“Hey Big Spender! Spend Some Time…” Thinking About Where Your Money Is Coming From

My biggest question about the economic crisis? What is the government going to do to prevent all of the bail out money (tax payers money) from going to pay for large bonuses and extravagant corporate “conferences”?

While the government can attempt to force companies to not give the huge bonuses if they have received a portion of the cash, they are very limited in what they can actually accomplish. Federal Reserve Chairman Ben Bernake tried to fight against AIG’s $165 million in bonuses to the sector of the business that caused the insurers troubles. If fact, he wanted to sure them to force them to stop the bonuses, but was warned against that by legal council because of a Connecticut State law that would allow those losing the bonuses to get even more in punitive damages than the value of the bonuses. The article on Fox News that this information comes from also mentions a new tax being enforced on these bonuses (up to 90%). Only 15 of the employees who received bonuses agreed to return them in full (this amounted to about $50 million).

President Obama also took a stand on costly “business conferences” that many businesses pay to attend or host. These conferences are held in leisure areas (Sunny Florida anyone? How about a nice party in Vegas?). Although Obama meant exuberant vacation-like trips being taken to these areas and paid for by the corporation, there was an uproar about his comments. Oscar Goodman, the mayor of Las Vegas, is certain that Obama’s nay says on LV conferences will damage the cities economy. I was in Las Vegas recently, it doesn’t seem to be over crowded with suits, mostly tourists looking for a good time. What Obama meant with these statements was that he did not want companies who were receiving bail out money to forget where it came from when they spend it. He doesn’t want the tax payer’s money to be funding someone else’s good time.

The greed of corporate America is irritating to me. There is a huge difference between living comfortably and living extravagantly. Many bankrupt businesses got that way because of the extravagant lifestyles of the employees (how about throwback to Enron… nobody knew how to spend money on things that had nothing to do with the business like they did). For one, no company who is asking for financial help should take transportation that costs $20,000 per flight (CEOs from GM, Chrysler and Ford each took their own private jet to be in attendance at the same senate meeting where they were asking for $25 billion for their companies). It makes me even more angry that the government cannot actually stop this from happening. I fear that the bailout money which is supposed to be used to restructure businesses will continue to be used to feed the greed of corporate America. 

Thoughts?

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4 Responses

  1. “insurers’ troubles” ! Not insurers troubles.

    Apostrophes, people.

  2. Your questions was how will the government make sure that bailout funds are used appropriately.

    Did you answer your own question?

    The CT law is interesting.

    However, contracts get renegotiated ALL THE TIME in America. Ask the UAW. My own cost of living increase was canceled (and I understand why).

    Part of the problem may be the timing. It is hard to get money back after it has been paid out as opposed to renegotiating ahead of time. That still raises the question of who was supervising the writing of the contracts and what accountability was included in the agreement between OUR government and AIG.

    Some more information:
    On contracts: http://www.nytimes.com/2009/03/18/opinion/18cunningham.html?_r=2&ref=opinion

    Letter from AIG VP: http://www.nytimes.com/2009/03/25/opinion/25desantis.html

    I read somewhere, and I can’t now find, that some of the CDS contracts that AIG’s unit wrote included clauses that if one of the AIG people left, AIG had to cover the value of the insured asset. If this is true, it sure smacks of a shake down of Enron proportions.

  3. I would like to compare the extravagant spending of corporate America to nicotine. You have a little bit and you feel good for awhile. After a couple more times smoking that cigarette you become addicted and can no longer live without it. Even though you go bankrupt and are on the verge of losing your house an all your assets you somehow leave room in your no-existent budget to buy cigarettes to get your fix.
    AIG and other companies like Enron and GM were so used to having so much money to spend on business trips and bonuses that it became a way of life. The $500,000 cap salary no longer satisfies their needs and they are all struggling to change their lives in order to cope with the decrease in pay. They NEED that nicotine.
    I would like to end this analogy with this: it would not be right if the government took our tax money to support people on welfare’s need to smoke, just as it is wrong for the government to support people’s need for extravagant spending. There has to be more regulations on this money and I hope Obama and the rest of the White House are working on them.

  4. Megan I like how you compared this to nicotine, the interesting part is where you say that it is not fair for our government to take our tax money for those on welfare to support their habits. The funny thing is, that is what they do. There are regulations on what welfare spending can go towards but, someone can be given their monthly assistance check from the US government, take their food stamps, sell them to another welfare recipient, and then go buy their cigarettes or their alcohol, whatever their addiction is. So, who is to say that big business won’t do the same with the money that Obama and his staff give. It is nice to think that big business wouldn’t do that, and it has been nice to see that employee’s recently have been giving back their big bonuses in order to help the company, I just hope that everyone does that.

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