Another Side to the AIG Bonuses

[RedDog]

http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=2&pagewanted=1&partner=rss&emc=rss


The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. ...


...I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.


But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments

[Ghost]

RedDog, thanks for posting. I had not seen this. I think it is an absolute MUST-read for anyone trying to understand what's going on.

Mike

[Just Say N20]

There are always 2 sides to every story.

This seems exponentially more credible than the class warfare hatred that is being spewed from D.C.

Thanks for posting. In conversations with people, I have tried to support the employees who were to receive the bonuses, usually taking great personal abuse as a result. This is a side of the story that the Cool-aid drinkers will never hear, and wouldn't believe anyway.

[McGary911]

HA. If you're going to write a resignation letter, get it published in the times. That's the way to go out.

That being said, I'm sure there's a lot more here than is mentioned in the letter. AIG-FS is the 400 person unit that wrote the 500 bil in credit default swaps that caused a lot of their ills. Did this guy personally do it? Sounds like he didn't. Did this very small unit within AIG do it? yep. I'd love to see these contracts they speak of. Typically, contracts in the financial industry weigh heavily on bonuses as a major part of compensation. Some years this is great, some it's terrible. He may have done a great job, but FP had issues. That would potentially impact his bonus, even if he personally did a great job. Working in this industry is a gamble in itself, with the bonus structure.
All through the past 7 quarters or so, my reviews have been top notch, my business unit has made billions, but my company in general has lost a ton. Did I exect or get a bonus that reflected on me or my business unit? Nope, got one that reflected how the company as a whole did.

Have any of these contracts been made public?

[Ghost]

HA. If you're going to write a resignation letter, get it published in the times. That's the way to go out.

That being said, I'm sure there's a lot more here than is mentioned in the letter. AIG-FS is the 400 person unit that wrote the 500 bil in credit default swaps that caused a lot of their ills. Did this guy personally do it? Sounds like he didn't. Did this very small unit within AIG do it? yep. I'd love to see these contracts they speak of. Typically, contracts in the financial industry weigh heavily on bonuses as a major part of compensation. Some years this is great, some it's terrible. He may have done a great job, but FP had issues. That would potentially impact his bonus, even if he personally did a great job. Working in this industry is a gamble in itself, with the bonus structure.
All through the past 7 quarters or so, my reviews have been top notch, my business unit has made billions, but my company in general has lost a ton. Did I exect or get a bonus that reflected on me or my business unit? Nope, got one that reflected how the company as a whole did.

Have any of these contracts been made public?

I think you're right on many counts, but I also think that if I understand it, the folks who did the work like this guy did entered into an agreement post-bailout that deferred virtually all their pay until this month. Had that agreement not been made, this guy and many others don't do the work that the feds wanted done for the last year.

I want to know more about the guys who created, managed, and profited over the last 10 years from selling all the credit default swaps. I want to know what they got paid, and I want to know about their political contributions, beyond what we already know about AIG's contributions. And I want to know more about the insurance regulators and the Congressmen and ratings agencies who made it possible to sidesetep long-established accounting rules.

These guys, in their various roles, circumvented insurance regulation and oversold insurance, got FILTHY RICH off the fraudulently priced premiums that lacked sufficient collateral backing. (Imagine if State Farm or Allstate took 99 percent of the premiums and paid it to themselves in salary. Then, some houses burn down, and they go, sorry, we don't have enough to pay.) If anyone should be pursued after the fact, it is all of these people in all of these roles. We should be looking at them, including the Chris Dodds and Barney Franks, and followign the money gained by fraudulently allowing, and selling bogus insurance, and seizing all their assets funded with the ill-gotten cash.

All the current bonus stuff is a contrived sideshow to keep us off the scent of the stuff above, and keep Congress and their real cronies from looking as bad as they really are. They are, literally, f#cking crooks, nothing short of that.

[McGary911]

Yep Ghost.....that's why I'd be curious to see what these contracts looked like. Deferred compensation is a much different beast than a bonus. Typically is used upon ending employment for tax advantages. I don't know if anyone's seen the contracts beyond attorney generals?

AIG was writing a ton of these CDFs, which were unregulated, and were hard to place a value on. When they started to realize they may have to actually pay out on some of these things, I'd love to have been a fly on the wall for that "oh chit" meeting. There are a ton of reasons why we are where we are, but CDFs are one of the big ones.

[Ghost]

When they started to realize they may have to actually pay out on some of these things, I'd love to have been a fly on the wall for that "oh chit" meeting. There are a ton of reasons why we are where we are, but CDFs are one of the big ones.

A year or two ago I was on a dive boat in the Caribbean with a guy from Lloyd's of London, who was asking about American mortgages. They were trying to do probability assessments about the likelihood of massive mortgage collapse here in the states. One of my buddies was a mortgage broker, so the guy really wanted to listen to him, more than me, about what we thought. Naturally, my friend, bless his heart, probably was too tied in to the whole business to be the right one to ask. I was more flip. "Yeah, well, let's see: massive increases in unemployment, mortgage defaults, falling real estate values? Probability estimate of 1. Just a matter of how many months or years you wanna put the time-horizon." Maybe they used my buddy's answer when they did the math for the swap guys...

[BigGrizzly]

I saw that hearing in its entirety, The funny and disgusting part were the people who were involved in the bill ie Barny the jerk Frank, Dodd and the others. Frank sitting on his omnipotent seat threatening legal action. He never gave a bonus back in his entire gay life ?He is one of the real crooks. Also just remember the bonuses were Retention Bonus, NOT performance bonus. This was to keep the people on board. Call it what you will but that is what it what is was I heard the discussion. The real problem was not only AIG but our inept senate. True they should not offered that package and a couple of hunderd other ones in that bill/ bailout