The bafoon was ready to sell Wachovia to Citi for dimes on the Dollar.

The sale to Citi (with bailout money) was hailed as smart until Wells Fargo showed up with its own $13 billions to buy the troubled bank!

Any bet, the Americans are going to see their $700 billions again with his expertise!

AIG is now a part of the federal government and is too big to fail.

As long as taxpayer dollars continue to prop them up, this situation can never change.

I figure that sometime in Jan we will start seeing AIG money showing up in congressional pockets!

I recall Peggy Noonan saying something similar back in January. People wanted to burn her at the stake.

I don’t think so. People on the right have been at odds with Bush for at least the last two years. The final straw for me was when he finally engaged the conservative blogs – in an effort to ram shammnesty down our throats.

Investments (assets) already ‘expensed’ out in a prior year that lose value this year become a loss on capital as opposed to an expense or liability. That’s not quite right, but I seem to having difficulty articulating what I mean. Revenue is revenue, assets are assets – they’re two different things. Investments are assets, but the gains (or losses) on them are revenue, but ONLY when they are realized (sold, or when interest is paid etc), until then it is just on paper, not ‘real’ as you say. That’s where mark-to-market can be a killer in this current market.

It is quite possible that the investments regain their value in future years if the company just sits on them, in which case the company itself was effective always financially sound from that perspective, however with mark-to-market, they are effectively giving an ‘as if realized’ figure, which is only on paper, and not ‘real’ until the company sells those assets, so you could just as easily say that the current crisis is only on paper. But it gets more involved – a company in that situation will have liquidity problems and then pays a higher rate to borrow in order to meet expenses, dividends have to be lowered accordingly, shareholders start selling off shares, and the company has even more liquidity issues, and basically it’s a nasty little downward spiral from there if they’ve got too heavily into whatever that investment is (in the current case, the mortgage market)..

Umm.. I lost track of where I was going with this, lol.

Basically if a company says ’screw you’ to it’s employees it’s not going to last much longer, which means it has no chance at all of waiting things out until the economy improves and those risky investment ‘assets’ regain some of their prior value. Problem is (IMHO) the housing market was way over-valued anyway. The govt is banking it will come back, which it eventually will, but as to how many years… too long for many of these companies to hold on for, thus the bailout.

nyc123me said:

Bonuses can be based purely on revenues, so although these monster corporates are still making billions in revenue (which is what the bonus may be based on), the balance sheet still shows a loss because of loss in value of assets, which effects dividends and share value, not revenue and bonuses…

You may be right. It would not surprise me if bonuses were pegged to gross revenues rather than net earnings.

But even so, these companies got in trouble because they invested heavily in subprime mortgages and other investments that have lost value recently. That means that investments they purchased this year have also lost huge amounts of value. So, if these failing companies are claiming “billions in revenue”, it must be based on the original purchase price of the assets and not on the current value. If so, this revenue is only on paper and is not real revenue.

If bonuses are tied to imaginary rather than actual revenue, they are a scam. In any case, if we had let these companies go bankrupt, there would be no money to pay these bonuses. If we are stuck with bailing out these businesses, our money should only go to essential expenses required to keep these companies from failing. Bonuses do nothing to help keep them afloat. If employees and executives want to quit in protest, fine. Let them join the unemployment line with the rest of their friends.

I see no reason why our tax dollars should be used to subsidize bonuses of failed financial workers. Do you?

I didn’t say I agreed with them getting bonuses, just saying that they do, and one possible explanation of how. Again, just because we don’t like it doesn’t mean we have the right to make some company renege on an employee contract that says a bonus will be paid based on some specified calculation. The Fannie Mae example you gave seems clear cut fraud to me, and I think that will catch up with those involved in time, but that’s just one or two people out of hundreds of thousands of employees that get bonuses legitimately, even though the bottom line for these same companies is a devastating loss for that financial period thanks in part to mark-to-market and GAAP reporting.