AIG planning to sue gov - Grrr!

[hiitdogs]

My question is, why is nobody blaming the Obama adminstration for making this AIG deal in the first place?? They agreed to it!!

Oh please!!! The Obama administration is being blamed and everyone knows mistakes have been made. So when we are done fingerpointing can we move on.

"Legally acquired money"???? Are you serious? I don't think those bonuses were legally aquired income and that's why I have no problem with getting that money with whatever legal means necessary.

And I have the very strong feeling that if it had been the Bush adminstration that had done this AIG deal, the blame would be laid squarely at the Bush administration's feet (where it would rightly belong).

The Bush administration was the one who made the decision that AIG needs to be bailed out and unlike for the auto industry / blue collar worker failed to mandate contract renegotiations for AIG. In fact, they were very adamant to not even put restrictions on excess pay and bonuses, it was the congress who pushed for this. AIG received $ 40 billion from the $ 700 billion TARP money which was originated by Bush and Paulson, modified and then approved by congress BEFORE Obama even was elected plus loans from the federal government.

Obviously, mistakes were made by both the Bush and Obama administrations but let's not forget either (and that is no fingerpointing), the last administration was in office for 8 years and it took them a while to get us into this mess and now we expect this administration to get us out in two months? Kinda sounds like one of those miracle diets, it takes people a while to gain the weight but they want to take it off in 24 hours

I'm sorry, I just can't argue this point anymore, when nobody will acknowledge that AIG was only able to give the bonuses because the goverment agreed to it!

I am sorry but I don't understand! Are you saying it is okay for AIG to take advantage of a mistake or oversight that was made and that congress should now throw up their hands in the air and say, oops, tough luck, let's write off the money? I expect that they get their butts in gear and get that money back! AIG wanted to give those bonuses and those bonuses sound fishy to me!!! Just another one of their wealth building schemes for select individuals. I think this spirit of corporate greed, lack of common decency and responsibility and I-am-going-to-do-it-because-I-can attitude is what has lead to this economic crisis.

 

[carres1973]

If this were true, does that make it right? And wouldn't you be condoning it by thinking it's ok for the govt to levy extra taxes against AIG employees despite what they agreed to?



But that possibility is written into every service member's enlistment papers, so the government did NOT break any contract at all! It's just that when people sign up they don't expect it to happen, and the recruiter probably downplayed the possibility at the time, so they complain when it happens, but it is right there in black and white. I was in the Navy, and every member of my family was in the military. When you sign up, you know full well that the government can extend your enlistment up to a number of years/months. My recruiter told me I wouldn't have to cut my hair in boot camp; guess what, they chopped it all off. No, the "hair-cutting" provision wasn't in my enlistment papers!

Again, the government did not break an "agreement" with your husband because there was no contract to send your husband to South Carolina. That is why they are call transfer orders. The military orders you; you go. Again, that is what you sign up for in the military, it should be no surprise and nobody has the right to complain when it happens.

Yes, the government changed their healthcare system, but the military members that signed up at the time of the old system were "grandfathered in". New enlistees (after a certain year of enlistment) weren't given free healthcare, but they knew that going in. My mother has this free healthcare, it is called "Tricare for Life". She is 84 years old, and joined under that agreement in 1950 during the Korean War (I beleive that makes her an "old-timer" as much as she'd be mad for calling her that!!) and was married to my father, an Air Force Vet for 26 years. Guess what, the goverment has honored that agreeement, as they should have, she has free healthcare for life, pays no fees and doesn't have to wait. But the media will probably never let anybody know about that.

Just getting the facts straight; what is reported in the newspaper and media can be wildly misrepresented!

And a "PS" to Carrie: I actually grew up at the Air Force Base in Dover Delaware, so I understand that it's not quite the same thing as South Carolina (where I was born---how ironic!!)

I am not quoting sources in the newspaper and media. I lived it. I was in the Air Force, DH was in the Air Force, and I worked with a lot of vets and family members of vets who enlisted in the 60's and 70's (Vietnam) who were NOT grandfathered in.

To say that military members shouldn't complain when change happens to them or they are asked to do something they don't agree with is not fair. As you correctly stated, many things are written in the "fine print" that are not explained properly. There are other things done that are just plain wrong. If no one complains, nothing changes. Though, in the military not much changes!

I enjoyed Dover...to a point. I would have enjoyed South Carolina A LOT more!

Carrie

 

[hiitdogs]

I may work for the government, but I am a TRUE-BLUE CAPITALIST at heart!

I would have never guessed

If the gov't gave AIG the bailout money but told them they couldn't pay the executives the bonuses they had contractully agreed upon, then AIG would have been sued by those executives for breach of contract (and won). That would easily bankrupt AIG. So, AIG would have gotten billions of govt money and STILL been driven out of business because of the lawsuits!

How would it have bankrupted AIG? Aside then it would have not been in the employee's best interest to sue AIG because if AIG - as you say - would go bankrupt it would have put these employees at the very end of a long list of creditors and they would not only get their bonuses but also lose their jobs. Referring to my previous post - LEVERAGE

By the way, are you aware that mortgage company's usually do put that in the contract? I've forgotten the term for it, but they can call up your loan at any time. Just an FYI.

It depends. We just refinanced, and ours says just the opposite. There is no pre-payment penalty, and they cannot demand full payment early. .

Yes they can under certain circumstances, it's called an acceleration clause. It allows the lender to demand payment in full in case of failure to make payment, bankrupcy, nonpayment of taxes or breaking of loan covenants. It's in every Deed of Trust I have seen.

 

[carres1973]

The other piece to this is that the government, Congress, whatever name you want to use changes their mind all the time! Slavery was abolished, women got the right to vote, alcohol was prohibited, and then that prohibition was later repealed. My point is, many initial decisions are later found to have been made in error and the government changes their mind (usually in response to public opinion) and writes or amends laws to fix the initial errors.

Why should this be any different? I was hired with a "contract" guaranteeing me certain levels of vacation time accrual. In order to save money, my company disallowed vacation accrual for one pay period. Am I annoyed? Yes! Do I see the bigger picture and realize it was necessary (as other sacrifices may be)? Absolutely.

We should all be able to say "NOT NICE!!" to EVERYONE at fault (the government who agreed to the terms, AIG for putting the terms in there, the fools from AIGs division who got them into trouble and are now getting the bonuses). We should then learn from that mistake and fix it if possible instead of shrugging our shoulders and saying "Awww well, a contract is a contract!"

Carrie

 

[Govtgirl]

"Legally acquired money"???? Are you serious? I don't think those bonuses were legally aquired income and that's why I have no problem with getting that money with whatever legal means necessary.

But if that money were acquired illegallly, why wouldn't the government just say so, press criminal charges, void the bailout agreement altogether, and take it back? This *is* the "transparent" adminstration, right?

They can't, because it was acquired legally, so now the govt is talking about taxing the bejeebers out of it after the fact (which is illegal but sounds good to the public which is angry) because they have no criminal charge options.

I'n just not going to look at this thread anymore, because the prime point that is not being heard is that..... (drumroll please! ) the government agreed to let AIG pay the bonuses.

Good night!

 

[LaughingWater]

Yes they can under certain circumstances, it's called an acceleration clause. It allows the lender to demand payment in full in case of failure to make payment, bankrupcy, nonpayment of taxes or breaking of loan covenants. It's in every Deed of Trust I have seen.

I meant aside from that. As in, "Oh, we woke up this morning and decided we want you to pay in full."
Obviously, if we're not making the payments, the whole game changes.

I've heard that Congress gave taxpayer money with zero strings attached. Does anyone know if this is true? If so, whatever made them think that was a good idea?! I'm no political or financial whiz, yet even I would have asked at some point, "Um...how do we know the money will be spent appropriately?"

 

[LauraMax]

The other piece to this is that the government, Congress, whatever name you want to use changes their mind all the time! Slavery was abolished, women got the right to vote, alcohol was prohibited, and then that prohibition was later repealed. My point is, many initial decisions are later found to have been made in error and the government changes their mind (usually in response to public opinion) and writes or amends laws to fix the initial errors.

Don't forget desegregation, arguably one of the most unpopular change of policy in our history.

I got a kick out of AIG's excuse that they were "retention" bonuses, not "performance" bonuses. Who wants to retain an employee who doesn't perform?

Lisa, you keep arguing that the govmt is breaking its contract w/AIG, but you seem to think that AIG had no responsibility to fulfill its side of the deal. Which, again, was to put money back into the economy, not into the pockets of its former employees, many of whom got the hell outta Dodge & don't even live in the US anymore. They won't even be putting their undeserved bonuses into our economy.

So perhaps we could agree that both sides have violated the contract--AIG in an outrageously unethical & immoral way, the govmt for the good of the taxpayers.

At least that's my story, & I'm sticking to it.

 

[kathryn]

My question is, why is nobody holding the Obama adminstration accountable for making this AIG deal in the first place? They MADE THE DEAL and agreed to it!

Wasn't this deal made BEFORE Obama took office? (Or am I thinking of another bailout?)

 

[LauraMax]

TARP was authored by Bush's Treasury Secretary Henry Paulson & his staff.

 

[hiitdogs]

I meant aside from that. As in, "Oh, we woke up this morning and decided we want you to pay in full."
Obviously, if we're not making the payments, the whole game changes.

Unfortunately it is not only if you are not making the payments, it also applies when you don't adhere to any of the loan covenants. For example if you bought the house as your primary residence but instead rented the house out. Of course, it would be fraudulent if that was your initial intention but theoretically they could also accelarate the loan if you had to relocate due to a job transfer, if you wouldn't be able to sell the house / wanted to keep the house and decided to rent it out instead.

And it can also be that you have to maintain a certain credit rating otherwise the loan can be called due. Or even if your property loses value they can accelerate the loan and ask for their money back. Those are not theoretical scenarios, this has happened to people I know.

And those acceleration clauses in respect to loan covenants are subject to interpretation. Unfortunately, contrary to what everyone is saying, a contract is not a contract. This is America any contract can be challenged and if the mortgage company / bank wants to find something they will find it.

 

[LaughingWater]

And it can also be that you have to maintain a certain credit rating otherwise the loan can be called due. Or even if your property loses value they can accelerate the loan and ask for their money back. Those are not theoretical scenarios, this has happened to people I know.

Really? I had no idea. That's a scary thought!

I wonder how much value one's property must lose or how low a credit rating must fall in order for the mortgage company to act in this manner. What if the owners are still making the agreed payments? You'd think the bank wouldn't mess with it in that case, but in the event they still called up the loan...would the owners be able to argue their case in court?

 

[hiitdogs]

Really? I had no idea. That's a scary thought!

I wonder how much value one's property must lose or how low a credit rating must fall in order for the mortgage company to act in this manner. What if the owners are still making the agreed payments? You'd think the bank wouldn't mess with it in that case, but in the event they still called up the loan...would the owners be able to argue their case in court?

Banks have been a little more hesitant these days to call in a loan due because with property values falling and the amount of foreclosures on the market they have not much incentive to do that. Especially now that the federal government is helping to keep people in their homes it is much more adventageous for the bank to keep people in their homes and getting payments, even if they are lower than before than to sit on a foreclosed house for months.

However, about 2 years ago, my home equity line was called due citing their acceleration clause and decreased home value. I had not missed one payment and I had not once paid late. It took a lot of phone calls and correspondence back and forth to get them to only cancel the home equity line, me paying it down partially and make payments for the remainder. I was lucky to be able to get it somehow worked because I think I would have crashed and burned in court. But even if you can go to court most people don't have the money to front for a lawyer.

Many other people got the same or similar letter at the same time, some mortgage companies were just cancelling the access to the home equity line, some were calling the whole amount due.

I know several people whose loans were cancelled due to a drop in credit rating. One was that his credit rating had dropped from over 700 to 500 due to late payments on his credit cards, a (unjustified) tax lien and a judgement against him, however, he had always paid his mortgage. The other one was a family whose credit rating went in the toilet due to medical expenses, fortunately in that case the bank was willing to work it out. Neither one of those people had the money to be able to afford a lawyer. If they had money their credit rating wouldn't have taken a nose dive in the first place.

 

[WantFit]

Banks have been a little more hesitant these days to call in a loan due because with property values falling and the amount of foreclosures on the market they have not much incentive to do that. Especially now that the federal government is helping to keep people in their homes it is much more adventageous for the bank to keep people in their homes and getting payments, even if they are lower than before than to sit on a foreclosed house for months.

However, about 2 years ago, my home equity line was called due citing their acceleration clause and decreased home value. I had not missed one payment and I had not once paid late. It took a lot of phone calls and correspondence back and forth to get them to only cancel the home equity line, me paying it down partially and make payments for the remainder. I was lucky to be able to get it somehow worked because I think I would have crashed and burned in court. But even if you can go to court most people don't have the money to front for a lawyer.

Many other people got the same or similar letter at the same time, some mortgage companies were just cancelling the access to the home equity line, some were calling the whole amount due.

I know several people whose loans were cancelled due to a drop in credit rating. One was that his credit rating had dropped from over 700 to 500 due to late payments on his credit cards, a (unjustified) tax lien and a judgement against him, however, he had always paid his mortgage. The other one was a family whose credit rating went in the toilet due to medical expenses, fortunately in that case the bank was willing to work it out. Neither one of those people had the money to be able to afford a lawyer. If they had money their credit rating wouldn't have taken a nose dive in the first place.

Wow, this is scary. We, little people, are always in position that is easier to be cut by the big corporates. They know just by mentioning attorney fees would defeat us.

But with property value down everywhere and so much, how could they even did that to people who did not miss payments at all. These drop down value is not just associated with one specific area, they are everywhere. Not any home owners or community can control it.

With TARP money instilling to bank, I hope they would not do it now.

 

[LaughingWater]

That is a real shocker. I'm sorry you had to go through that, Carola. I feel terrible for the people you mentioned as well.

I went through our paperwork again, and I think DH and I will crawl through it a third time to see what we can find. So far, other than not making payments, I've only found statements regarding us transferring the property without notifying the lender. I'll comb through the rest looking for any mention of credit rating or property value.

The woman from the Title Co. who did our closing said specifically that the bank agrees it cannot call up the loan ahead of time, assuming all criteria are met. Of course, if property values and credit ratings are part of the unmentioned criteria, then they slipped that past us. That's not cool. No wonder my Dad busted his butt to pay off their house ASAP.

Thanks for the information, Carola!

 

[hiitdogs]

That is a real shocker. I'm sorry you had to go through that, Carola. I feel terrible for the people you mentioned as well.

I went through our paperwork again, and I think DH and I will crawl through it a third time to see what we can find. So far, other than not making payments, I've only found statements regarding us transferring the property without notifying the lender. I'll comb through the rest looking for any mention of credit rating or property value.

The woman from the Title Co. who did our closing said specifically that the bank agrees it cannot call up the loan ahead of time, assuming all criteria are met. Of course, if property values and credit ratings are part of the unmentioned criteria, then they slipped that past us. That's not cool. No wonder my Dad busted his butt to pay off their house ASAP.

Thanks for the information, Carola!

I didn't want to worry you, Lori!! I am sure you will be fine. Most of the problems were with Home Equity Lines and loans which were tied to the property, first mortgages to a lesser extent.

I haven't seen or heard of anyone's loan being called in for a while and I don't think in this market you need to worry that they will call in the mortgage/loan. They have even started to work with people who can't make their payments whereas 2 years ago, or even a year ago they were absolutely unwilling to do so. How times have changed!

 

[LaughingWater]

Aw, thanks. I'm not super worried, but I am curious about what was missed during the whole transaction. I'd like to think that between DH and I, we have a clear understanding of the terms when it comes to something like this.

You can bet the next time we're applying for any kind of loan, one of my questions will be, "Specifically now...under what criteria can you demand full payment of this loan?" The Lender will have to spell it out for me, and I'll want to see it in writing.

Learned something new today.