How can they legally pay out bonuses? Aren't they a government agency now?

How come I don't get a bonus to keep me from losing my house?

/sarcasm

Everyone else is worried about being laid off and not being able to find new work. But for some bizarre reason, the devastated financial sector has such low unemployment that they have to pay employees extra to keep them from quitting?! Doesn't that make any sense? Of course not. Exactly where would these employees go if they did not receive their bonuses?!

I was stunned when I heard about this.

@GMFish: Exactly what I was going to post. Don't give them the bonuses and let them leave if they like. I know plenty of MBAs who would be grateful to take their places.

@gqcarrick:
They aren't a government agency, they are under a government conservatorship. They are still a private company, the government has just stepped in to temporarily run it in order to ensure it doesn't collapse. Either way, I'm not sure why you think it's illegal for the government to pay bonuses.

This was our government's response regarding AIG bonus:

"The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place"
http://www.huffingtonpost.com/2009/03/16/national-outrage-forces-o_n_175554.html

So under contractual laws the Administration cannot stop AIG from giving out bonuses. Fine, then please explain why FDIC regulators can break "contractual laws."

"F.D.I.C.'s October agreement with JPMorgan Chase and Washington Mutual allows Chase to pick and choose which of the city's 148 Washington Mutual branches it will keep. Chase will then turn over the rejects to the F.D.I.C. But here's the kicker: According to sources, the F.D.I.C. [CAN THEN SIMPLY TERMINATE THE LEASES OF THOSE REJECTED BRANCHES, ALL CONTRACTUAL OBLIGATIONS VOIDED]...

-I am Lanlord for on of the WAMU Location I don't know who to talk to about this Lease or how to pay my Mortgage.
SOMEONE PLEASE HELP ME
-I believe we spoke with each other. WaMu moved out as of 2/10/,leaving me with an empty building and half a million loan with Chase-WaMu. FDIC legalized the cherry pick by Chase without obligations.Jamie Dimon is really a very smart banker and good bzman,but at the price of all WaMu contractors, landlords,shareholders,etc.
-I got the same situtation. They stopped rent payment. I can not pay the mortgage and will lose the property."
http://www.observer.com/2008/real-estate/it-s-washmu-landlords-fear-gaping-spaces-f-d-i-c-mulls-nuclear-option

*imho*

I'm going to blame the government for this.

Exactly. In this day and age your bonus is being able to have a job in the first place. With the unemployment rate topping 8.5% now - I know there are plenty of qualified people out there that could step in and fill positions.

I guess it's time to pickup the AIG pitchforks and torches and go on the march yet again! :)

yay lets all bash them for being capitalistic; then whine for the government to do something about it. Then complain that the government is too big, is involved in too much and doesn't get anything done.!!!

*headdesk*/*facepalm*

That's pretty much all I can sum up at this point.

@Esquire99: the government can't even run itself it has no business telling others how they should run their own business.

and these contracts would have gone away if the government let them fail first and then stepped in.

The problem being that they were allowed to run like every other private corporation in the country so they have the same screwed up mentality as AIG. Only they have govt. backing. Ironically Ginnie Mae isn't having all these problems because they actually are govt. owned.

I'm sure Barney Frank will be leading the charge to tax them at 90%.

@Skankingmike: It's not capitalistic, it's a good ol' boy system.

@Skankingmike: "yay lets all bash them for being capitalistic"

No one is bashing them for being "capitalistic." We're bashing them for being greedy, losing our money, but yet still being paid for their failure. The rest of us have to face the consequences of our failure, why should these guys be any different?

"then whine for the government to do something about it."

The only people I've heard call for government intervention on this crisis are from the people who caused it but yet still want to be bailed out. I've not heard a single person who wanted AIG, or any other complete failure, to be helped by our government.

"Then complain that the government is too big, is involved in too much and doesn't get anything done"

And once again, the only people complaining about this are the people who caused it. They lost a bunch of our money, but they still want the government to pay them for their failures and losses, but yet they get mad and complain when the government decides not to pay them bonuses for their failures and losses.

shouldn't these companies only give bonuses if they actually had some kind of profit? do they plan to just write off this money along with the billions they've already lost? seems counterintuitive to reward poor production. "great job guys, you just lost us $29 billion! here's a $1 million bonus, keep up the good work!!!"

@gqcarrick:
At one time they were controlled by HUD. The problem is that this is such a good old boy network with many in congress taking campaign contributions from them that they can do whatever they want to.

Stop calling them retention bonuses, these employees would stay at this position with or without this bonus. Seeing as how we're all shareholders I'm willing to bet on it, no wait I'm willing to do more than just bet on it I'm telling you that's how it has to be. You don't like it? Give back my money, every single dime, then do whatever you want.

@GMFish:

In what way is it "our" money?

You know how little our tax dollars actually pay for? Corporations (that pay taxes) pay more into our economy than personal taxes. As well as our bonds and notes that are bought by China and Saudi Arabia. So stop with the Our business.

No most people want a form of government intervention I bet just about every person who's been laid off would love for more government intervention and people now want more government regulation in markets and banking. So yes most people want intervention in some way.

I hear people on this site and IRL that complain constantly about how big the government is, I for one do our government is overgrown and completely outstayed it's welcome

All these companies should have gone belly up and they would have lost their contractual obligations to pay out bonus's. You had millions of constituents hounding Obama and Bush to bail out the Auto Makers, Banks, Insurance companies, mortgage brokers for fear of collapse, as well as just as many who didn't want it.

So don't sit back now after the fact and claim nobody wanted this but those people in those industries cause just as many people wanted this as didn't.

I hope some people wake up from all of this and realize our 2 party system sucks and there is little to no difference in the 2 parties we have.

you want real change in this world then vote 3rd party.

@BluePlastic: no it's contractual obligations that had our wonderful leaders left well enough alone, would have gone away if these companies filed for bankruptcy

We then could have bailed them out if needed or maybe enticed another company to buy them up eating their bad debt for government backed insurance on it or give the companies that bought crap companies the money.

First of all, I like and voted for Obama.

But this is ridiculous. He needs to, uh, not allow this to happen. Or at least reduce bonuses to a level that's a bit more tolerable. I understand that AIG's employees worked and signed on to the job expecting their bonuses--though this is a bad system (a bonus should be a bonus, not a commission), maybe these employees are working at F & F because of the expected bonuses, which augments whatever salary they get. So some reasonable bonus might be due.

I don't know enough about how much these folks were getting paid in the first place to say what's reasonable, but a couple thousand dollars in post-salary cash is really quite nice sounding to me, and not over the top (again, if it's not a commission--if it is, then pay a standard rate and call it what it is).

While I think the these bonus payments are undeserved I beleive i saw on another post the reason that bonuses are paid is they are used instead of a true salary inorder to beat company matching payroll taxes. Does anyone know if this is true? If so I think the corporate tax loophole for high paid execs who get the majority of their compensation in bonus form is a worse problem. How many of these deals never make the limelight.

What I meant to say after stating that I support the President was that I am pissed he hasn't stopped this, if not for the bad practice of rewarding failure, then because politically it's disgusting.

can you scream ffllaatt ttaaxx

@Skankingmike: Capitalism is just a word with many meanings to many people. Socialism is just a word, again, with many meanings to many people. Why do Americans insist on wrapping every concept in a black and white sound bite label? The world is a complex place. A blended approach usually yields the best results.

Starbucks pays bonuses (or it did) to its managers for things like no overtime, along with standard things like sales, etc. That no overtime thing motivated my first manager (not Cal, my second manager, who was/probably still is a delightful and great person, and a kind and understanding manager) to simply not report overtime. So, if I worked 43 hours one week, I would get a paycheck reporting 39.5 or so hours worked. When I confronted her about that, she said she'd given me back the hours, or was going to, for times when I did not work. That's probably fine if a) she had told me in advance b) we'd worked out a way to make sure i was getting paid correctly for correct amounts of overtime, but none of those things happened. Instead she messed with the time clock without my knowledge, which is painful for a conspiracy theorist like myself. Also, overtime paid at time and a half, when shifted to regular hours, is 1.5x the time I worked. So if I worked 44 hours one week, and she shifted the clock so that the next week I "worked" 6 hours (to make up for the shifted overtime), I lost the opportunity to actually work 40 hours that week--I could only actually work 34 hours that week.

I reported her and she left. The district manager, to whom others had raised the issue before and nothing happened, afterwards suggested to me that I should have brought my complaint to him instead. I guess he got in trouble over it too. He kind of sucked.

Anyway, some bonuses can encourage bad behavior.

@frodolives35: I don't see home it can be. Most years, I get a performance bonus, and that counts as straight income on my taxes.

Of course, my company isn't giving bonuses this year because it is having economic troubles due to the mess these financial industry idiots created and oddly enough feels that keeping the company solvent is more important than the bonus plan.

@frodolives35:

Supposedly with AIG, the reason wasn't for tax purposes, but to get the people to stick around - the bonuses weren't being paid unless the stayed until a certain date.

I would imagine that even though the financial business is in sad shape, that the very best people are still sought after, and that you need to give people an incentive to stay on a sinking ship if they can get off.

@Skankingmike:
I'm not sure if that's just a general statement, or a response to what I said, but I agree whole-heartedly that the government has no business telling private businesses how to run themselves. That said, I am willing to accept that there are certain, very limited circumstances in which it is appropriate for the government to extend loans to private businesses in order to prevent collapse.

I'm not familiar enough with precisely what led to the Freddie/Fannie takeover, so I can't really express an opinion as to whether I feel like that particular situation fits within the circumstances that I feel are appropriate.

I say 'get out the pitchforks!' I've got enough energy for another witchhunt, and I disagree with many media outlets that this is taking attention off of more important issues.

I think this is sending a very important and overdue message to the top executives of America.

Getting the job of CEO of a company is not, in itself, a measure of success...guiding the company to a state of dependable and stable profitability should be the primary measure of success and therefore, compensation.

Why does this seem like a radical point of view?

The notion of paying retention bonuses in this economy is laughable at best. The job market right now is pretty barren-in a recent job fair nearby, 40 jobs that people would have utterly avoided a couple of years ago attracted over 200 applicants. Yet there is a need to pay people a bonus to stay in their current jobs? I think not.

These companies failed so miserably that they had to ask the government to help them out in order to stay afloat-this failure was due to shady business practices across the board, coupled with their own piss-poor management. Yet somehow the people who helmed this whole debacle are deserving of a retention bonus?

Maybe it's just me, but I was always under the impression that bonuses in the workplace were intended to reward good work. Instead these companies are using them to keep people who helped destroy (however temporarily) the economy in the jobs that they did so poorly.

I'm pretty sure my two kids (ages 5 and 7) and I could run that company better then the people who they are so desperate to keep on. And we would be a lot cheaper for taxpayers, in that my daughters would work for Littlest Pet Shops and Go-Gurt.

@Skankingmike:

In what way is it "our" money?

In the way Fannie and Freddie were part of my dad's investment portfolio which is now worth next to nothing. Certainly that counts as money lost or am I missing something?

@Esquire99: the answer is always no :P

@Super_Moose: Investments are not guaranteed, lesson learned?

Many companies have multiple business lines, each with their own dedicated employees, budget and core competencies. In many cases, especially in the financial world, corporate losses aren't always across the board. If you use AIG as an example, their derivatives group was the major source of their losses. But when everything is aggregated for financial reporting, the company takes the ultimate loss and in the public eye - the blame.

Now, if you're an executive of a company with 2 business lines and one is profitable and one is dead, you are going to do everything in your power to retain employees on the profitable side or the entire company will go belly up. Problem is, politicians create rhetoric, the media stirs fear and people are given these skewed views of corporate America that become lore.

@HogwartsAlum: No need to call it sarcasm. It's a very legitimate question in my mind. The government has gone 'round the bend in repeatedly rewarding the losers at the expense of the competent, hardworking and productive taxpayers and entrepreneurs. Instead of the land of opportunity, our government has turned our country into the land of rewarding the incompetent, whether rich or poor.

Those of us who bought a home we could afford, and continue to pay our mortgages as agreed, get punished, while the government turns itself inside out to enable the others to keep the homes they never should have bought, and their lenders from going under for their incompetence and unreasonable greed. On top of that, they are now going to REWARD those incompetent managers.

A $24,000 bonus sounds like a lot, but it depends on the base salary.

I work in a similar industry. I get a bonus over $20,000 every year, but my base salary is set intentionally very low. The bonus brings me up to market rate for my position. It's like getting the second half of my salary all at once at the end of the year. (Which makes it hard to survive on the very low salary all throughout the first year. Once you get the hang of it though, you take the bonus at the beginning of the year and ration it for the next 12 months.) I've been paid this way for 10 years now. It's not really a bonus, it's the "other half of my salary."

That being said, the non-taxpayer-funded company I work for has cut our bonuses for 2009. I have to survive on basically minimum wage this year. I have a kid and a modest mortgage payment. It's going to be a very difficult year. However, I knew that this would always be a chance when the market tanked. It's just hard to swallow because the previous ups and downs were met with adjustments in bonus, not complete elimination.

So those with the lowest bonuses of $24,000 may very well be on low base salaries (near minimum wage even.) In this case I have sympathy for them.

The higher bonuses are harder for me to defend. (Sell the beach house and get over it! Skip the vacation in the tropics! Trade in the BMW for a Honda!) But the people who are on a minimum wage/bonus to bring to market rate structure I can sympathize with. They will have a great deal of trouble meeting basic living expenses.

However, I can see how that would make me a bit of a hypocrite, defending the bonuses of some on low salaries, but not those getting extravagant amounts. I'm sure those receiving extravagant bonuses would use the same logic with me, that they need $1.5 million to maintain their "basic living expenses." I just have different ideas of what basic living expenses are.

Regardless, I am happy to still have a job in this economy, bonus or no bonus, bare-bones base pay or not.

Some people's biggest worry right now is about big government? Seriously? What is wrong with you people? The unrealistic faith in a free-market society is what got us here in the first place. What a stupid idea it was to completely deregulate the entire banking system so these criminals can make a killing destroying the economy. In every other country where the banking system fails, the government takes over and fixes it, then relinquishes total control once things have stabilized. Here people are so afraid of some concept of Big Government that they're okay with ridiculous publicly-subsidized bonuses for robber-barons who exploit the payroll tax loophole. Yes, keep up that attitude, you enablers; corporate executives love you for that.

@frodolives35: What do you mean?

@opticnrv: We shouldn't have bailed out Fannie and Freddie in the first place.

Of course, to some people, my idea sounds more radical than yours.

@Madison Underwood: Incentivizing illegal behavior leads to illegal behavior? Get out!

(Yeah, I had the same kind of boss at once point.)

@opticnrv: They have more than 2 colors now? When did this happen? Has anyone informed cable news companies?

@Jennifer Duquette: Hired

@xkevin: When the company I work for misses their target no one gets bonuses. Including the executives. What a crazy concept.

If these are real bonuses and not "deferred salary being called a bonus" like AIG's were, then these bonuses have to be stopped.

If these ARE deferred salary, then they need to all STOP calling it a bonus for pete's sakes.

And yeah, "retention" bonuses are ridiculous in this economy, in one of the hardest hit fields (and thus there are tons of financial people who need jobs).

Plus, if ANY of these people are the ones that were there before the collapse causing these problems by pushing garbage ARMs and sub-primes, then they not only shouldn't get a bonus, they should be FIRED.

@Skankingmike: Do you have any citations to back up your assertion that "So yes most people want intervention in some way" or "So don't sit back now after the fact and claim nobody wanted this but those people in those industries cause just as many people wanted this as didn't?" Just curious.

I just got 3 letters for this. WTF?!

@Skankingmike: I don't really care if it's taxpayer money being used for these bonuses or not; they should be capped at no more than a million dollars or so.