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90% thing. watch

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    discuss.

    if it actually becomes law, it will be epic.
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    Well it's been through the first House. It's only for those banks who have received bail-out money though. Also it'll probably only be temporary, until the economy recovers. Will it affect bonuses paid by US banks to UK workers in UK though?
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    it's a matter of principle, not the actual money

    if the government had allowed the companies to go bust, the bonuses would have been among the least senior claims on the firm's assets and would probably not have been paid.

    that sort of gives the government the right to do whatever the **** it wants with the money
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    aka my view is "tough but fair"
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    (Original post by Brown_Bateman)
    Imo, either bail them out and allow them to run in a profit maximizing manner, or let them fail.
    Umm... I agree...?
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    I think the subject of debate should not be the end objective (re: curbing rewards for failure, on which there is relative consensus) but rather the means for doing so.

    Authorities did not act when they should have (at the time of the bailouts, or in the TARP/stimulus legislations) - and in the face of public outrage are now trying to makes amends for the loopholes. In effect hoping that two wrongs make a right.

    This has serious repercussions for not just free markets, but also the concept of a democracy. It seems to be targeted at certain specific individuals, and is punitive in nature - arguably making it unconstitutional. Leave alone the fact that it's a hurried piece of arbitrary legislation - the $250k floor, the 12 largest recipients etc
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    An indirect knockon effect will be lower compensation all around. I don't think the European banks will pay much higher to their workers than the going rate at US banks. So the pay of executives will become similar across the board.
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    Fine, maybe incentives needed to be altered slightly. But kneejerk anti-bonus legislation like this is destroying any incentive. How is the government ever going to get a return on its vast investment unless it encourages workers to be productive? Bills like this are only going to lower profitability, thus increasing further reliance on bailout money.
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    Knee-jerk anti-bonus legislation is bad. But rewarding people for taking on excessive risk is even worse.
    For some reason I have a feeling that at above 1m a year or something its not really the bonus that drives workers to be productive, or the marginal benefit (in terms of "productivity") of each dollar of bonus money decreases.
    Note that these taxes aren't for new analysts or associates going into banking to earn a couple hundred thousand or something pathetic like that and then quit, its for people making over 250k a year.

    ++ If they don't like it, they can just quit.


    +++ obviously profitability will fall - these institutions were carrying way too much risk. Profits will fall now that the government is "controlling" that.
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    I don't understand the big deal, clearly the firm has failed, so I don't see why employees should get a bonus. I only get my personal bonus if the firm as a whole performs.
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    90% is way, way too high.
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    (Original post by Consultant)
    I don't understand the big deal, clearly the firm has failed, so I don't see why employees should get a bonus. I only get my personal bonus if the firm as a whole performs.
    normally it isn't the government who decides this though.

    and, crucially, normally firms do make money. so people get bonuses. taking 90% of it away is not good.
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    Given at certain levels the motivating factor is your bonus rather than the basic salary this means that for every 12 hour day you work (I'm thinking markets here) you effectively get paid for 1 hr 12mins 'tax free'.
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    ROFL 90%? surely banks will just merge the bonus into the employees salary so that it's only affected by income tax?
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    From what I've heard, the bonuses are required by the company's contract to be given out if the employee reaches a certain goal. Apparently these goals were met, and if the bonus wasn't given, the employees would have had plenty of reason to sue for breach of contract, which would have been far more costly than just giving out the bonuses.

    I don't see any reason to punish AIG for holding to its contractual obligations, even if they presently don't seem terribly well thought out.
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    (Original post by Chewwy)
    normally it isn't the government who decides this though.

    and, crucially, normally firms do make money. so people get bonuses. taking 90% of it away is not good.
    Yeah, I see your point, but if the firm has been doing extremely badly (which they have) then why should they be obliged to give out bonuses at all? I think the bonus culture itself can be extremely damaging (vis a vis risk, etc.).
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    IB gets less lucrative by the day.
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    the entrei AIG is a self created mess anyway.
    AIG deliberately chose t obe bailed out by the FED.
    They had offers from several large comapnies, including Allianz and Munich RE, for large parts of their busiensses. They decliend and opted for government money.
    In my book, AIG managers don't deserve any money at all. They had their chance and rejected it.
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    (Original post by Brown_Bateman)
    snip
    I completely understand your and Chewwwy's point, its just that in my mind bonuses are tied to firm wellbeing, perhaps its simply because I'm not in IB.

    I can completely understand how a few people have caused this entire mess and a reduction in bonuses across the board is unequitable - but, I don't envy those who have to fix the mess either.
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    Are bonuses of junior bankres etc also cut?
    That'd suck for them...
    The guy at a BB in the US i know.. FO... his base salary can't even pay rent. Has to share...
    I'm sure he didn't spend tens of thousands on college for that...
 
 
 
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