Week 5

My first article this week was called "AIG CEO asks employees to repay some bonus money" and was about Edward Liddy, the AIG CEO, and his sit down in Washington about the 165 million dollars the company, who is receiving unbelievable amounts of bailout money in excess of 180 billion dollars, spread out to 400 of its top employees as bonuses. Liddy flimsily attempted to appease some anger by stating that he had "asked" employees of the company that had received in excess of $100,000 to return at least half of their bonus, but that he would not list the recipients names for safety reasons. Liddy explained that the payouts were necessary to retain top employees with specialized knowledge to dispose 2.7 trillion dollars in complex securities that dragged the insurer down last year. Liddy then claimed they had whittled that amount down to 1.6 trillion, while the Washington POst reported that the work of defusing the most dangerous bets placed by AIG was mostly finished, down to 13 billion. Public rage is apparent on this issue, and Congress is even trying to pass a bill on Thursday to recoup most of the bonus money paid to the AIG executives. New York Attorney General Andrew Cuomo subpoenaed AIG for a list of the recipients.

This article really pissed me off. Hearing that the money that our society works for as whole for the betterment of our nation is being used to fill the pockets of greedy executives who let this giant corporation fall to its knees and beg in the first place is absolutely ridiculous. When you are AIG, and you screw up enough to bring one of the biggest corporations in the world to bankruptcy, how can you honestly believe that you deserve a bonus? Especially 165 million spread over 400 people! Thats more than 400,000 each if distributed evenly. Also, the lackadaisical responses Liddy gave to the subcommittee made it seem as if it wasn't a big deal, like "oops my bad too late now". It's his foul up, their his employees, he should straight up tell them to give the majority of their bonuses back. I'm sure these people work hard for these bonuses but a company has to recognize when they don't the luxury of handing out such sizable payouts, and their employees should understand that. If they value their job, they will stay, if they don't then they leave, it seems to me like AIG is going to collapse sometime in the near future anyway.

My next article was name "Fed says let's Twist again after 48 years" and was about how the Federal Reserve on Wednesday flashed back to a campaign almost 48 years that was named "Operation Twist" as it announced the purchase of $300 billion worth of longer-dated Treasury securities, as well asa $850 billion of mortgage securities, to help curb the deepening recession. The Japanese did this in the 1990's and by the Bank of England in recent weeks. The Fed is trying to boost the mortgage securities and debt market to the tune of 1.45 trillion dollars, and has also aggressively tried to support private credit markets, which is a program that could grow to 1 trillion in size. This combination of monetary, credit, and fiscal easing will hopefully slow the recession in the second quarter and spark modest recovery by year-end. However the risk for inflation is high since all this money is going to be printed, adding a lot of parchment into the economy.

These spending plans are beginning to absolutely blow my mind. The money that is being talked about here is a humongous sum of cash. Multiple trillions of dollars being injected into our economy. Hopefully, all this government spending sends us into an even more prosperous era than we were in before this crisis, because there is going to be a huge amount of national debt to pay off. I have to keep reminding myself that this is our money that these people are playing with, and when the Fed decides to print a trillion more dollars, that effects how much the money in your bank account for your kids is actually worth. This is all very scary stuff, I feel like America is one big social experiment now, with the end either being the discovery of something new and cool, or in the end the chemicals we used end up combining into explosive material and blowing up right in our face.

My last article was called "FedEx profit tumbles on global slump" and was about the huge drop that FedEx took in profit. Reportedly, the package delivery company took a 75 percent drop in its profit due to the recession and gave a low quarterly outlook. In the span of one fiscal year the company has reported that its net income went down from 393 million or 1.26 dollars a share to 97 million, 31 cents a share. Fed Ex is considered a bellwether of U.S. economic activity because when the economy does well, companies and consumers ship more goods; in a recession, package volumes drop. FedEx also has a 14 percent revenue drop to 8.14 billion. The company will be forced to suspend paying matching contributions to its 401 k retirement plan reciepients for a minimum of 1 year, and also gay pay cuts and cut man hours to compensate. 

It seems that the economic windfall is really catching every part of our socioeconomic system now. I fear for the job market for when I get out school, hopefully it will be back to normal by that time. I am just surprised about how much FedEx fell within a couple of quarters. Other than that the article was interesting, I'm now thinking of buying some FedEx stock so when things get going again I can see a quadrupled return.