would be a law that reads something along the lines of, "Bill Miller is prohibited from conducting [blank] activities." A law that potentially applies to thousands of financial service employees is far too broad to be considered a bill of attainer.


As you stated, though, this bill would have horrible ramifications throughout the financial sector. While I haven't read the text or summaries of the bill, if it generally applies to the employees (who make more than 250K a year) of TARP recipients (that received >5 billion), then an M&A banker at Goldman would be subject to that tax on his bonus for his M&A advisor services performed on a transaction totally unrelated to any derivatives trading. This is clearly not the right result. I could be wrong about the breadth of the law, but if my understanding of the law is correct, then the law is stupid! As distasteful as these bonuses may be, the solution is not to punish all bankers and provide significant disincentives for these firms. In any event, this law would just result in more creative compensation methods or simply higher base salaries. Our congress is shameful.

Last edited by jerZ07002 on Mar-20-2009 at 20:09

quote:

Originally posted by jerZ07002 While I am opposed to this 'tax' on bonuses, I don't think it violates the constitution, and in my opion definitely not the clause you cited. An ex post facto law refers to a law that is enacted to change the legal status of an already completed activity. In this case, the activity that was completed was the issuance of a bonus. The legal status of that activity would not be changed - i.e., AIG would still be permitted to pay and the employees would be permitted to receive the bonuses. The fact that it is being taxed at a higher rate doesn't change the legal status of the bonus. Tax laws often apply retroactively. In most cases they apply retroactively so that market participants don't modify their behavior before the effective date of the law (e.g., a change in the capital gains rate would likely apply retroactively so that people wouldn't sell off their assets prior to the rate change - usually within the same year though). For example, a change in the capital gains rate would be introduced in a bill in June 08, with a retroactive effective date beginning January 08 to prevent a sell off of capital assets prior to the bills passage. The policy behind retroactive application is to prevent distortions in economic behaviors because of changes in tax laws.

Eh, you're probably right on this stuff--it's definitely more your field. I was reading this on another website this morning while I was rather incensed. This is what the guy said:

quote:

o you know what that means? The key is the word "attainder." Let's go to Websters: It's a 15th century word meaning "extinction of the civil rights and capacities of a person upon sentence of death or outlawry usually after a conviction of treason." A definition, this one from the Catholic Encyclopedia, describes "bill of attainder" thusly: "A bill of attainder may be defined to be an Act of Parliament for putting a man to death or for otherwise punishing him without trial in the usual form. Thus by a legislative act a man is put in the same position as if he had been convicted after a regular trial." Well, in this case the Congress isn't trying to put anyone to death ... they're just trying to steal some money. They are trying to deprive some individuals of property that is rightfully and lawfully theirs without accusing them of a crime and without the benefit of any trial ... except, that is, for this trial that has been taking place in the media for the last week. Well, there's that pesky little Constitution again. A man cannot be deprived of life, liberty or property without due process, and in our country due process means a trial before a jury of one's peers. Barney Frank et al are trying to take these people's money through legislative action without a trial. I would truly hope there isn't a federal judge in this country that wouldn't smack this idiocy down at the earliest opportunity. This isn't about whether or not those people deserved those bonuses. Perhaps not. But the bonuses were paid pursuant to a legally enforceable contract. The property is theirs. Now we have politicians who are trying to take it away just because they're unhappy and embarrassed because they didn't take care of this little problem before the bailout money was paid.

In any event, we can agree that it's horrible policy. And as I understand it, the Senate version is much more far reaching. It "only" levies a 70% rate that is split 35% between the company and 35% between the employee but applies to any company that has received at least $100M in TARP money.

quote:

Originally posted by Shakka Eh, you're probably right on this stuff--it's definitely more your field. I was reading this on another website this morning while I was rather incensed. This is what the guy said: In any event, we can agree that it's horrible policy. And as I understand it, the Senate version is much more far reaching. It "only" levies a 70% rate that is split 35% between the company and 35% between the employee but applies to any company that has received at least $100M in TARP money.

Umm....i screwed up describing bill of attainer. A bill of attainer would be a law that reads, "Bill miller is guilty of treason."

my bad! it's been a while since i last dealt with constitutional law issues unrelated to tax law (or criminal law).

attainDer!

quote:

Originally posted by Shakka attainDer!

werd - i be hungd over.

I would like to pass a warm and gentle "fuck you" to all executives like these (and you guys thought AIG was bad). Who gives a shit about "preventing" them from leaving - let them go - and how about promoting some other folks to do the job of restructuring (I am sure there will be people who would love to do it, plus executives get paid good money) - I am pretty sure its not that much of a back-breaking job. Plus tell it to the 1100 Nortel workers who lost their jobs since the bankruptcy was announced in January - and have been DENIED severance payments. In the bigger picture, many more employees have been terminated since Nortel started freefalling few years back.

http://business.theglobeandmail.com...al_gam_mostview

quote:

Eight Nortel chiefs to split $7.3-million in bonuses March 20, 2009 at 3:52 PM EDT Toronto — Eight senior executives at Nortel Networks Corp. will receive up to $7.3-million (U.S.) in retention bonuses to keep them from leaving the telecommunications giant while it restructures under bankruptcy protection. Bankruptcy court judges in Canada and the United States approved orders at parallel hearings Friday allowing the payments to be made if executives meet various performance objectives, including completing a court-approved restructuring of the company. The approval came despite objections from a Toronto lawyer representing about 60 of the 1,100 Canadian workers who have been laid off from Nortel and were denied their severance payments after the company filed for bankruptcy protection in January. Lawyer Eli Karp said the employees are dismayed to see large bonuses being paid at the same time the company is refusing to honour their promised severance costs. He argued it has left the workers forced to turn to government employment insurance for income. Nortel Nortel is operating under court protection from creditors. Nortel Networks Corp. The Globe and Mail “In the context of the global financial climate the way it is today, our clients object to millions of dollars of bonus payments being made,” Mr. Karp said. “Our clients are now on the government employment insurance payroll and at the same time, the company seeks to pay millions of dollars to its executives while leaving employees not receiving their severance payments.” Nortel would not reveal the names of the eight executives receiving the payments, citing confidentiality. But company lawyer Derrick Tay confirmed Friday they could receive up to $7.3-million if they achieve goals, including completing a reorganization plan. He said five executives in the U.S. would share about $5-million and the rest would go to three executives in Canada. Nortel has previously said chief executive officer Mike Zafirovski will not receive the retention bonus. The payments are part of Nortel's key executive retention program, which totals $23-million and covers 92 employees. The company has also adopted another retention program for 880 key professional employees with a maximum payout of $22-million. The retention plan received court approval on March 6, but the approvals did not include the payments for the top eight executives. Nortel's unsecured creditors in the United States asked that the payments to U.S. executives be delayed until the company had provided its 2009 budget plan. Mr. Tay told the Ontario court Friday the budget plan has been provided, and the company now can seek approval to pay the retention bonuses to the final eight executives in Canada and the United States. He said Nortel's top executives receive much of their compensation from programs such as a stock incentive plan, all of which have been cancelled since the company filed for bankruptcy protection. “Those programs have all been terminated and, therefore, employees of Nortel were in fact below market in terms of their compensation,” he said. “Therefore, it was necessary to put in some type of incentive program to ensure we keep the people we need to keep in order to have a successful restructuring.” Lyndon Barnes, a lawyer representing Nortel's board of directors, also urged Mr. Justice Geoffrey Morawetz of the Ontario Superior Court to approve the bonuses, saying the board cannot function without the advice of its experienced leadership team. He said Nortel's best hope of preserving its value and saving employees' jobs is to complete its restructuring. “The loss of senior management at this time may well dash the hopes of getting this done,” Mr. Barnes said. Mr. Tay also told the court Mr. Karp should not “whip up a frenzy” by suggesting the company's top executives are getting millions of dollars when there is “no evidence” to support this. He said 29 executives in Canada will receive $6.8-million in total. “I think we should all be responsible about what we say, especially in these times of heightened concerns about these matters,” he said. But during a break in Friday's hearing, Mr. Karp said he felt his comments were fair because he believes the 29 people are indeed Nortel's top workers and they are getting millions in total. “I don't know how many employees Nortel has, but it is safe to say there are thousands. The top 20-some to me are pretty senior.” Justice Morawetz said he would approve the bonuses because he had previously approved the executive incentive plan for all other employees except the eight top executives. “Although the amounts involved are not insignificant, it is necessary in my view to consider the plan in the context of the overall restructuring,” he said.

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More good news: the CBO now says that Obama's policies will lead to deficits much worse than anticipated.

quote:

In a new report that provides the first independent analysis of President Obama’s budget request, the nonpartisan Congressional Budget Office predicted that the administration’s agenda would generate deficits averaging nearly $1 trillion a year over the next decade — $2.3 trillion more than the president predicted when he unveiled his spending plan just one month ago. And while Obama would come close to meeting his goal of cutting the deficit in half by the end of his first term, the CBO predicts that the nation’s annual operating deficit would never drop below 4 percent of the overall economy over the next decade, a level administration officials have said is unsustainable because the national debt would grow too rapidly. By the CBO’s estimate, for example, the nation’s debt would grow to 82 percent of the overall economy by 2019 under Obama’s policies, compared with a pre-recession average of 40 percent Senate Budget Committee Chairman Kent Conrad (N-N.D.) has said the gloomier CBO forecast would require “adjustments” to Obama’s budget, though he declined to specify what changes would be necessary.

http://www.usatoday.com/news/washin...it_N.htm?csp=34

... and I remember the outrageously outrageous outrage at Bush's $400 billion deficit spending.