AIG Bonuses: Moral Theory of Contract?

When I was in law school, Grant Gilmore's 1974 book The Death of Contract was a part of the discussion of a theory of contract. Gilmore's work was answered by Charles Fried in his 1981 book Contract as Promise, in which Fried was critical of the theory of efficient breach.

In the NYTimes, it is argued that the AIG bonuses should be paid because "the “fundamental value” in question here is the sanctity of contracts. . . . If government officials were to break the contracts, they would be 'breaking a bond[.]' Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts." (Emphasis mine.) This is, in a word, nonsense. While I have argued here that, at first blush, the AIG bonuses agreements will be hard to break legally, it never would occur to me that there is some moral obligation to honor these contracts. Indeed, the "morality" of the situation, such as it is, would seem to militate towards not honoring the contract.

More . . .

But the important point here is that any commercial lawyer can tell you that this idea of a "contract is a bond" has no connection to contract law. The standard remedy for a breach of contract is damages, not specific performance (for which you have to demonstrate the inadequacy of money damages.)

There is something especially galling about seeing this rather nonsensical argument on behalf of the AIG bonuses on the front page of the New York Times. I have been trying to think about the legal issues involved in a dispassionate way. But it is this type of nonsense which pushes folks to outrage. Glenn Greenwald wrote:

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

As any lawyer knows, there are few things more common – or easier -- than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions.

I am not in agreement that it is quite as easy as Glenn makes it out to be, but there is no doubt that building legal arguments, oftentimes borderline (and not so borderline) frivolous arguments, is often part of the process of negotiating an "efficient breach" and the payment to be made by the party seeking to breach a contract.

But one thing is pretty clear, the idea that we practice a species of contract as moral bond is ludicrous. It is embarrassing to see it argued as such in the New York Times on behalf of these AIG bonuses. If morality had anything to do with this, the bonuses would not be paid.

Speaking for me only

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    Breech vs Re Negotiated (5.00 / 1) (#3)
    by Saul on Tue Mar 17, 2009 at 05:30:16 AM EST
    Why can't the government (with the public out cry that exist) get them to re negotiate the contracts to the liking of the government.  Is this not what they did with the auto workers union contracts just recently?

    Indeed (none / 0) (#4)
    by Big Tent Democrat on Tue Mar 17, 2009 at 05:33:02 AM EST
    yes, that's what they did (none / 0) (#8)
    by TimNCGuy on Tue Mar 17, 2009 at 07:34:39 AM EST
    the difference being they did that with the auto industry BEFORE they loaned the the money.  The time to have done this with AIG would have been BEFORE handing over the money.  The government should have understood what AIG's contracts were before handing them any money.

    On a different note, why isn't anyone explaining the difference in the laws between the US and the UK?  The UK is much friendlier to employees than the US is.  And, it's my understanding that the division of AIG that brought the company down (and many of those who are getting the "retention" bonuses) are based in London.  So, they are covered by the laws in the UK, not the US.

    If we are bailing out AIG so they can pay off all the insurance they owe against bad mortgage instruments, then how could any other financial institution who held they "insured" instruments need to be bailed out since we are paying AIG to pay off the insurance on these bad investments?

    ALL mortgages with less than 20% down are required to be insured.  How are all the non-insurance financial institutions going down based on "insured" mortgages if we are bailing out AIG to pay off the insurance?


    The contracts in question (none / 0) (#16)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:53:50 AM EST
    are expressly covered by Connecticut law.

    I do not know if UK law impacts the situation. I am inclined to think not.


    I worked for a UK company (none / 0) (#29)
    by TimNCGuy on Tue Mar 17, 2009 at 08:38:58 AM EST
    that had operations in the US.  The laws governing employees were different in each country and the employees in each country were treated differently based on the differences in the laws.

    I think it might make a difference here for the retention bonuses in he contracts of UK employees.  I heard a report about the costs that would be incurred by "breaking" those contracts.  It would be double what the bonuses are.  The report was based on the UK laws governing those employees.


    Let the contracted workers... (none / 0) (#36)
    by kdog on Tue Mar 17, 2009 at 08:47:53 AM EST
    try and collect through the courts...AIG, if you take away all the welfare payments, is broke...there is no money to pay the bonuses, let alone to pay double as a penalty for not paying the bonuses.  Let them try and sue for it, there is nothing to be got if you take away the charity.

    the problem with that (none / 0) (#64)
    by TimNCGuy on Tue Mar 17, 2009 at 10:22:01 AM EST
    is that AIG is the insurer for so many other comapnies.  If AIG goes belly up, then all the other comapnies they owe insurance payouts to will also go belly up.

    Lie down with dogs... (none / 0) (#66)
    by kdog on Tue Mar 17, 2009 at 10:27:01 AM EST
    come up with fleas...what else can we tell them?  They bought insurance from crooks...live and learn and be more careful next time with who you choose to do business with.

    Might be the only way to explode (none / 0) (#86)
    by Inspector Gadget on Tue Mar 17, 2009 at 11:07:56 AM EST
    all this fraud and greed so people can start over and recover from what those big guys did to them.

    It would make sense (none / 0) (#43)
    by joanneleon on Tue Mar 17, 2009 at 09:06:55 AM EST
    that if they qualified for bailout money from the U.S. Treasury, they'd have to under U.S. law.  I thought that TARP monies required this, and had other requirements for qualification relating to the category of bank or holding company.

    It looks like all of this was done through the AIG parent company.  The contracts, however, could have involved the U.S. subsidiary and/or the European subsidiary, I don't know.  I'm not sure how contract law works with subsidiaries.

    AIG Financial Products Company Description

    A subsidiary of insurance giant American International Group, AIG Financial Products is a market maker and trader in over-the-counter derivatives of stocks, bonds, credit, and commodities as well as energy trading and foreign exchange markets. It operates outside the US through its subsidiary Banque AIG. It also offers economic research, pension strategies, online institutional trading, and municipal finance. In 2008 AIG Financial Products found itself at the center of controversy after its investments in credit default swaps, a type of debt insurance, collapsed. It was one of many woes that compelled the Federal Reserve to float an $85 billion emergency loan to its parent company to keep it solvent.

    Cassano and his team that were originally from Drexel Burnham were almost certainly U.S. citizens.  Life would have been a lot easier for them and for AIG if they were employed and paid through the U.S. company.


    Union contracts (none / 0) (#49)
    by Maryb2004 on Tue Mar 17, 2009 at 09:38:23 AM EST
    That was my first thought.  Nobody ever seems to argue for the sanctity of union contracts.

    one big difference (none / 0) (#91)
    by Bemused on Tue Mar 17, 2009 at 11:17:46 AM EST
      Is that in collective bargaining agreements the entire workforce is bound to a K ratified by a majority.

      Here, each exec wanting his bonus money is an independent actor and each distinct K would have to be modified with individual consent of each employee. The UAW guys who don't like it can only grumble but these execs cn refuse to agree to change their individual contracts and litigate.



    Right (none / 0) (#96)
    by Steve M on Tue Mar 17, 2009 at 11:31:31 AM EST
    Or, to put it another way, the highly-paid executives have the bargaining power to resist renegotiation, the way that individual autoworkers do not!  That is EXACTLY the difference.

    But in terms of societal expectations, why should we expect one category of workers but not the other to surrender some of their bargained-for benefits in order to improve their company's overall prospects?  There is no good reason.  It's simply that leverage can be deployed more readily against one group than the other.


    because (none / 0) (#97)
    by Bemused on Tue Mar 17, 2009 at 11:38:10 AM EST
      we expect people to be as defensive of their economic interests  as their leverage allows them to be?

       I think my expectations would be torn asunder if most people voluntarily agreed to give up money for the common good if they had a viable opportunity to ge it.

      The fat cat who foregoes a bonus or the owner who generously shares the wealth with his employees are rare enough creatures that it often makes national news when it happens.


    Really? (none / 0) (#109)
    by Steve M on Tue Mar 17, 2009 at 11:55:37 AM EST
    Maybe that's a statement of what you expect.  I think many other people have a stronger belief in the common good than you do.

    We should also think about how it is that society has become structured such that one category of workers has far greater bargaining power than another, and whether it's worth doing anything to remedy that situation.


    The moralit y of that (none / 0) (#99)
    by Big Tent Democrat on Tue Mar 17, 2009 at 11:41:28 AM EST
    escapes me.

    Perhaps bemused will fill us in on why it is moral.


    Here (none / 0) (#103)
    by Bemused on Tue Mar 17, 2009 at 11:47:15 AM EST
      we are talking about our expectations of what other human beings are likely to do. I'm not suggesting that I expect most other people to conduct their personal financial business with an eye on morality. i actually thought I somewhat flippantly suggested that would surprise me.

      That has nothing whatsoever to do, with my observations that you fail to grasp the moral considerations underlying contracts law.


    Heh (none / 0) (#105)
    by Big Tent Democrat on Tue Mar 17, 2009 at 11:48:22 AM EST

    whatever? (none / 0) (#108)
    by Bemused on Tue Mar 17, 2009 at 11:51:17 AM EST
      The man of a million words concedes on that note?

      I'm disappointed.


    What (none / 0) (#110)
    by Big Tent Democrat on Tue Mar 17, 2009 at 12:06:13 PM EST

    and banning you from this thread because I made it clear that you should stop your off topic commenting.

    Sanctity of Contracts ... (5.00 / 1) (#100)
    by santarita on Tue Mar 17, 2009 at 11:41:47 AM EST
    is a little too religious for me.

    However, I do think that the belief that, absent good reason for breach,  contracts will be honored according to their terms is essential for "the wheels of commerce" to keep running smoothly (as was expressed in my UCC class).  One of the problems encountered in international transactions is the doubtful nature of enforceability of commercial transactions.  (Actually this is one of the reasons for letters of credit and other means of guarantying performance, like CDS).  

    US Companies as trading partners have been seen to be reliable partners because of our array of disclosure laws and other regulations but also because other countries know that by and large the contracts will be enforceable and relatively free from arbitrary government action.  Abrogating contracts without good cause would be arbitrary government action.

    As to the UAW contracts - weren't they reenegotiated and not breached?  

    Well (none / 0) (#107)
    by Big Tent Democrat on Tue Mar 17, 2009 at 11:49:50 AM EST
    that simply is not the law.

    when a contract is breached, you sue for damages - "honoring the essential terms" only happens if damages are deemed inadequate, a very rare occurence.


    If the AIG execs were promised (none / 0) (#111)
    by andgarden on Tue Mar 17, 2009 at 12:17:06 PM EST
    particular Picasos, for example.

    The terms of a contract are .. (none / 0) (#112)
    by santarita on Tue Mar 17, 2009 at 12:24:24 PM EST
    honored even if  breached if the aggrieved party is awarded damages for the breach.  It's not the expectation that all contracts will be performed as agreed but the belief that there is a somewhat reliable mechanism for either specific performance or for awarding damages in the event of breach that keeps the wheels of commerce greased.  

    Damages are awarded more than specific performance for a variety of reasons - usually because specific performance is no longer attainable or because specific performance will not compensate for all harm done.


    Well (none / 0) (#113)
    by Big Tent Democrat on Tue Mar 17, 2009 at 12:34:05 PM EST
    you redefined the phrase "honoring the contract" there imo.

    This prior WoPo article provides good (none / 0) (#1)
    by Green26 on Tue Mar 17, 2009 at 04:53:34 AM EST
    background on the situation at AIG's Financial Products group. It shows that the 2008 retention plan, under which the current bonuses are being paid, was probably put in place for a good reason.

    The FP group has been in the process of unwinding transactions and shutting down for some time. Someone needs to be kept around to do this work.


    Contracts are very important in the US and in business in general. While contracts may not be sacred, they are a critical component of doing business in the US and most of the important fiancial markets of the world. In my view, it would be bad precedent for the US to force the breach of these contracts. From where I sit, I can see no legal basis on which to breach the contracts. Given what AIGFP is currently doing, I see no valid reason for these employees not to be paid. Most, if not all, of them have probably relied on these future payments in deciding to continue to work for AIGFP during its wind down phase.

    Contract enforcement (5.00 / 1) (#2)
    by Big Tent Democrat on Tue Mar 17, 2009 at 04:55:47 AM EST
    is not a moral issue in the US.

    Otherwise, specific performance would be the first resort. Damages is the first resort.


    contract enforcement (5.00 / 0) (#56)
    by diogenes on Tue Mar 17, 2009 at 09:56:19 AM EST
    Contract enforcement and property rights are what separates prosperous countries from places like Russia, Nigeria, etc.

    Perhaps so (5.00 / 1) (#58)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:58:11 AM EST
    But it is not a moral separation.

    Indeed they are (none / 0) (#59)
    by Steve M on Tue Mar 17, 2009 at 10:11:02 AM EST
    Where were you when the US Government was using its bargaining power to force autoworkers to surrender their bargained-for compensation as a condition for their employers' receipt of federal assistance?  Or is it only contracts with highly-paid executives which must be honored according to their terms?

    It seems unlikely to me (none / 0) (#24)
    by Steve M on Tue Mar 17, 2009 at 08:11:40 AM EST
    that even a single company will choose not to do business in the exceedingly lucrative US market simply because the government, in the midst of an extraordinary financial crisis, forced a company to dishonor certain bonus payments as a condition of receiving extraordinary financial assistance.

    If true, why didn't those companies all flee in terror when the UAW was forced to renegotiate its labor contracts with the Big Three as a condition for the auto industry receiving bailout funds?  Why do I not recall you even making the argument in that case?


    An insurance company (none / 0) (#5)
    by NYShooter on Tue Mar 17, 2009 at 06:24:49 AM EST
    employs highly skilled mathematicians, actuaries, whose job it is to calculate risk factors to a high degree of probability, and to establish premium prices that a consumer is willing to pay, and that will also reward the issuer with a profit even if the item being insured suffers a loss in value.

    AIG committed fiduciary malfeasance by creating instruments guaranteeing the value of CDS's, even though calculating their risk, and their value, was admittedly impossible. What they created was a cross between a Ponzi scheme and the psychotic Tulip craze of the seventeenth century.

    It was a criminal act, and I don't believe a contract rewarding the perpetrators of a crime would stand up to legal challenge.

    Fraud in Inducement (none / 0) (#6)
    by NMvoiceofreason on Tue Mar 17, 2009 at 07:25:37 AM EST
    My old Contract Law course taught me that contracts which are induced by fraud are voidable. In this case, the contracts involve specific performance of generating valuable contracts for AIG. For AIG, and the economy in general, the assets upon which these contracts were based didn't exist (as in the case of Credit/Debt swaps), or were overvalued to falsely increase their apparent value.

    Either AIG is profitable, and the contracts are fully performed, or AIG has lost so much value due to the fraudulent contracts produced by these derivative traders that it had to be bailed out to the tune of 170B$. If you promise me a Kentucky Derby winner, but give me a shetland pony, I don't think you get to keep the 500,000$ commission on the 2.5M$ deal.

    Anybody want to buy a pony?

    Disagree (none / 0) (#7)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:30:06 AM EST
    There was no fraud in the inducement because the retention bonuses are only intended to keep these employees at AIG, not a performance based bonus.

    Why would you (none / 0) (#9)
    by NMvoiceofreason on Tue Mar 17, 2009 at 07:35:58 AM EST
    want to keep someone who is generating fake business volume? Would you retain Bernie Madoff on staff for investment counsel?

    Also, the argument can be made that they weren't really working for AIG. They were working to dump bad debt ON AIG. Do you really think that kind of bad judgement should be encouraged? And where is the line where it crosses into outright fraud?


    No guarantee of good performance (none / 0) (#12)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:41:56 AM EST
    Just retention.

    Fraudulent inducement is not a viable theory here.

    For example, what is it that these employees said or did not disclose that AIG relied upon to induce granting the retention agreements?

    Let's be real here.


    Unregulated Insurance (none / 0) (#14)
    by NMvoiceofreason on Tue Mar 17, 2009 at 07:50:22 AM EST
    Glass-Stegall made it illegal. Phil Graham made it legal again. But the contracts themselves were insurance contracts, without any assets to back them, or with assets whose value was fraudulently inflated.

    If I represented to you that the work I was bringing to your company was legal, above board, and profitable, and it was none of those things, would fraud be involved?

    So if I induce the contract on the basis that I routinely bring in 1B$ worth of business to get a 250m$ retention, when in fact that business is worth about 50 cents, there is no misrepresentation?

    Yes, lets be real here. Credit/Debt Swaps are fraud. Those whose dealt in them perpetrated a fraud. They should go to prison and any contracts they made along the way are voidable.


    Excuse me (none / 0) (#15)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:52:42 AM EST
    But you are arguing that AIG did not know what these employees were doing (even accepting your description.)

    As a defense to the contract, this is a terrible argument. The phrase "knew or should have known" might ring a bell.


    If you could argue (none / 0) (#18)
    by NMvoiceofreason on Tue Mar 17, 2009 at 07:57:29 AM EST
    that your client knew or should have known that fraud was involved, or that your client had no knowledge of the fraud, which way would you argue?

    When AIG is brought to face the 2 Trillion dollar CDS debacle, will their defense be that they "knew or should have known" they were aiding and abetting in a massive fraud on the financial system? Or will that be the wording in the DOJ indictment?


    I would not argue (none / 0) (#20)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:00:33 AM EST
    a ridiculous argument sure to lose under any circumstances.

    I would search for an argument that could succeed.

    AIG claiming fraudulent inducement here is simply a nonstarter.


    But what if.... (none / 0) (#53)
    by NMvoiceofreason on Tue Mar 17, 2009 at 09:46:22 AM EST
    DOJ claims it?

    That AIG was defrauded? (none / 0) (#54)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:47:20 AM EST
    then I would expect it would be laughed at.

    AIG would need to claim it.


    We don't know for sure (none / 0) (#65)
    by joanneleon on Tue Mar 17, 2009 at 10:25:44 AM EST
    that these were specifically retention bonuses.  We won't know until Cuomo gets the actual contracts.  Personally, I find it hard to believe that all of these bonuses were retention bonuses.

    Having been a recipient of bonuses from a Wall St. firm for six years, I know that my bonuses were always based not only on my own performance but the performance of the company.  Just for the record, my bonuses were a small fraction of my salary, as is typical for most employees of Wall St. companies.  I was an IT manager (functional title) and an AVP, then VP (officer title).  In good years, the bonuses were nice and in bad years they were just a token.  At least that's the way things used to be in some Wall St. firms that used to be solid and used to be a trusted manager of people's money before they were taken over by fools who should have known better and then by Goldman so-called experts, possibly thieves, who probably couldn't have saved the too-far-gone company anyway.


    After having heard about Cuomo's findings (none / 0) (#128)
    by joanneleon on Tue Mar 17, 2009 at 07:58:37 PM EST
    I'm even more in doubt now about the contracts being for purposes of retention, since some of those who received the money are already gone, and some took the money and ran.

    "A contract is a contract" (none / 0) (#10)
    by DFLer on Tue Mar 17, 2009 at 07:37:32 AM EST
    as I read in this morning's paper.

    Unless it's a labor union contract, apparently.

    Does anyone have the details (none / 0) (#11)
    by TimNCGuy on Tue Mar 17, 2009 at 07:41:47 AM EST
    for which of these bonuses are "retention" bonuses and which are "performance" bonuses.

    It is being reported today that the crappy division of AIG which brought the company down has contracts with "retention" bonuses.  But, that parts of this bonus pool are for employees from the very profitable divisions of the company and those are "performance" bonuses.

    It seems rather convenient that it just kind of worked out that way.

    I'm not sure the distinction should really matter.  I worked for a comapny with a "bonus" plan for employees.  But, the company as a whole had to be profitable before ANY employee qualified for a bonus.  It wasn't done on an individual division basis.  The individual division performance only applied AFTER the entire company was profitable as part of the calculation to decided how to divide up the bonus pool of money.

    The plan you had (none / 0) (#13)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:42:44 AM EST
    obviously is not the one we have here.

    it appears to me (none / 0) (#30)
    by TimNCGuy on Tue Mar 17, 2009 at 08:42:14 AM EST
    that the entire financial industry runs on a very strange concept of what a "bonus" really SHOULD be based on.

    Throughout this mess we have continually heard the financial types claiming that "bonuses" are just expected as part of their compensation package whether the company makes money or not.

    These people planned their entire life budgets fully EXPECTING these HUGE bonuses every year no matter how the company performed.


    That is a different matter (none / 0) (#35)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:47:12 AM EST
    The law and economics (none / 0) (#17)
    by Bemused on Tue Mar 17, 2009 at 07:55:53 AM EST
    types at Chicago, et al, who originated, or at least gave intellectual credibilty to concepts such as efficient breach (in a nutshell of a nutshell that in deciding whether to enforce contracts courts should heavily weigh the economic efficiency as opposed to antiquated concepts such as fair dealing, moral obligations, etc.) believe the overriding purpose of the law should be to  enhance the ability to create wealth.

       To them,  morality  is equivalent to whatever produces the most wealth. their idea of utopis would likely appall most people let alone most people here.


    You got that wrong (5.00 / 1) (#19)
    by Big Tent Democrat on Tue Mar 17, 2009 at 07:59:22 AM EST
    efficient breach was the law long before the Chicago School came along.

    Think Oliver Wendell Holmes.


    no, big Tent (none / 0) (#21)
    by Bemused on Tue Mar 17, 2009 at 08:07:41 AM EST
      No, Posner and his allies misreprented Holmes dictum as supportive of their ideas in order to claim historical basis in law and gloss over the radicalism of their ideas. See for instance:

    Fordham University School of Law
    Fordham Law Review, Vol. 68, P. 1085, 2000

    Oliver Wendell Holmes' most notorious statement about contract law was that "the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,-and nothing else." This has generally been interpreted to mean that a contracting party has a lawful option to perform or not. Holmes, however, was speaking of remedial limitations and did not espouse the belief that a contracting party had a right to breach. In other writings he equated a contractual breach with the commission of a tort. As a judge he labeled contract breaches as "wrongs."

    The misreading of Holmes has given comfort to theorists who espouse the notion of "efficient breach." The paper demonstrates that, whatever the merits the theory of efficient breach may have as an economic model, it has none as a legal postulate. Moreover, theorists who espouse the efficient breach theory, have difficulty in explaining why the law regards interference with a contract as a tort. Holmes, however, was one of the prime architects of the modern law of tortious interference.

    their ideas (5.00 / 1) (#23)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:10:22 AM EST
    have nothing to do with the fact that efficient breach has been contract law for a long time.

    They did not invent efficient breach, which is what you are trying to sell here.

    Look, the Restatement of Contracts has been around for a while.


    What a tangled web we weave... (none / 0) (#22)
    by kdog on Tue Mar 17, 2009 at 08:09:18 AM EST
    when we set to prop up dead companies.

    It's like "Weekend at Bernie's"...the hijinks keeps snowballing until the scene really blows up....and in the end the dead get buried regardless.

    I agree (none / 0) (#25)
    by Bemused on Tue Mar 17, 2009 at 08:14:15 AM EST
     on the other hand with you that fraudulent inducement by the employees is not a viable legal argument. That requires reasonable reliance by the complaining party on a false representation which induces the complaining party to exchange a promise.

      Here, AIG as the employer has no reasonable argument that it was induced to promise to pay bonuses based on a "false representation by the employees because all the information was not only available to but owned by AIG.

    big Tent (none / 0) (#26)
    by Bemused on Tue Mar 17, 2009 at 08:17:42 AM EST
      Arguing that efficient breach concept  is not the product of the the law and economics school definitely places you well outside mainstream thought. If you actually have a basis for this stunning assertion stop with the meaningless references to "Holmes" or the "Restatement" and articulate some basis for your claims.

    Are you nuts? (none / 0) (#33)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:45:07 AM EST
    Have you ever read the Restatement? You think Farnsworth was a Law and Economics guy? Hell, how about Corbin?

    to elaborate (none / 0) (#27)
    by Bemused on Tue Mar 17, 2009 at 08:32:20 AM EST
      You are referring to a situation where a party is permitted to breach a contract and pay damages caused by the breach rather than being required to perform the contract. The choice by a court of remedial damages over specific performance is in keeping with established law. the throet there is the breaching party avoids the greater loss from performance and the complaining party is made whole through damages.

      That though has no application to "efficient breach" as exists here. Where the contractual obligation of AIG is to pay its employees money, the payment of damages and specific performance are for practical purposes the same thing. To argue AIG should not be required to perfom but should pay damages instead is nonsensical.

      It's only when we get to the law and economics argument that a court should refrain from enforcing fully a contract when the net result is economically inefficient that any of these ideas come into play.


    Um, duh? (none / 0) (#32)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:44:21 AM EST
    Of course efficient breach is not the issue here. That is my entire point - the argument I am trying to refute is the idea that breach of contract is some outrageous thing when in fact it is well established in contract law.

    Not some new fangled government idea.


    two things: (none / 0) (#28)
    by cpinva on Tue Mar 17, 2009 at 08:36:03 AM EST
    1. have any of you actually seen any of these employment contracts? they've been discussed, but i've yet to see a sample of one. anyone have a link?

    2. according to the wp, the people who actually created and entered into the complex transactions at issue are long gone. yet, AIG claims only those who created and entered into these complex transactions understand them. these would not be the people whose retention bonuses are the subject of the current controversy.

    i am confused. if only those who created and entered into these transactions can possibly understand them, and they are gone, what are these other people doing?

    on the other hand, if the people currently working to unwind these very, very complex transactions, that they neither originated or entered into, can understand them, that would give lie to the assertions made by AIG, with respect to the retention bonuses; they must be paid, to retain the only people capable of understand these transactions. clearly, other people do too.

    3. the other possibility that crossed my mind: neither AIG or the wp has a clue what they're talking about.

    any helpful links or insight would be appreciated.

    A further illustration (none / 0) (#31)
    by Bemused on Tue Mar 17, 2009 at 08:44:01 AM EST

       I contract with you to paint your house for $5000. I thn breach the contract because I got a job for $10,000. You sue me to make me paint the house. i argue i should not be forced to paint your house but only pay you damages. You then have to pay $6000 to get the job done and the court orders me to pay you $1000 damages.

      On the other hand, if after we execute the contract and I perform my  obligation by painting   your house you breach then contract by only paying me $3000 and I sue you, you will be ordered to perform the contract by paying the remaining balance. Your conception of "efficient breach" has absolutely no relation to any issue in the case.

      My promised performance was providing laboe but your promised performance was paying money. you are equivalent to AIG here.

    Please stop (none / 0) (#34)
    by Big Tent Democrat on Tue Mar 17, 2009 at 08:46:28 AM EST
    acting like this.

    We all know what efficient breach means. Do I need to pull out Farnsworth's contract treatise and quote it to you?

    Seriously, stop it.


    slippery (none / 0) (#37)
    by Bemused on Tue Mar 17, 2009 at 08:48:57 AM EST
     but "inefficient."

    You are the one who wrote:

    "This is, in a word, nonsense. While I have argued here that, at first blush, the AIG bonuses agreements will be hard to break legally, it never would occur to me that there is some moral obligation to honor these contracts. Indeed, the "morality" of the situation, such as it is, would seem to militate towards not honoring the contract....

    But the important point here is that any commercial lawyer can tell you that this idea of a "contract is a bond" has no connection to contract law. The standard remedy for a breach of contract is damages, not specific performance (for which you have to demonstrate the inadequacy of money damages.)"


      Do you still not understand that from AIG's perspective honoring the contract means paying money?

    Do I not understand it? (none / 0) (#41)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:04:01 AM EST
    Are you joking? Or just an a**?

    Riddle me this genius, what is measure of damages for the breach here? Or does the concept of mitigation mean nothing to you?


    Or even better (none / 0) (#42)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:06:29 AM EST
    Could AIG argue the measure of damages should be the reliance interest instead of the expectation interest? What earning opportunity was forsaken?

    Intentional breach of contract is not (none / 0) (#50)
    by Green26 on Tue Mar 17, 2009 at 09:42:36 AM EST
    something new, but having the US force the breach of contracts, especially employment-related ones, would be new.

    Having a third party, including the government, force the renegotiation of contracts is not new.

    The analogy to the auto makers and union contracts is not the same, as the US forced renegotiation of contracts, not breach. Also, union workers don't have individual contracts, like in AIG's situation (apparently).

    Damages in this situation are double the amount of the unpaid bonus, plus attorneys fees, not just the amount not paid--according to the Conn. statute.

    Even in a bankruptcy situation, which this is not, I assume that a judgment for salary/bonus would be a higher claim than for an unsecured creditor--and thus the judgment would more likely be paid and would be paid ahead of unsecured creditors.

    If the bonuses had not been paid, this would be a nice case for a plaintiffs lawyer, probably representing many of the similarly situated employees. Clear damage amounts. Double the recovery under the statute. Attorneys fees payable by the defendant. Defendant, defendant's law firm, and some of US representatives, have already admitted that the amounts are owed and must be paid.

    Likely winnable on summary judgment, i.e. well before trial.


    It is interesting (none / 0) (#52)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:46:03 AM EST
    that the argument would likely be made by the employees, and have a fair chance of success, that such a claim would get the status of a postpetition or administrative claim.

    It certainly would if the debtor (AIG) defended the claim against a challenge from a creditor.


    Look the Feds are giving money to AIG. (none / 0) (#60)
    by BobTinKY on Tue Mar 17, 2009 at 10:12:47 AM EST
    For what specific purposes?  What do the documents outling the grant of federal money to AIG say?  Can the money be used for payment of bonuses or not?

    That is where I would focus, not on the AIG/AIG employee contracts.  It is not Uncle Sam "forcing a breach" if Uncle Sam said the money can only be used for the following purposes which do not include rentention bonus payments.  It is a federla bailout of an insolvent company and Uncle Sam can attach almost whatever conditions he wants.

    The question is:  what conditions did Uncle Sam attach?  

    Did Sen Dodd insert a provision allowing for these bonus as has been alleged in the media?  If so he should let someone else run in CT or we defintely are going to lose that seat; his favorabel mortgage is probably going to sink him anyway.  Sen. Dodd should answer these allegations.

    The MSM is focusing on the AIG employee agreeements which I suspect you and BTD are right about.  I see very little, nothing in fact, on the agreements between the US Government and AIG.  We are being told by our ever vigilant MSM yet again to watch the hole,as the doughnut goes rolling by.

    Geithner and Summers, in their never ending effort to save their pals, are going to bring the promise of this Amdinistration to a premature end.  Obama should can these idiots who have shown they are incapable of imagining any approach to these issues that does not require taxpayers to pick up the tab for keeping Wall Streeters whole on their wildly, recklessly, speculative investments.


    "....what conditions did Uncle Sam attach? (none / 0) (#98)
    by NYShooter on Tue Mar 17, 2009 at 11:41:02 AM EST
    My understanding is........

    They are being quoted now saying things like, "well, I guess we got snookered again, (exhaling dejectedly) "so I suppose we'll have to start adding some strings to future payouts."

    Look, all these guys are, like our Senate, a Patrician's Club, and wouldn't sully their gentile, unspoken, understanding by earthly, grubby things like "rules, or conditions." Paulson, Geithner, and Summers are as much in touch with common, every day, working folks as Usay and Kuday were.

    I simply refuse to believe that our top economic ministers are that stupid, especially after having been seemingly rolled like hapless victims of a date-rape drug in the first 350 billion Tarp bailout. These guys are so rich, so disconnected from the rest of us, that pocketing 350 billion of our dollars was just no big deal to them.

    Now, a couple of trillion dollars later, Geithner seems to be saying (with a sigh) "Gee fellas, skimming the first few hundred billion, no big deal, but now the rabble is starting to get restless, so please, o.k. guys? please give it a break for just a little while........just till the dust settles down, o.k.?"


    Maybe the Explanation is the .. (none / 0) (#104)
    by santarita on Tue Mar 17, 2009 at 11:47:43 AM EST
    different mindsets of the dealmakers and the bankers.  (In banking this is referred to as the hunter/gatherer dichotomy or more colorfully the hunter/skinner dichotomy.  One party goes out and searches for the deal and comes up with the letter of intent.  The other does all the back office work of due diligence, documentation, compliance etc.

    Paulson is more of the hunter mode.  Geithner may have not have much experience as either hunter or skinner.


    O.K. so maybe (none / 0) (#119)
    by NYShooter on Tue Mar 17, 2009 at 01:58:42 PM EST
    Geithner is naieve to the world of politics and public opinion, but Obama sure isn't. What's his excuse, so many handouts later?

    Reports were that, when Congress was (none / 0) (#120)
    by oculus on Tue Mar 17, 2009 at 02:01:32 PM EST
    trying to limit executive compensation for bailed-out banks, Obama administration activetly lobbied Congress not to do so.

    Yes, indeed... (none / 0) (#122)
    by santarita on Tue Mar 17, 2009 at 02:06:11 PM EST
    The Obama Administration is flubbing on some major issues.

    But--people waiting in line (none / 0) (#124)
    by oculus on Tue Mar 17, 2009 at 02:12:05 PM EST
    overnight for tickets to Obama town hall in Orange Co., CA.  No wonder he's "on the road" again.

    I hope you don't think... (none / 0) (#123)
    by santarita on Tue Mar 17, 2009 at 02:10:36 PM EST
    I'm making excuses for Paulson or Geithner.  I'm explaining why they may have made mistakes.  Perhaps they were/are not the right people for the job.

    Obama is losing the public relations battle here.  He looks like he is reactive instead of proactive.  Maybe he's delegated too much.


    now kdog (none / 0) (#38)
    by Bemused on Tue Mar 17, 2009 at 08:51:47 AM EST
      might have a thoughtful answer

      If AIG breaches and the employees sue and obtain money judgments let them stand in line with all the the other creditors.

    Fearmongering in the NYT. What a surprise. (none / 0) (#39)
    by joanneleon on Tue Mar 17, 2009 at 08:54:05 AM EST
    Well.  That was quite an experience reading that NYT article.

    In addition to the "moral" hogwash, it was chock full of fearmongering.  Why am I not surprised?  You'd think it may have even been written by a government propagandist.  (But we all know they don't have any of those at the old Grey Lady.)  Then again, Wall Street has their own breed of thugs too.

    As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.


    But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.


    Let them leave, you say. Where would they go, given the troubles in the financial industry? But the fact is, the real moneymakers in finance always have a place to go. You can bet that someone would scoop up the talent from A.I.G. and, quite possibly, put it to work -- against taxpayers' interests.

    When everything else fails, try to scare the living crap out of the people.  Some things never change.

    The NYT Article Is Interesting... (5.00 / 1) (#90)
    by santarita on Tue Mar 17, 2009 at 11:16:38 AM EST
    These employees have to be bribed to remain employees of AIG because they are the only ones that know about these transactions and how to unwind them.  Kind of explains why AIG got into this mess doesn't it?  

    If what the NYT is saying is true, then our trustee, Tim Geithner, better be sending in Treasury guys to learn the business quick, otherwise there will be no effective supervision and these employees, for all we know, could be picking our pockets.


    Aren't these employees receiving these bonuses, (none / 0) (#40)
    by BobTinKY on Tue Mar 17, 2009 at 08:59:08 AM EST
    by virtue of whatever retention bonus agreement they have in place with AIG, third party beneficiaries of the deal between the US government and AIG?  Just like the AIG counterparties?

    I don't know if that provides an out but it should open up a couple of more avenues to consider when searching for an out.  What, if anything, do the documents underlying the federal bailout say about third parties?

    If you ask me for money to stay in business and I give it to you can't I condition the grant of my money that that money be used only for certain purposes?  It seems to me those wanting to deny the use of federal taxpayer monies for bonuses need to also look at the conditions attendant to the grant of  federal money.  Uncle Sam does not generally give money without stringent conditions.


    In this case the measure of damages (none / 0) (#44)
    by Bemused on Tue Mar 17, 2009 at 09:09:50 AM EST

     is exactly the amount of performance. That's the whole point and wy you fail to grasp the situation.

      I hire you and as part of the contract I promise to pay you a bonus of $1000 on a future date certain if you are still in my employ. I then refuse to pay you the  $1000 even though you are in fact still working for me. Your damages are $1000 and there obviously is no way for me to argue that you had a duty to mitigate damages.

      If that isn't true, explain to me your theory as to how there is something you could have done to mitigate the damages from my refusing to pay you the $1000.


    Let's consider 3 points (5.00 / 1) (#46)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:23:52 AM EST
    First, your inability to push the reply button makes it difficult to follow what you are responding to.

    Second, my point here is not what the measure of damages would be, but that contract breach is not a matter of morals and never has been.

    Third, I certainly do not have a theory of mitigation to present, nor a theory of set off, nor even a theory of why reliance is the proper measure of damages.

    But a lawyer with access to the documents might in fact be able to construct these defenses on damages and many more.

    Finally, please stick to the topic.

    Later I can put up an open thread and we can have a hale and hearty discussion on the measure of contract damages.

    What this post is about is the faulty assertions regarding how contract breach is treated under the contract law prevalent in most of the United States (I think even in Connecticut, which governs this agreement by express provision we are told.)  


    then who wrote: (none / 0) (#48)
    by Bemused on Tue Mar 17, 2009 at 09:34:37 AM EST

      No, you are getting a little closer, but still missing key points. In the abstract you conflate choice of remedy with absence of moral underpinning.

      I think most would agree it's more accurate to say that in many circumstances our system recognizes the payment of damages in lieu of performance as being adequate to satisfy moral requirements than it is to say moral considerations are ignored.

      Secondly, your conception ignores the obvious moral underpinnings of laws which state that certain classes of "immoral" contracts cannot be enforced at law or equity.  For instance many states and the Feds have laws which prohibit courts from enforcing contracts to pay certain classes of gambling debts, even if the debts were incurred in a jurisdiction where such gambling is legal. Now, that might be to some a somewhat perverse moral decision, but it's clearly based on someone's idea of morality.

      My basic point is that you should probably calm down and think things through before you decide to make broad and sweeping assertions when your blood gets hot.


    Is a breach of contract immoral? (5.00 / 1) (#51)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:44:06 AM EST
    you finally came little closer to relevance.

    From what I gather you are arguing that the payment of contract damages is a result of moral lawmaking.

    I can only ask - are you serious? You think it is a moral imperative? Or a legal one?

    How about the exclusion of punitive damages? Moral or immoral?

    Do some provisions of contract law have moral or non-contractual underpinnings? Of course.

    Does paying damages for breach serve some moral purpose? Of course not.


    yes (none / 0) (#62)
    by Bemused on Tue Mar 17, 2009 at 10:19:30 AM EST
      I am quite serious. I suggest if you want to be considered "serious" you stop making comments which read as if you think something that is "legal imperative" then must necessarily not also include a mral one?

      I'm not sure where you are going with the introduction of punitive damages question. Are you suggesting that moral considerations play no role in decisions on whether punitives should be available or to what extent if they are? If that is your position I think you are, again, clearly wrong.

      Then the idea that "paying damages for breach serve[s] [no] moral purpose" only serves to illustrate your stunted conception of morality not anything approaching the truth. Do you honestly see "no moral purpose" in requiring people to pay for the losses they cause others to suffer because it is wrong to unjustifiably cause peole to suffer?

      I'm really intrigued by what your conception of "morality" might be.


    You believe that (none / 0) (#67)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:28:36 AM EST
    every law has a moral imperative apparently.


    I am done with this discussion.


    BTW (none / 0) (#70)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:39:23 AM EST
    I think it is important to differentiate between a moral imperative and a moral result.

    Not everything in life involves a moral judgment.

    The concept of efficiency has been imbued by conservatives as being a moral imperative, when in fact it is more a policy imperative.

    If we reduce the meaning of the word moral to"best policy result," then it is stripped of meaning. It is Dworkin reduced to absurdity.


    Gambling Debts (none / 0) (#129)
    by Amiss on Wed Mar 18, 2009 at 02:25:04 AM EST
    Secondly, your conception ignores the obvious moral underpinnings of laws which state that certain classes of "immoral" contracts cannot be enforced at law or equity.  For instance many states and the Feds have laws which prohibit courts from enforcing contracts to pay certain classes of gambling debts, even if the debts were incurred in a jurisdiction where such gambling is legal.

    To my mind and to many others,gambling debts are exactly what the American Taxpayers are being expected to pay off for AIG. They (both AIG and their employees) gambled with other people's money, they should not be able to collect on that debt, what they did was immoral and we the taxpayer should not have to be held to a contract with a morally bankrupt entity such as AIG.


    Solving a problem (none / 0) (#55)
    by gyrfalcon on Tue Mar 17, 2009 at 09:50:19 AM EST
    We have only a vague idea of who at AIG was granted these "bonuses," how much they were for and what they were for.  We don't know whether these were extraordinary or standard operating procedure at AIG.  We don't even know for certain when the contracts were written, although it has been reported in some places it was before a single dollar of bail-out money was so much as a gleam in Hank Paulson's eye.

    And yet we're all absolutely certain the compelling reason for breaking them is what, now?  Other than perhaps soothing uninformed public outrage ginned up by equally uninformed media, breaking these contracts would solve what problem?

    The comparison with the UAW contracts is a bitter sort of feel-good, but it's in no way actually comparable.  The UAW is not some helpless victim, it's a powerful force representing all the workers who produce the companies' products.  It did not have to enter into negotiations to change its contract terms, but it did so because it reluctantly became convinced it was necessary in order to keep the auto companies from going under altogether.

    There's nothing even remotely similar with AIG and the employees (and presumably executives) of the financial products unit.  This is just knee-jerk scapegoating, and it's not even scapegoating the responsible parties.

    Can we agree, at least, that legal contracts should not be broken absent some compelling reason to do so?  If we agree on that, then what's the compelling reason here?

    I can see lots of potential risks in doing so (ah, yes, "scare tactics," just like the warnings about the risks of overleveraging were considered "scare tactics" by the executives) but I'm scratching my head to find any real benefits.

    It would be nice, wouldn't it, if the financial world and Wall Street didn't structure its compensation packages in a way that's so alien to us working stiffs, but they do and have done for quite some time.  Whether they "should" or not and whether regularizing the way they pay people would be a useful thing to do is another matter.  But because it offends the sensibilities of folks who aren't familiar with it isn't sufficient reason.

    We keep losing sight of who the actual villains are in this whole mess.  It's not the derivatives traders in London, not even the "quants" who came up with the flawed formulas for assigning value and risk to these impossibly complicated instruments.  It's the top-level management of these companies, particularly on the financial side, who knew or had reason to know that what they were doing was ultimately unsustainable and chose to ignore it for the sake of the tsunami of money coming their way.

    Personally (none / 0) (#57)
    by Big Tent Democrat on Tue Mar 17, 2009 at 09:56:59 AM EST
    The counter party payments have me much more concerned.

    I do not disagree with you.


    Agreed entirely (none / 0) (#61)
    by gyrfalcon on Tue Mar 17, 2009 at 10:13:56 AM EST
    This whole flap is about something even less significant than an earmark for hog waste research.

    Having said that (none / 0) (#63)
    by Steve M on Tue Mar 17, 2009 at 10:19:41 AM EST
    Here is the definitive piece on the pig odor research earmark.

    A bit pedestrian, yes, but (none / 0) (#68)
    by joanneleon on Tue Mar 17, 2009 at 10:35:20 AM EST
    I can't resist saying that many words and phrases in that article, when placed next to the words "on Wall Street" (in today's world) are pathetic oxymorons.

    "breaking a bond" on Wall Street
    "trust and commitment" on Wall Street
    "commitment to taxpayers" on Wall Street
    "better off" on Wall Street
    "honor the contracts" on Wall Street
    "retain the best and brightest talent" on Wall Street

    And in general, the concept of morality on Wall Street is perhaps the most understated, in a British way, oxymoron of the century.

    No, i didn't say that (none / 0) (#69)
    by Bemused on Tue Mar 17, 2009 at 10:37:55 AM EST
      I implied you miss the moral imperatives behind most laws because you don't think things through.

      I believe there are moral considerations underlying contracts law and it is wholly fallacious to argue that the fact courts will order payment of damages rather than performance means moral considerations are ignored.

      Now, some narrow classes of laws might be viewed as having no direct "moral imperative." If you wanted to argue that a law which requires one to file paperwork documenting that he has complied with laws or regulations when he has in fact complied serves "no moral purpose" I'd find that at least reasonable, but I might suggest that even there exists a "moral imperative" which is premised on the belief that an orderly society serves the common good and we must all do our part to allow for fair and efficient administration and it wrong for us to fail to do so.

    What is the moral imperative (none / 0) (#71)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:40:47 AM EST
    for permitting breach and damages instead of enforcing specific performance as a general matter?

    You trivialize important questions of morality and the law with this kind of pedantry.


    In short (none / 0) (#73)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:43:50 AM EST
    while you can turn any legal question into a question of jurisprudential philosophy (as you just proved), it serves no purpose in this instance.

    Let me question whether it is "moral" for you to turn a simple discussion about a mistaken premise forwarded in the NYTimes about the "morality" of contract breach into a question of the "internal morality" of the law of contract remedies.


    Not to mention statutes of limitation (none / 0) (#74)
    by andgarden on Tue Mar 17, 2009 at 10:47:56 AM EST
    which I think are quite detached from morality.

    not entirely (none / 0) (#77)
    by Bemused on Tue Mar 17, 2009 at 10:54:35 AM EST
      Do you not see a "moral" basis for the belief it is wrong to require to defend themselves against a civil or criminal claim aftter the passage of time  may have prejudiced one's ability to defend?

      Now, the arbitrary fixation of specific terms in which actions must be brought is based on practical not moral considerations, but that does not mean moral considerations don't exist.


    Well (none / 0) (#80)
    by eric on Tue Mar 17, 2009 at 10:57:21 AM EST
    taking off my defense hat, I will tell you that a court can make an independent determination about the prejudice that one might suffer because of the passage of time.  It might be there, it might not.

    But, putting my hat back on, I will tell you that two years after notice of the injury is the moral deadline for suing my clients.


    "moral" in quotes (none / 0) (#81)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:58:17 AM EST
    is good.

    At least you are accepting that you have redefined the term in this discussion.

    The public policy rationale for the statute of limitations is not generally put in "moral" terms.


    You obviously (none / 0) (#78)
    by eric on Tue Mar 17, 2009 at 10:55:02 AM EST
    are not a defense attorney.  ;)

    heh (none / 0) (#82)
    by andgarden on Tue Mar 17, 2009 at 10:59:43 AM EST
    Hey, I understand the argument for SOL, I just don't think that the passage of time has any bearing on the moral weight of a claim.

    the moral imperative (none / 0) (#76)
    by Bemused on Tue Mar 17, 2009 at 10:51:51 AM EST
    (with which you are not required to agree--only recognize) is premised on the belief that it is right to make people pay for the losses they unjustifiably cause others to suffer but it is wrong to compel someone to take actions against his will and also possibly contrary to his interests if the aggrieved party can be made whole without coercing someone to take that action.



    Like writing a check (none / 0) (#79)
    by Big Tent Democrat on Tue Mar 17, 2009 at 10:56:02 AM EST
    to perform a contract, or purchase real estate or  . . .

    The funny thing is you have specific performance somewhat backwards in that it usually involves coercion by the court regarding physical actions by a party (i.e. - the musical performer enjoined from performing in breach of an agreement.)

    In the end, sometimes a cigar is just a cigar. But there probably is a moral to that too.


    Well, (none / 0) (#72)
    by eric on Tue Mar 17, 2009 at 10:43:04 AM EST
    when I rented that flat, I thought there was going to be a coronation.  Gimme my money back!

    That must have been (5.00 / 1) (#75)
    by Steve M on Tue Mar 17, 2009 at 10:49:49 AM EST
    very frustrating for you.

    Yes (none / 0) (#83)
    by Bemused on Tue Mar 17, 2009 at 11:03:06 AM EST
     and the concept of laches exist for that purpose.

      Requiring a person to provide facts proving unfair prejudice rather than relying on an arbitrary limit set by statute might strike many of us a a "better" moral approach in the abstract, but that doesn't mean that the reasoning behind establishing arbitrary time limits is entirely detached from morality.

      SOLs save time, money and resources that would be required to litigate prejudice and also undoubtedly bar some otherwise meritorious actions where the defendant could not show actual prejudice. clearly, they are not premised entirely on moral considerations. The fallacy into which peole are falling here is drawing the conclusion that things which  are not entirely premised on morality are therefore totally ignoring morality.

    Do you see (5.00 / 2) (#84)
    by Steve M on Tue Mar 17, 2009 at 11:04:31 AM EST
    the little link entitled "Reply to this" at the bottom of every single comment in this thread?  Please learn to click it when you are replying to someone else's comment!

    Keep moving those goalposts! (none / 0) (#85)
    by andgarden on Tue Mar 17, 2009 at 11:05:12 AM EST
    how (none / 0) (#88)
    by Bemused on Tue Mar 17, 2009 at 11:10:09 AM EST
    an i moving the goalposts. I think i've been pretty darn consistent from the get go.

    More correctly, you invented a strawman (none / 0) (#89)
    by andgarden on Tue Mar 17, 2009 at 11:14:06 AM EST
    In particular, this:

    The fallacy into which peole are falling here is drawing the conclusion that things which  are not entirely premised on morality are therefore totally ignoring morality.

    no I hardly invented it (none / 0) (#92)
    by Bemused on Tue Mar 17, 2009 at 11:19:45 AM EST
      I only showed how it appears in the posts of others making claims such as SOLs are totally detached from morality or that contract law is shown to have no moral basis because it often allows for damages to be paid in satisfaction of breaches.

    You did not "show" (none / 0) (#93)
    by andgarden on Tue Mar 17, 2009 at 11:21:28 AM EST
    You asserted.

    sorry (none / 0) (#87)
    by Bemused on Tue Mar 17, 2009 at 11:08:39 AM EST
     I will try to do better on that. I have been viewing in the flst unthreaded mode and didn't realize it made a difference in the display for everyone.

    Too late (none / 0) (#102)
    by Big Tent Democrat on Tue Mar 17, 2009 at 11:42:12 AM EST
    This thread is a mess.

    correctly asserted (none / 0) (#94)
    by Bemused on Tue Mar 17, 2009 at 11:22:44 AM EST
    Or are you actually going to provide some refutation of the points i made?

    re keeping threads in order (none / 0) (#101)
    by DFLer on Tue Mar 17, 2009 at 11:41:54 AM EST
    For example, no one can see who the "you" is that you refer to in this comment, because there is no "parent" to click on.

    Also, check out the settings at the top of the comments for "nested" "Ignore ratings" so the comments display in order first to last, otherwise the comment with the highest ratings will display first, out of time-order.

    Hit "set"


    I got it now (none / 0) (#106)
    by Bemused on Tue Mar 17, 2009 at 11:48:56 AM EST
     i have switched to the nested and see why you should reply to a post not the thread.

    another useful hint (none / 0) (#125)
    by DFLer on Tue Mar 17, 2009 at 03:20:29 PM EST
    If you click on "Your comments" underneath your log-in name on the right sidebar, you can quickly see if there have been any responses to your particular posts on multiple threads, without having to scroll through the various diaries.

    I find this handy, especially when new diaries have moved have my attention elsewhere when I'm just reading.


    Grounds For Not Paying the Employees... (none / 0) (#95)
    by santarita on Tue Mar 17, 2009 at 11:29:17 AM EST
    could be based on breaches of their duties to the Company.  I wonder if anyone at AIG or Treasury has looked at the activities of the employees and determined that everything that each of them did was above board. For example:  Were their trades all legitimate?  Did they keep two sets of books?  Were there any improper conflicts of interest?  

    I am as horrified by the fact of the bonuses as I am by the apparent lack of due diligence by Treasury prior to its engaging in the various bailout transactions with AIG.  I understand that, especially in September, things were happening fast and Paulson was wheeling and dealing.  But we need our trustees to act like prudent bankers and not just deal makers.

    Why, why, why (none / 0) (#114)
    by gyrfalcon on Tue Mar 17, 2009 at 12:40:02 PM EST
    are we trying to blame the traders in this unit for this whole huge mess instead of the people who gave them their marching orders?  This makes absolutely no sense to me.

    You Assume That There Were.. (none / 0) (#115)
    by santarita on Tue Mar 17, 2009 at 01:02:08 PM EST
    marching orders other than "Here are our division income goals.".

    I'm not necessarily blaming the traders - just thinking that the owner of a majority interest in a troubled company ought to be looking very carefully at the subsidiary that led to the downfall of the parent and making sure that all employees were following applicable company policies (if any) and applicable regulations (if any).  

    The fact that Geithner appears to be taken by surprise by the retention agreements doesn't give me a whole lot of comfort that he has a good handle on that business.


    Geithner surprised? (none / 0) (#116)
    by gyrfalcon on Tue Mar 17, 2009 at 01:39:31 PM EST
    People keep saying that he "appears to be surprised," but I can't imagine where that comes from.  We're surprised, Geithner et al definitely are not. According to the Wapo article, the government has known about this for something like, I believe they sayd, a year and has been working to try to do something about it.  Apparently, a fair number of the upper level recipients were persuaded to take less $$, and legal types were brought in months ago to try to figure out if there was a way to get out of honoring the contracts.

    Geithner just has a face that looks surprised the sun came up in the morning.


    The Initial Articles Made It... (none / 0) (#118)
    by santarita on Tue Mar 17, 2009 at 01:50:39 PM EST
    seem as if Geithner had just learned about the bonuses and was on the phone to Liddy this weekend trying to talk him out of the bonuses.

    If Geithner and/or Bernanke knew about these bonuses before this weekend, why not disclose it.  It may be that subordinates knew and didn't say anything to those two.  

    I suspect that they are allowing too much business as usual at banks and companies that are on the dole.  But the more I read, the more I realize that the reporting on these issues is disjointed and incomplete.  But this too is a problem for Bernanke and Giethner (and Obama).  If they don't provide adequate information in a timely manner, the public then has to rely on crummy reporting, rumors and innuendo.


    Truth (none / 0) (#127)
    by gyrfalcon on Tue Mar 17, 2009 at 04:30:49 PM EST
    "clumsy reporting" is exactly the right term.

    I suspect they didn't make it public because they knew what an uproar it would cause and were trying to get as much of it clawed back as they could before it did become public knowledge.

    "Business as usual" at the banks, surely. But from another point of view, if you're trying to keep marginal institutions on their feet, requiring them to behave in such a penurious way that they're telegraphing their weakness isn't a very smart thing to do.  The object is to get these guys off the dole.

    The banking industry throws vast wads of cash around like confetti as normal business practice.  If a couple of banks with bail-out money suddenly stop doing that while all the other banks are carrying on as usual, wouldn't that be a signal to you that maybe you better cash in your stocks and bonds and get your investment the heck out of there in a hurry?

    I was once a guest at a wildly expensive dinner and evening's entertainment thrown by one of the big banks just for folks whose trust funds were being managed by the bank.  They did this bimonthly for these people.  They probably did something similar every week for different groups of high-value customers and investors.

    It's a totally different world, insanely out of whack, IMHO, but either you have to get everybody to stop doing it or you have to realize that this kind of thing is just a standard business expense that a bailed-out bank is going to have to engage in, just like, oh, having an 800 number and free calendars.


    According to news tonite (none / 0) (#130)
    by Amiss on Wed Mar 18, 2009 at 02:35:23 AM EST
    Geithner knew about it last Tuesday, was on the phone with Liddy on Wednesday and when he couldnt get anywhere, he told Obama last Thursday.

    It all stinks to high heaven to me, especially since at least CNN was reporting on it as early as January 28th.


    I don't believe (none / 0) (#117)
    by gyrfalcon on Tue Mar 17, 2009 at 01:45:07 PM EST
    for one second that top management of AIG and Bear Stearns and Lehman et al can credibly claim innocence and I'm astounded that anybody would think they could.  That's like absolving Rumsfeld for what happened at Gitmo and Abu Ghraib.

    I say again this was not a rogue unit, this was at the core of AIG's massive increase in income.  When AIG saw how profitable these loony derivatives could be, they threw themselves into it whole hog, just as many other financials did.  Whether risk assessment people in the company tried to warn them off it, I don't know.  But it's reported that some did in other companies and they were waved off as naysayers and alarmists.


    Who Knows? (none / 0) (#121)
    by santarita on Tue Mar 17, 2009 at 02:03:32 PM EST
    No one seems to be looking into possible misdeeds except for Cuomo.

    Cuomo (5.00 / 1) (#126)
    by squeaky on Tue Mar 17, 2009 at 03:48:43 PM EST
    Is just looking to 2010 election.