While I Was Out

So we didn't post a blog last week because of the test, so now I have two whole weeks of news to choose from. Obviously, the big economic story is the AIG bonus issue.

"Insurance giant AIG
was given $152 billion in bailout money by the federal government since nearly
collapsing in September. Now the company is planning to take millions of that
money and hand it over to employees in a program that sounds a lot like
bonuses."

In some cases, company workers were promised anywhere between one and four million dollars as part of a retention plan (a "carrot on a stick" for employees to remain with the company). As you can imagine, this has angered many people in Washington as well as many tax payers. Why should a company who was bailed out with public funds--our hard earned tax dollars-- be allowed to be so spend that money so loosely. The argument top AIG managers make is that it needs its top talent in order to run a profitable business and get back on track. The plan is to sell 65% of its business to repay federal loans. Under this light, it makes more sense. If I were a top CEO of AIG, I would want to get out of there too. Especially if the company is going under and a rival company is willing to buy me off. And naturally, AIG will want to keep its best talent because it'll go under for sure without it.

Later in the week, with much pressure from Washington, AIG executives have agreed to return some or all of the bonus money. However, at the same time, Congress was passing a bill that would tax 90% of the bonus money given to executives from bailed out firms.

Obama, who promises that his administration was not responsible for the lack of administration in the use of the bail out money, also promises to put an end to poor use of the money by possibly creating a new agency to oversee bail our spending. But didn't he promise to do that before? I could swear hearing that the spending of this money was going to be tightly monitored and that tax payers had nothing to worry about in terms of where their money was going. However, it's good that action is being taken now instead of months down the road, when the money that was given in bonuses would be untraceable. I do agree with Congress's decision to claim the money given in bonuses. It isn't right for a company that was bailed out using our money to spend it on bonuses--no matter how cleverly they're disguised as retention plans.

Also in the news, on a different note, population analysts have noticed a decrease in migration toward the Sun Belt (Florida, Arizona, Nevada, etc.). These analysts blame the downturn in the economy.

"Census data released Thursday highlight a U.S. population somewhat locked in
place by the severe housing downturn and economic recession, even before the
impact of rippling job layoffs after last September's financial meltdown."

I'm not surprised. In my earlier posts, I mentioned that certain products like T.Vs, cars, and refrigerators are good indicators of the health of the economy. Well, so are migration trends. It costs a lot of money to pick up and move, especially across the country. Many of these people rely on the money from selling their homes. However, since the housing market is so bad and housing prices are so low, sellers aren't getting enough money for their houses to move. While it's a buyer's market, it's difficult to buy a home while you're sitting on one right now. Hopefully, things will get better, but for now, people will have to sit tight in traditional cities. It's not a bad thing, it just shows that people simply can't afford to move.