Incorrect. If the contract is NOT valid, or some of the terms are NOT valid, because it, or they, violate some law or public policy or because it was entered into based on fraud, coersion, or the signatories lacked proper authority, etc., then the other party is not breaking the contract, they are refusing to perform an invalid contract. There’s nothing wrong with that at all. In fact, one should definitely refuse to perform an invalid contract if the terms are unacceptable.
If AIG got the govt to sign investment agreemetns and pay the money based on fraud, the govt should do everything possible to make sure the bonuses aren’t paid in the first place. It’s always easier to avoid paying out money then to pay it out and try to take it back.
I don’t know if they’re enforceable or not. Depends on all the detailed language of the contracts underlying the bonus payment obligations as well as possibly other contracts, laws and facts. Also, you’re “assuming facts not in evidence” when you state that the parties entered into the contract in good faith. Maybe they did, maybe they didn’t. The lawyers are looking into that. So, we don’t know if they’re legally enforceable or not. One would need to review substantial complex, detailed information (not just brief news summaries) to make a reasonable assessment.
I agree more with you on that. Ex post facto law to remedy for their screw up is a different matter, definitely more scummy.
Will it cost more? I don’t know. As I said, an ex post facto tax seems scummy and perhaps AIG would sue over it and millions would be spent on attorney fees ( ) but perhaps in the end it would result in govt savings.
[quote=“Charles Fried, Harvard Law School prof”]Faithful performance of contractual obligations is certainly a keystone of a well-functioning system of business and credit. . . But that surely does not mean the money should have been paid out no matter what.
Could the well-known doctrine of change in underlying assumptions have been invoked to abrogate the obligation?
. . . And most pertinently, as these bonuses appear to have been related to performance of services, is it clear that the recipients faithfully performed the services for which they were being compensated?
These and other such questions cannot be answered without seeing the actual contracts that are being invoked. And even then, there are questions about whether the performance of these individuals matched the performance set out in the contracts. As we all own 80 percent of the company, we ought to be able to see the text of these contracts. They should be posted on our company’s — that is, A.I.G.’s — Web site. Then we can discuss whether the recipients of that money really earned it.[/quote]
[quote=“James Tuthill, UC Berkelely Law professor”]Every first-year law student learns that a court can invalidate a contract’s “unconscionable” terms, rescind it or reform it. If these bonus contracts benefiting the very people who have destroyed incalculable amounts of wealth in the pursuit of their own personal greed don’t warrant revision, rescission or reformation, then our legal system is seriously deficient.
A.I.G.’s argument is that it had to agree to these bonuses to retain the “best and brightest talent.” But how can these executives be the best and brightest talent when shareholders have been wiped out, bondholders have incurred substantial losses and the American taxpayer has pumped $170 billion into the company?
Payment of bonuses to employees who have wrought so much destruction and havoc on us all is simply ipso facto unconscionable, and a court should reform or invalidate the contracts. Every contract has certain implied provisions and terms that are not specifically spelled out but presumed to be part of the agreement because such terms are so fundamental to a reasonable agreement between two parties. So with a payment of a bonus, it must be presumed that an implied term is the employee won’t destroy the company and shareholders for whom the employee supposedly works. If the employees’ acts have been so contrary to the interests of the shareholders, as is the case with A.I.G., then payment of the bonuses is unconscionable and the obligation can be voided.
The doctrines of rescission and reformation can also be used to challenge the bonus contracts. Under rescission, a contract can be voided because of misrepresentation or mistake, and under contract reformation, a court may equitably modify a contract where there are mistakes of fact or law. The bonus contracts that A.I.G. said were made last year must have been premised at least on maintaining A.I.G. as a shareholder-owned company. Thus they were premised on a mistaken fact and now can be revised[/quote]
A.I.G.’s argument is that it had to agree to these bonuses to retain the “best and brightest talent.” But how can these executives be the best and brightest talent when shareholders have been wiped out, bondholders have incurred substantial losses and the American taxpayer has pumped $170 billion into the company?
Yes, these guys are only qualified for lining their own pockets and have been PROVEN (to the tune of 170 billion USD) to be completely incompetent at actually running a business.
I don’t believe they didn’t know the systematic risk, they were just hoping the sh%t would hit the fan with their unstable bets after they had made off with their annual bonuses.
Thanks for posting that Mother Theresa. Interesting reading from the esteemed law professors. I truncated the quotes because the post was 80% quoting and difficult to read. What I would like to point out is highlighted below:
[quote=“James Tuthill, UC Berkelely Law professor”]Every first-year law student learns that a court can invalidate a contract’s “unconscionable” terms, rescind it or reform it.
…
Payment of bonuses to employees who have wrought so much destruction and havoc on us all is simply ipso facto unconscionable, and a court should reform or invalidate the contracts
[/quote]
My point is that the law professors all seem to agree that the proper forum is the courts. I wasn’t as clear in my initial posts as I should have been, but my contention is that Congress should not be attempting to write special legislation to deal with this problem. We have a well functioning court system and separation of powers for this very reason. An individual can seek redress in the courts, not in Congress. The courts are the one’s with the power to rescind or reform the contracts, not Congress.
I would also point out that the last two professors are in agreement that the terms of the contract must be examined in order to see if they can be voided. Without the contracts available we are all shooting in the dark, even if some are closer to the target than others.
Speaking for the peanut gallery here, we’re all doomed anyway if government officials obligated taxpayers to pay “performance bonuses” to dumfucks who drove their company off an historic cliff because we’ve obviously put dumfucks in charge of fixing the problem.
On the other hand, if government officials didn’t knowingly or unknowingly obligate us to pay a dumfuck surcharge then what’s the problem?
[quote=“spook”]Speaking for the peanut gallery here, we’re all doomed anyway if government officials obligated taxpayers to pay “performance bonuses” to dumfucks who drove their company off an historic cliff because we’ve obviously put dumfucks in charge of fixing the problem.
On the other hand, if government officials didn’t knowingly or unknowingly obligate us to pay a dumfuck surcharge then what’s the problem?[/quote]
Well Spook, you were eerily correct about your dumbfucks in government comment. It looks like they didn’t just obligate taxpayers to bailout AIG but that Senator Chris Dodd, Chairman of the Senate Banking Committee, was the one who wrote in the loophole into the Stimulus bill that allowed AIG to still pay out their bonuses that were promised before Feb 11, 2009. The only hope is one of the lines written in the amendment to the bill may be able to get them back.
[quote]Dodd still thinks the Treasury can get the bonuses back, despite the inclusion of a date in the stimulus bill, and he said officials are, in fact, using his very language to claw back the money.
“There is language after that date that says explicitly that the Treasury has the right to modify, reaching back, those bonuses, compensations, if it’s inconsistent with the TARP legislation or contrary to the public interest,” he said.[/quote]
I may not have been paying much attention lately, but this morning I see headlines of $1.2 trillion? Anyone interested in starting a pool for what the bailout will actually cost?!
Correct me if I’m wrong, but aren’t the historically low mortgage rates now believed to be one of the primary causes of the housing bubble? With the unemployment at 8% what makes them think that the housing market needs to be revived right now? Aren’t they worried that this will just set up for another bubble to form in the housing market? Also, why are they trying to boost car sales and credit card usage? Wouldn’t that money be better spent on education and job creation?
How much will the bailout actually cost? That’s like asking how much air it will take to fill a tire with a hole in it.
A better question would be ‘how much time and borrowed money will we have to spend before we realize that the only thing which really matters is an economy in which you make or do something cheaper and better than anyone else?’
In other words, it’s the economic fundamentals, stupid.
Ok, rephrase the question then so that you aren’t insulting: How much will American bonehead legislators throw at the tire with the hole in it before they realize that it’s just the economic fundamentals? :raspberry:
[quote=“Washington Post”]Federal Reserve officials knew for months about bonuses at American International Group but failed to tell the Obama administration, according to government and company officials, exposing problems in a relationship that is vital to addressing the financial crisis.
[…]
As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due.
[…]
Treasury Secretary Timothy F. Geithner, a central figure in the decision to bail out AIG last fall as president of the Federal Reserve Bank of New York, said in an interview yesterday that he had not been aware of the size of the bonuses and the timing of the payments.
“I was stunned when I learned how bad this was on Tuesday [March 10],” Geithner said. “I shouldn’t have been in that position, but it’s my responsibility and I accept that.”
Two days later, Geithner told the White House. The last-minute disclosure irked some of the president’s senior advisers, but they refuse to point fingers now, saying the timing had little impact on the outcome or the president’s public statements this week. [/quote]
Obama’s response:
[quote=“Wall Street Journal”]President Barack Obama said he will take the blame for bonuses being paid at American International Group Inc. if it will settle an intense finger pointing under way over how such payments were possible at a company that has received tremendous taxpayer aid.
“Washington is all in a tizzy and everybody is pointing fingers at each other and saying it’s their fault, the Democrats’ fault, the Republicans’ fault,” he said at a town hall meeting Wednesday. “Listen, I’ll take responsibility. I’m the President.”
He also make clear that it isn’t really his fault. “We didn’t grant these contracts,” he said.
But he added: “So for everybody in Washington who’s busy scrambling, trying to figure out how to blame somebody else, just go ahead and talk to me, because it’s my job to make sure that we fix these messes, even if I don’t make them.”[/quote]
I’ve long been unhappy with the big Canadian banks (and not just because the service sucks), but they’re now looking like very good investments… they’re in good shape, and there’s lots of cheap American banks and business just waiting to be picked up.
Ok, rephrase the question then so that you aren’t insulting: How much will American bonehead legislators throw at the tire with the hole in it before they realize that it’s just the economic fundamentals? :raspberry:[/quote]
That was a rhetorical “stupid.” A throwback to the slogan from the Clinton era. In answer to your question my guess is they’ll have to be dragged kicking and screaming back to the economic fundamentals – which means they’ll be a lot of pain and suffering before that occurs.
Ok, rephrase the question then so that you aren’t insulting: How much will American bonehead legislators throw at the tire with the hole in it before they realize that it’s just the economic fundamentals? :raspberry:[/quote]
That was a rhetorical “stupid.” A throwback to the slogan from the Clinton era. In answer to your question my guess is they’ll have to be dragged kicking and screaming back to the economic fundamentals – which means they’ll be a lot of pain and suffering before that occurs.[/quote]
Rhetoric and dated references obviated by what? Directly quoting another poster and dated political references?
Pain and suffering are already obvious by the rise shanties in American cities and towns with people living in their cars or tent communities and also the rise in prostitution. But the real pain will only be obvious once they (the gov’t) drag everyone else down and their creditiors refuse to keep funding their debt. Then the mechanism will show its true state of disrepair. Then you will see not only pain and suffering, but violence, too.
Anyway, enough with doomsday scenarios: I was asking for a quantifiable amount, a kind of guessing game, if you will…
[quote=“spook”]How much will the bailout actually cost? That’s like asking how much air it will take to fill a tire with a hole in it.
A better question would be ‘how much time and borrowed money will we have to spend before we realize that the only thing which really matters is an economy in which you make or do something cheaper and better than anyone else?’
In other words, it’s the economic fundamentals, stupid.[/quote]
Common sense, it’s hard to face though, people want a magic carpet ride to fly away from the problem. If we take the economy of the US to be like a company economy or a family budget, we can see that the day of reckoning can never be put off forever…for some reason they are saying it’s the banks, it’s property etc…always a new target. Eventually you have to face facts like you said. Rise and fall and rise again (maybe).
You’re missing the point of this latest bailout. Bernanke is so fucking stupid that he believes that people will continue to dig themselves deeper into debt, even when their jobs are unstable and they have no savings and they can see we’re heading into a depression, if only he offers them the opportunity to do so.
Everybody needs a new Hummer, don’cha know? If you don’t buy one – hell, buy TWO – General Motors will have to declare bankruptcy. Not that that would be any real loss. But the point is, if GM declares bankruptcy, then GM can RENEGOTIATE ITS LABOR CONTRACTS and the United Auto Workers doesn’t want that to happen. Oh, and the UAW happens to be one of the biggest donors and vote-buyers for Obama. Did you think this bailout was about the American economy? It’s not; it’s about transferring money to politically-connected campaign contributors. Obama got over $100,000 from AIG during his campaign. Senator Dodd got a bit more than Obama.
Education? At least half of the money spent on “education” is a total waste. “Golf course administration” is not a worthwhile major. “Women’s studies” is something I enjoy working on at strip joints; it doesn’t belong in college (unless the girl needs to pay her way through, of course). Most of the idiots who are pouring money down the toilet on a degree should just go get a job serving up french fries at Burger King.
In talking with my classmates, I’m floored by how many are piling on $150,000 to $200,000 in student loan debt. I’m on a pretty good scholarship, but I’ve got enough in savings to pay full price if I didn’t have that. These kids are 23, have never held a serious job, and are accumulating more debt than I was willing to take on when I was making $80,000 a year. (I maxed out with a $165K mortgage, and I hated every second of it.)
[quote=“spook”]Speaking for the peanut gallery here, we’re all doomed anyway if government officials obligated taxpayers to pay “performance bonuses” to dumfucks who drove their company off an historic cliff because we’ve obviously put dumfucks in charge of fixing the problem.
On the other hand, if government officials didn’t knowingly or unknowingly obligate us to pay a dumfuck surcharge then what’s the problem?[/quote]
No, Carter’s gone. It’s now the witch doctor gallery.
[quote=“MaPoSquid”]
Education? At least half of the money spent on “education” is a total waste. “Golf course administration” is not a worthwhile major. “Women’s studies” is something I enjoy working on at strip joints; it doesn’t belong in college (unless the girl needs to pay her way through, of course). Most of the idiots who are pouring money down the toilet on a degree should just go get a job serving up french fries at Burger King.
In talking with my classmates, I’m floored by how many are piling on $150,000 to $200,000 in student loan debt. I’m on a pretty good scholarship, but I’ve got enough in savings to pay full price if I didn’t have that. These kids are 23, have never held a serious job, and are accumulating more debt than I was willing to take on when I was making $80,000 a year. (I maxed out with a $165K mortgage, and I hated every second of it.)[/quote]
It’s surprisingly easy to pile on that kind of debt if you go to a private university. When you take money out in student loans like most students do, it takes strong will to send back the extra money left over and not spend it on a lifestyle. The student loan disbursement (what’s left after you pay tuition) covers more than just books and supplies. They hand you a check and allow you to spend it on anything at all. My student loan balance would be half of what it is now had I sent back the extra instead of using it so I wouldn’t have to work while in college.
If that wasn’t bad enough, a lot of people I know were certain they could land a job making at least 60k a year right out of college and none of them were engineering majors. Most were looking for the 80k to 100k a year right out of college. Now Southern California is expensive and has a higher median income, but not enough that someone right out of college would be making that kind of change.
) but perhaps in the end it would result in govt savings.
