Allan Sloan at your service
Fortune's godfather of Wall Street opens his mailbag and answers your questions.
NEW YORK (Fortune) -- Welcome to my first mailbag. I've shortened and edited most of these questions for clarity, and I'm identifying the authors by initials or the screen names they used.
Got a question or comment about one of my articles - or anything at all? You can post your questions or comments here and I'll try to address them in my next mailbag.
Ok, here we go:
You totally miss the point in your column about bonuses. The AIG bonuses went to managers who failed miserably in their primary task, to make money for investors. Further, it appears that these folks manipulated the system to get their bonuses out of some sense of entitlement. All of this reeks not only of greed, but of arrogance. --Jim, King City, Calif.
This is typical of a ton of e-mails I've gotten. To use my own cliché, let me explain. I'm not outraged by the AIG bonuses because many if not all of them went to people who had nothing to do with the collapse of AIG. I'd love to see some of the AIG biggies who ruined the company but left rich, laden with bonus money suffer some public disgrace. It infuriates me to see people letting those biggies slide, but picking on AIG worker bees who are trying to get enough nectar to live on. Now, I'll share two things that we kick around at Fortune but don't generally mention in the real world outside of Manhattan.
First, living in Manhattan is hideously expensive (which is why I live in the suburbs). So $250,000 a year, which is "rich" in most of the country, doesn't get you much in high-tax Manhattan, especially if you're strapped with a huge mortgage or rent payment and have a couple of kids in private school at $30,000 or so each. (That's after-tax if you're wondering.) Second, "bonus" has a different meaning in New York than in the normal world. To normal people, "bonus" is an extraordinary payment for a job done exceptionally well. But on Wall Street, salaries are so (relatively) low that part of your "bonus" is really base pay. This linguistic disconnect is a major irritant to both parties in the Wall Street-Main Street divide.
It is outrageous that you would compare the bonuses that the federal government pays to its employees - even if collectively they amount to $1.6 billion as you assert - with those given to corporate executives. It is all the more specious that you would suggest they are not deserved because the federal government is running "more than $1 trillion in the red." --D.R., Washington, D.C.
It depends on whose ox is gored. It sure seems inconsistent to oppose paying bonuses to AIG people because their employer gets taxpayer money while supporting giving bonuses to more than 30,000 federal employees when the government is hemorrhaging cash. I have no problem with either set of bonuses, provided they go to people who deserve them. Someone mentioned the federal bonuses (which go to about 30,000 employees at various levels) to me during my research. My associate Lawrence Delevingne got the details from the Office of Personnel Management, and I couldn't resist tweaking the political twits who hyperventilate about AIG but don't mention federal bonuses.
I assume you're the same guy I used to hear on NPR [yep, though I'm on Public Radio International's Marketplace, which competes with NPR]. I suspect that the big players like China and the sovereign wealth funds gave a call to [Fed Chairman Ben] Bernanke and [then-Treasury Secretary Hank] Paulson last fall and told them what would happen if they didn't get their money back on [Fannie Mae and Freddie Mac] bonds and AIG credit default swaps. Is my guess in the ballpark? --T.D., Anchorage, Alaska
Indeed. I don't think China, et. al. had to call, because I'm sure that Bernanke and Paulson, who are no dummies, were well aware of this problem. I think that's a major reason they decided to put Fannie (FNM, Fortune 500), Freddie (FRE, Fortune 500) and AIG on life support rather than let them croak. When your government gets deeper and deeper in hock to the rest of the world, as ours has, you've got to care what your foreign creditors think.
I disagree with your story on TARP-receiving corporations taking luxurious business junkets on taxpayer money. All taxpayers are taking a huge financial hit because of these corporations' irresponsible and greedy decisions. As for the financially healthy corporations, celebrations anywhere they choose are in order. We recommend Orcas Island! --S.S., Orcas Island, Wash.
Now, that's my kind of letter!
Is the Senate's retirement plan insured by AIG? --Comber, Philadelphia, Pa.