Why do these execs keep getting millions for failure? Sure, he keeps the shares and the cash. But why does he get a $4 million bonus for the last 6 months, after a BAD performace?
failure?! um…it says that he still gets it based on the ruling. but here’s my concern, if it resigned, why does the company still want to hold onto him and his office and even give him an assistant? for what? he no longer is in power, so what work will he be doing?
Good point wudchuck.
Not surprised of this or any CEO failure. They always get PAID. Dont support this occurrence but you cant blame the CEO. The boards need to step it up and pay for performance and penalize for lack thereoff. IE you f’up and resign or get fired you are not getting $$$. Common sense everyone. They are employees not gods they should be treated the same. Yes compensate better but still an employee gets paid to perform not fail.
at the end of the year, if that’s okay with you, and here is almost $50 mil just to make sure you don’t talk to the SEC or state attorney generals circling like sharks around a sinking ship.
This is the stuff that really gets the middle class up in arms. In the old days the pitch forks would be out and storming the Bastille.
The middle class is dwindling, they’ve seen declining wages, layoffs, etc. and some guy walks with $47 million.
What the heck do you need or intend to do with $47 million in one shot?
The average wage in this country (66.2 percentile in * year 2006) was around $37,500. I know we aren’t to care what other people make but darn, it just seems to get screwier and screwier as years pass.
I am not sure if we are a capitalist nation anymore….more like a feudal system of Kings, Queens and surfs.
Oh, you guys. This is a way of life nowadays. Here in CA, we pay teachers (and continuously give them raises to keep them from striking) who can’t impart enough of an education to our children to get close to AVERAGE test scores in the nation. And people keep voting for school bonds and never scream about increased property taxes coming directly from their pockets to pay THOSE incompetents. Why would you expect them to “storm the Bastille” when some big bloated overpaid CEO gets a “parting gift” they figure won’t touch THEIR pocketbooks?
I know someone that works at AIG. They got a promotion and was due for their annual review. After H.R. cut it, upper management cut it and then “compensation” cut it. Their original raise was redused by over half. Reason-the stock is not doing well.
The top exec that she works for got a substanial raise and oddly enough, it was not cut at all. I guess upper management geets paid based upon different stock results.
Ther richer get richer and the working middle class still get screwed.
Boards of Directors have been covering the asses of CEO’s for decades. It’s a great gig if you can get into the “inner circle”. If you succeed, you get over-compensated. If you screw up, it doesn’t matter, you get over-compensated. Anyone with half a brain should realize that no one individual is worth, or needs that kind of money. The practice of rewarding failure is symptomatic of where the country is headed. There’s no accountability and no consequences for anyone anymore. (unless it’s you or me in which case we’d be in prison)
God bless America and save us from ourselves! Corporate greed and the good ole boy boards of directors are silent terrorists who are taking this great nation down the path of the Roman Empire! If the expression ‘Freedom isn’t Free’ has relevance, why should these hundred’s of modern-day CEO’s get exorbitant, outrageous gifts for running their companies into dire straights?…
Here’s an email that agents in Texas recently received – maybe this “new” President will be NEXT!
Please add AIG_Auto@aigcorpebus.com to your address book or safe list to ensure our e-mail reaches your inbox.
AIG Agency Auto
Deerfield Corporate Centre Two
13010 Morris Road
Alpharetta, GA 30004
James W. Dwane
President
June 17, 2008
Dear Texas Producer,
In my first few weeks as the new President of AIG Agency Auto, I have spent a great deal of time evaluating where we are as a business and where we want to go. One of our principal strengths has been, and will continue to be, our producers. I recognize the significant value of independent agents and brokers and the need to provide you with competitive insurance products for our continued mutual success.
Recently, the personal lines market has experienced an increase in losses. This, combined with a lack of rate adequacy, has affected our financial performance, as it has many other leading insurers. In response to these challenges, we are preparing to make the following changes to our Personal Auto product.
Adjusting rates to provide the appropriate rate for each risk
Making necessary underwriting changes to increase policy accuracy
Temporarily suspending the writing of single vehicle new business policies effective July 2, 2008
Elimination of new annual term policies effective July 2, 2008
Restricting the availability of some pay plans while suspending others
These changes are required in order to improve our loss results and to ensure a better position in the marketplace. In the meantime, please continue to quote us on multi-vehicle auto business as we focus on creating greater value and ultimately becoming your preferred provider in the independent agency market. Our goal is to differentiate ourselves by providing the innovative product offerings and services that you expect from the world’s leading insurer.
We appreciate your patience and continued partnership as we take these necessary steps to ensure our future success together.
Sincerely,
James W. Dwane
President
AIG Agency Auto
Insurance and Services Provided by Member
Companies of American International Group, Inc.
This is especially infuriating, given the recent reports of the “soft market” and lower earnings. Our agency CEO recently emailed us all a newsletter from one of our carriers which elaborated on how earnings for 2008 are down from 2007, and commented that our agency revenue followed a similar curve (implied – bonuses recd in past years may not be there this year). Then I also noticed on another company’s agent’s page detailed information on a sales incentive super-luxury Alaskan cruise. Kind of like choking on dry bread when trying to swallow the stories of how poorly the ins companies are doing this year.
When my son had a fender bender and they increased our insurance by nearly double (over $4,500 for 4 people, no prior claims)I dropped THEM and have been smiling ever since. Just happy AIG is not getting any of my money.
It’s a pre-negotiated contract with a back-loaded parting gift. Same as a pre-nup. Call it a cost of doing business and move on.
The only difference between this and A-Rod, Jeter, and anybody else who sells ‘long’ at the top of the market is the timing of the outrage.
Who doesn’t get all they can when they have scarcity and opportunity working in their favor. Only the scale is different for you or me. It’s the American Way forchrissakes
This is spot on. It’s an absolute travesty that this was allowed to happen. It speaks volumes about the integrity and moral ethics of this company’s management. If I was a stockholder in AIG, I would do two things: demand the firing of every board member, then sell every share of AIG stock I owned.
Sad that Jeff and most others it seems, think of this as the “American Way” Used to be the American Way was something one could be proud of – finding success through doing the right thing (good work ethic, good morals) – now apparently, the American Way is just obtaining material wealth any way possible, usually who you know, and there is no such thing as accountability or personal pride in the quality of the work, or how well a job is done, just get in, have your slimy lawyers draft the deal with your cronies, and walk away with the dirty cash. No wonder the rest of the world now hates us.
Gosh, the rest of the world hates us? Maybe they should stop taking our foreign aid then, huh? If you haven’t noticed the increase in narcissism in this country, you just haven’t been paying attention. Single women having babies they can’t afford, CEO’s getting high didg parting gifts–where have YOU been?
Yikes! Most of you who posted here make me puke. While I have never been the CEO of a large corporation, I have had employment contracts in the past. When accepting a job I negotiated for the best terms I could get. Then, when my employment ended, I expected the terms of the agreement to be met.What’s wrong with that?
There will always be executives who make way more than I can ever imagine, but so what. I don’t suffer from class envy like the whining weenies who are horrified by large bonuses for top execs. If you worked as hard as they have to get those positions then the weenies would envy you. You’re pathetic!
BUT- when they drive a company into losses and possibly bankruptcy, where in your ‘deal with it’ world should they receive an amount of money that basically drain a percentage of the assets the company has left.
The CEO of Countrywide walked away with a similar bonus. (Of course, he’s probably going to spend most of it on a defense attorney) The former CEO of the company that brought on a substantial percentage of the economic backslide we’re facing today will whistle while he moves into his new mansion.
What happened to pay for performance?
I can screw up! I can, I can, I can….. pay me $47M and you won’t believe how I will strive to be as bad as he was.
I am a possible new customer to AIG. I was contacted by my mortgage company to have Health Benefits insurance program through AIG. This allows me, the primary insured, to have accident and hospital coverage and then for the whole family to have $100 physician visit per month. This is for myself, my husband or any of our 5 children that go to a dentist, chiro, doctor, or any licensed physician they will reimburse us $100.00 each month if we do that. Obviously to a large family we will use this service and benefit greatly from this program. My cost is $25.95 added to my mortgage escrow per month. After reading a few posts I am concerned and looking for some input from others about this company. Is this an insurance company and program I can trust. Will they actually reimburse me for my monthly visits. I also read on another page that people did not get their gas reimbursements ($15) and I just have some concerns so anything you can share I would appreciate as I have until August 12 to cancel. Thank you all.
please give Mr. Sullivan some space. He has greater expenses that most of us, so he needs more income. Once his severance is all gone, he can get unemplyment to tyde him over.
YES—I GUESS I’M A WEENIE CUZ I THINK A JOB LIKE CEO SHOULD BEAR THE ULTIMATE RESPONSIBILITY FOR SUCCESS OR FAILURE. SO SALARY SHOULD BE ABOUT $100,000 AND BONUSES BASED ON THE P & L STATEMENT. I DON’T FAULT SULLIVAN FOR NEGOTIATING THE BEST DEAL HE COULD GET, AND THE COMPANY MUST HONOR IT. HOWEVER I DO FAULT THE BOARD OF ANY CORPORATION FOR MAKING SUCH DEALS IN THE FIRST PLACE. THEY DO NOT REPRESENT THE BEST INTERESTS OF THE SHAREHOLDERS AND POLICYHOLDERS!
What next is in store for the free market capitalist to screw up and pass the buck to us taxpayers, is there next chapter in their playbook? I hope not, my grandkids are already in the whole thanks to this greed they created. Anyone out there who votes for McCain should hold their head in shame because he adorns the very reason this happened,,,,DEregulation.
Apparently, you missed the part of the sub-prime mess where the “guvmint” virtually forced lenders to loan to people the banks knew couldn’t pay them back. You might want to do a little research before you trash big corporate America. In my neighborhood the banks were “encouraged” (which undoubtedly translates into some advantageous tax break) to loan to illegal immigrants. When was the last time businesses actively advertised to criminals? This mess is what comes of government involvement. How many congresscritters have ever run a successful business? They just want to count the politically correct beans.
BAIL THEM OUT WITH THEIR OWN MONEY. WHY SHOULD I HAVE TO PAY FOR SOME IDIOTS RUNNING THE FINANCIAL SYSTEM:
THE DISREGARD OF FUNDAMENTAL ECONOMIC PRINCIPLES OF SOUND PRACTICE IS WHAT HAS BROUGHT US INTO THIS NATIONAL MESS.
WHAT ASTONISHES ME IS HOW ANY KIND OF REASONABLE RESPONSE TO THIS CRISIS HAS BEEN IGNORED BY THE GOVERNMENT IN WASHINGTON , BY THE POLITICAL CAMPAIGNERS, AND BY THE NATIONAL MEDIA.
THE CLUE IS TO LOOK AT REFORMS REGARDING FUTURE PRACTICE, AND TO DRAW FROM THOSE CONCLUSIONS SOME FIRM IDEAS AS TO HOW TO DEAL WITH THE CURRENT CRISIS.
FIRST:
BANKS AND OTHER INITIAL MORTGAGE GRANTORS SHOULD BE PROHIBITED FROM PACKAGING AND SELLING MORTGAGE INSTRUMENTS TO THIRD PARTIES. THAT WOULD MAKE THEM LOOK CLOSELY AT THE CREDITWORTHINESS OF POTENTIAL HOME BUYERS.
THE PRACTICE OF ADJUSTABLE-RATE MORTGAGES SHOULD BE MADE ILLEGAL. THE INITIAL AND FIRMLY FIXED MORTGAGE RATE SHOULD REFLECT THE RISK INHERENT IN INTEREST RATE FLUCTUATIONS.
SECOND:
THE PROHIBITION OF ADJUSTABLE-RATE MORTGAGE PAYMENTS SHOULD APPLY TO EXISTING MORTGAGES. THE INITIAL RATE CHARGED SHOULD BE SET IN CONCRETE, ABJUGATING THE INCREASES CHARGED TO MORTGAGE HOLDERS.
THE CONVERSION TO INITIALLY OFFERED INTEREST RATE ON OUTSTANDING MORTGAGES WOULD REDUCE THE “TAKE” BY WALL STREET ON EACH MORTGAGE, BUT WOULD STOP THE FLOOD OF FORECLOSURES.
THE LOWER RATE OF RETURN WOULD DEVALUE THE PACKAGED SECURITIES HELD BY THIRD PARTIES, BUT WOULD SOLIDIFY SOME LEVEL OF VALUE IN THEIR HOLDINGS.
IN ORDER TO PROTECT AGAINST FORECLOSURES, THE EXCESS ABOVE INITIAL RATE WHICH HAS BEEN PAID IN THE PAST, WOULD BE APPLIED TO THE REMAINING PRINCIPAL OWED BY THE MORTGAGE HOLDER.
I BELIEVE THAT THESE STEPS WOULD STABILIZE THE MARKET SUFFICIENTLY, WITHOUT ANY MASSIVE “BAILOUT” BY TAXPAYERS.
IT IS UNFORTUNATE THAT SUCH REASONABLE REFORMS HAVE NOT BEEN DISCUSSED, SINCE THEY OFFER BOTH SHORT-TERM AND LONG-TERM CORRECTIONS TO A FINANCIAL SYSTEM THAT HAS INNOVATED ITSELF BEYOND REASON AND FIDUCIARY RESPONSIBILITY.
Why do these execs keep getting millions for failure? Sure, he keeps the shares and the cash. But why does he get a $4 million bonus for the last 6 months, after a BAD performace?
HEY,JEFF! WHY DON’T THEY JUST HIRE SOME HOMELESS BLOKE OFF THE STREET AND PAY HIM $25,000 A YEAR NOT TO SHOW UP? WHY DO THEY NEED A CEO?
failure?! um…it says that he still gets it based on the ruling. but here’s my concern, if it resigned, why does the company still want to hold onto him and his office and even give him an assistant? for what? he no longer is in power, so what work will he be doing?
Good point wudchuck.
Not surprised of this or any CEO failure. They always get PAID. Dont support this occurrence but you cant blame the CEO. The boards need to step it up and pay for performance and penalize for lack thereoff. IE you f’up and resign or get fired you are not getting $$$. Common sense everyone. They are employees not gods they should be treated the same. Yes compensate better but still an employee gets paid to perform not fail.
Don’t go away mad, just go away…
at the end of the year, if that’s okay with you, and here is almost $50 mil just to make sure you don’t talk to the SEC or state attorney generals circling like sharks around a sinking ship.
This is the stuff that really gets the middle class up in arms. In the old days the pitch forks would be out and storming the Bastille.
The middle class is dwindling, they’ve seen declining wages, layoffs, etc. and some guy walks with $47 million.
What the heck do you need or intend to do with $47 million in one shot?
The average wage in this country (66.2 percentile in * year 2006) was around $37,500. I know we aren’t to care what other people make but darn, it just seems to get screwier and screwier as years pass.
I am not sure if we are a capitalist nation anymore….more like a feudal system of Kings, Queens and surfs.
* 2006 was the last year for the government stats. http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2006
NO MAN IS WORTH THAT AMOUNT OF MONEY – NEVER EVER !
Oh, you guys. This is a way of life nowadays. Here in CA, we pay teachers (and continuously give them raises to keep them from striking) who can’t impart enough of an education to our children to get close to AVERAGE test scores in the nation. And people keep voting for school bonds and never scream about increased property taxes coming directly from their pockets to pay THOSE incompetents. Why would you expect them to “storm the Bastille” when some big bloated overpaid CEO gets a “parting gift” they figure won’t touch THEIR pocketbooks?
I know someone that works at AIG. They got a promotion and was due for their annual review. After H.R. cut it, upper management cut it and then “compensation” cut it. Their original raise was redused by over half. Reason-the stock is not doing well.
The top exec that she works for got a substanial raise and oddly enough, it was not cut at all. I guess upper management geets paid based upon different stock results.
Ther richer get richer and the working middle class still get screwed.
My experience tells me that your friend needs to have an “addidictomy”.
Boards of Directors have been covering the asses of CEO’s for decades. It’s a great gig if you can get into the “inner circle”. If you succeed, you get over-compensated. If you screw up, it doesn’t matter, you get over-compensated. Anyone with half a brain should realize that no one individual is worth, or needs that kind of money. The practice of rewarding failure is symptomatic of where the country is headed. There’s no accountability and no consequences for anyone anymore. (unless it’s you or me in which case we’d be in prison)
God bless America and save us from ourselves! Corporate greed and the good ole boy boards of directors are silent terrorists who are taking this great nation down the path of the Roman Empire! If the expression ‘Freedom isn’t Free’ has relevance, why should these hundred’s of modern-day CEO’s get exorbitant, outrageous gifts for running their companies into dire straights?…
Maybe if the CEO wasn’t given a $47,000,000 severence package, the company wouldn’t be losing money.
Just think of how many auto policies AIG Direct will have to sell to finance the severance package of a “failure”.
Here’s an email that agents in Texas recently received – maybe this “new” President will be NEXT!
Please add AIG_Auto@aigcorpebus.com to your address book or safe list to ensure our e-mail reaches your inbox.
AIG Agency Auto
Deerfield Corporate Centre Two
13010 Morris Road
Alpharetta, GA 30004
James W. Dwane
President
June 17, 2008
Dear Texas Producer,
In my first few weeks as the new President of AIG Agency Auto, I have spent a great deal of time evaluating where we are as a business and where we want to go. One of our principal strengths has been, and will continue to be, our producers. I recognize the significant value of independent agents and brokers and the need to provide you with competitive insurance products for our continued mutual success.
Recently, the personal lines market has experienced an increase in losses. This, combined with a lack of rate adequacy, has affected our financial performance, as it has many other leading insurers. In response to these challenges, we are preparing to make the following changes to our Personal Auto product.
Adjusting rates to provide the appropriate rate for each risk
Making necessary underwriting changes to increase policy accuracy
Temporarily suspending the writing of single vehicle new business policies effective July 2, 2008
Elimination of new annual term policies effective July 2, 2008
Restricting the availability of some pay plans while suspending others
These changes are required in order to improve our loss results and to ensure a better position in the marketplace. In the meantime, please continue to quote us on multi-vehicle auto business as we focus on creating greater value and ultimately becoming your preferred provider in the independent agency market. Our goal is to differentiate ourselves by providing the innovative product offerings and services that you expect from the world’s leading insurer.
We appreciate your patience and continued partnership as we take these necessary steps to ensure our future success together.
Sincerely,
James W. Dwane
President
AIG Agency Auto
Insurance and Services Provided by Member
Companies of American International Group, Inc.
Copyright © 2008 American International Group, Inc. All rights reserved.
AIG Agency Auto, 13010 Morris Road, Alpharetta,GA 30004
If you do not wish to receive messages like this one in the future, please click here.
This is especially infuriating, given the recent reports of the “soft market” and lower earnings. Our agency CEO recently emailed us all a newsletter from one of our carriers which elaborated on how earnings for 2008 are down from 2007, and commented that our agency revenue followed a similar curve (implied – bonuses recd in past years may not be there this year). Then I also noticed on another company’s agent’s page detailed information on a sales incentive super-luxury Alaskan cruise. Kind of like choking on dry bread when trying to swallow the stories of how poorly the ins companies are doing this year.
When my son had a fender bender and they increased our insurance by nearly double (over $4,500 for 4 people, no prior claims)I dropped THEM and have been smiling ever since. Just happy AIG is not getting any of my money.
HEY PAL, HE RAN THE COMPANY FOR THREE YEARS!!!!
It’s a pre-negotiated contract with a back-loaded parting gift. Same as a pre-nup. Call it a cost of doing business and move on.
The only difference between this and A-Rod, Jeter, and anybody else who sells ‘long’ at the top of the market is the timing of the outrage.
Who doesn’t get all they can when they have scarcity and opportunity working in their favor. Only the scale is different for you or me. It’s the American Way forchrissakes
This is spot on. It’s an absolute travesty that this was allowed to happen. It speaks volumes about the integrity and moral ethics of this company’s management. If I was a stockholder in AIG, I would do two things: demand the firing of every board member, then sell every share of AIG stock I owned.
Sad that Jeff and most others it seems, think of this as the “American Way” Used to be the American Way was something one could be proud of – finding success through doing the right thing (good work ethic, good morals) – now apparently, the American Way is just obtaining material wealth any way possible, usually who you know, and there is no such thing as accountability or personal pride in the quality of the work, or how well a job is done, just get in, have your slimy lawyers draft the deal with your cronies, and walk away with the dirty cash. No wonder the rest of the world now hates us.
Curses on Sullivan and his family for 3 generations. This money will bring them nothing but misery. It is now so.
Gosh, the rest of the world hates us? Maybe they should stop taking our foreign aid then, huh? If you haven’t noticed the increase in narcissism in this country, you just haven’t been paying attention. Single women having babies they can’t afford, CEO’s getting high didg parting gifts–where have YOU been?
Yikes! Most of you who posted here make me puke. While I have never been the CEO of a large corporation, I have had employment contracts in the past. When accepting a job I negotiated for the best terms I could get. Then, when my employment ended, I expected the terms of the agreement to be met.What’s wrong with that?
There will always be executives who make way more than I can ever imagine, but so what. I don’t suffer from class envy like the whining weenies who are horrified by large bonuses for top execs. If you worked as hard as they have to get those positions then the weenies would envy you. You’re pathetic!
he needs to feed his family—JUST LIKE YOU!!!!
Is outrageous, yes. They work hard, yes.
BUT- when they drive a company into losses and possibly bankruptcy, where in your ‘deal with it’ world should they receive an amount of money that basically drain a percentage of the assets the company has left.
The CEO of Countrywide walked away with a similar bonus. (Of course, he’s probably going to spend most of it on a defense attorney) The former CEO of the company that brought on a substantial percentage of the economic backslide we’re facing today will whistle while he moves into his new mansion.
What happened to pay for performance?
I can screw up! I can, I can, I can….. pay me $47M and you won’t believe how I will strive to be as bad as he was.
I am a possible new customer to AIG. I was contacted by my mortgage company to have Health Benefits insurance program through AIG. This allows me, the primary insured, to have accident and hospital coverage and then for the whole family to have $100 physician visit per month. This is for myself, my husband or any of our 5 children that go to a dentist, chiro, doctor, or any licensed physician they will reimburse us $100.00 each month if we do that. Obviously to a large family we will use this service and benefit greatly from this program. My cost is $25.95 added to my mortgage escrow per month. After reading a few posts I am concerned and looking for some input from others about this company. Is this an insurance company and program I can trust. Will they actually reimburse me for my monthly visits. I also read on another page that people did not get their gas reimbursements ($15) and I just have some concerns so anything you can share I would appreciate as I have until August 12 to cancel. Thank you all.
please give Mr. Sullivan some space. He has greater expenses that most of us, so he needs more income. Once his severance is all gone, he can get unemplyment to tyde him over.
Feed them what, golden eggs? Get real.
YES—I GUESS I’M A WEENIE CUZ I THINK A JOB LIKE CEO SHOULD BEAR THE ULTIMATE RESPONSIBILITY FOR SUCCESS OR FAILURE. SO SALARY SHOULD BE ABOUT $100,000 AND BONUSES BASED ON THE P & L STATEMENT. I DON’T FAULT SULLIVAN FOR NEGOTIATING THE BEST DEAL HE COULD GET, AND THE COMPANY MUST HONOR IT. HOWEVER I DO FAULT THE BOARD OF ANY CORPORATION FOR MAKING SUCH DEALS IN THE FIRST PLACE. THEY DO NOT REPRESENT THE BEST INTERESTS OF THE SHAREHOLDERS AND POLICYHOLDERS!
so, if the golden egg, do we solve the problem like willie wonka? is it a good egg or bad egg? (is the garbage day this week or last week?)
“the buck stops “over-there”……………
All the sub-prime crap was put on AIG’s books when old Hank was still the CEO.
Marty was just the scapegoat.
I’d say he deserves that money considering what this has done to his reputation (by the sounds of the misinformed breathing fire in these replies).
Wonder how much money in premiums this would save AIG policyholders….
WHY BAIL THEM OUT!!!!!!
MAKE THEM PAY FOR THE BAIL OUT WITH THEIR OWN MONEY NOT MINE….I DON’T EVEN THE STOCK BUT I AM A TAX PAYER
What next is in store for the free market capitalist to screw up and pass the buck to us taxpayers, is there next chapter in their playbook? I hope not, my grandkids are already in the whole thanks to this greed they created. Anyone out there who votes for McCain should hold their head in shame because he adorns the very reason this happened,,,,DEregulation.
Apparently, you missed the part of the sub-prime mess where the “guvmint” virtually forced lenders to loan to people the banks knew couldn’t pay them back. You might want to do a little research before you trash big corporate America. In my neighborhood the banks were “encouraged” (which undoubtedly translates into some advantageous tax break) to loan to illegal immigrants. When was the last time businesses actively advertised to criminals? This mess is what comes of government involvement. How many congresscritters have ever run a successful business? They just want to count the politically correct beans.
TO BOBR: WHEN IN DOUBT, BLAME JOHN. DO NOT HOLD YOUR DEM CRONIES ACCOUNTABLE FOR THEIR COZY RELATIONSHIP WITH FANNY AND FREDDIE, AND MAYBE YOU?
BAIL THEM OUT WITH THEIR OWN MONEY. WHY SHOULD I HAVE TO PAY FOR SOME IDIOTS RUNNING THE FINANCIAL SYSTEM:
THE DISREGARD OF FUNDAMENTAL ECONOMIC PRINCIPLES OF SOUND PRACTICE IS WHAT HAS BROUGHT US INTO THIS NATIONAL MESS.
WHAT ASTONISHES ME IS HOW ANY KIND OF REASONABLE RESPONSE TO THIS CRISIS HAS BEEN IGNORED BY THE GOVERNMENT IN WASHINGTON , BY THE POLITICAL CAMPAIGNERS, AND BY THE NATIONAL MEDIA.
THE CLUE IS TO LOOK AT REFORMS REGARDING FUTURE PRACTICE, AND TO DRAW FROM THOSE CONCLUSIONS SOME FIRM IDEAS AS TO HOW TO DEAL WITH THE CURRENT CRISIS.
FIRST:
BANKS AND OTHER INITIAL MORTGAGE GRANTORS SHOULD BE PROHIBITED FROM PACKAGING AND SELLING MORTGAGE INSTRUMENTS TO THIRD PARTIES. THAT WOULD MAKE THEM LOOK CLOSELY AT THE CREDITWORTHINESS OF POTENTIAL HOME BUYERS.
THE PRACTICE OF ADJUSTABLE-RATE MORTGAGES SHOULD BE MADE ILLEGAL. THE INITIAL AND FIRMLY FIXED MORTGAGE RATE SHOULD REFLECT THE RISK INHERENT IN INTEREST RATE FLUCTUATIONS.
SECOND:
THE PROHIBITION OF ADJUSTABLE-RATE MORTGAGE PAYMENTS SHOULD APPLY TO EXISTING MORTGAGES. THE INITIAL RATE CHARGED SHOULD BE SET IN CONCRETE, ABJUGATING THE INCREASES CHARGED TO MORTGAGE HOLDERS.
THE CONVERSION TO INITIALLY OFFERED INTEREST RATE ON OUTSTANDING MORTGAGES WOULD REDUCE THE “TAKE” BY WALL STREET ON EACH MORTGAGE, BUT WOULD STOP THE FLOOD OF FORECLOSURES.
THE LOWER RATE OF RETURN WOULD DEVALUE THE PACKAGED SECURITIES HELD BY THIRD PARTIES, BUT WOULD SOLIDIFY SOME LEVEL OF VALUE IN THEIR HOLDINGS.
IN ORDER TO PROTECT AGAINST FORECLOSURES, THE EXCESS ABOVE INITIAL RATE WHICH HAS BEEN PAID IN THE PAST, WOULD BE APPLIED TO THE REMAINING PRINCIPAL OWED BY THE MORTGAGE HOLDER.
I BELIEVE THAT THESE STEPS WOULD STABILIZE THE MARKET SUFFICIENTLY, WITHOUT ANY MASSIVE “BAILOUT” BY TAXPAYERS.
IT IS UNFORTUNATE THAT SUCH REASONABLE REFORMS HAVE NOT BEEN DISCUSSED, SINCE THEY OFFER BOTH SHORT-TERM AND LONG-TERM CORRECTIONS TO A FINANCIAL SYSTEM THAT HAS INNOVATED ITSELF BEYOND REASON AND FIDUCIARY RESPONSIBILITY.