AIG Bonuses

[jackellis]

You'll have to register on the NY Times web site (free) to read this letter by one recipient of the infamous AIG bonuses:

http://www.nytimes.com/2009/03/25/op...=1&ref=opinion

I'm sure this isn't the whole story any more than statements by public officials tell the whole story but I will agree with the author on one point:

"Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press."

It seems like the office of attorney general ends up being a steppingstone to the governor's mansion rather than an office that enforces the law of the land. Sometimes they get carried away, to the detriment of the rule of law.

[germdoc]

A couple of snarky comments...I almost felt a twinge of sympathy for the guy, but...

"As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house."

What about the guy who owns the house? (Us) Why should we suffer more than this manager whose company burned down the house? Why wasn't he and his colleagues trying to prevent his company from burning down houses, even if he himself didn't start the fire? THIS IS THE LARGEST FINANCIAL FAILURE IN HISTORY!!!

"On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands."

Awww--he's getting $3/4 million AFTER TAXES from a BANKRUPT COMPANY and wants our sympathy. Awww...the regular guys getting laid off by Circuit City, the auto companies, etc., didn't get a huge payout as I recall.

"I know that because of hard work I have benefited more than most during the economic boom [no s***, Sherlock] and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree."

Understatement of the ****ing year. Excuse my French.

[radhak]

He forgets the biggest thorn here : even if all his claims are true, even if he were the sole conscientious worker left in AIG, and even if he truly deserved that bonus (I concede nothing, I just want to get to my point) - the real issue is, AIG had no money to pay him that bonus. It got the money from me (us) under false pretenses. It said it needed the money to operate. Then it turned around and distributed it among its chosen few.

This is the same as stolen goods. And we know that stolen goods do not rightfully belong to the purchaser but the original owner, however much innocent that purchaser be.

But for that bonus, he and others of his ilk deserve sympathy, as do all others in similarly doomed houses. But when they started divvying up the loot, they needed to worry about the wrath of the looted.

Thanks for posting that link. I was wondering when we'd start seeing such defiant speeches from those exalted beings. I predict we'll see more, and even from enlightened journalists. Something like, '...this is catastrophic, it will only see the flight of high quality talent from financial institutions...'. Bah! For what they did with that talent, Joe the Plumber might do better .

Oh - about that extra-judicial reach by the AGs; I abhor all such proclivities; but in this 'alien vs predator' round, i have sympathy for neither. May the more political win.

[RyFitz13]

He forgets the biggest thorn here : even if all his claims are true, even if he were the sole conscientious worker left in AIG, and even if he truly deserved that bonus (I concede nothing, I just want to get to my point) - the real issue is, AIG had no money to pay him that bonus. It got the money from me (us) under false pretenses. It said it needed the money to operate. Then it turned around and distributed it among its chosen few.

Just to play devil's advocate, I'd bring up 2 points:

1) AIG was given the bailout to meet their financial obligations. Period, end of story. They don't get to pick and choose which obligations they must meet, any more than you or I get to pick and choose which bills we pay. When we do that, we face consequences. AIG will face consequences for any obligations they do not meet now that they have the means (the bailout) to do so.

2) In terms of these bonuses, we're talking $165 million. Yes, that's a very large number. But the bailout was $170 billion! Those bonuses were _less_ than one tenth of one percent of the bailout amount. That's hardly distributing the bailout money among their chosen few.

Yes, it sucks that a large number of our dollars went into these bonuses. Not knowing the specifics, I'd certainly allow that at least some of those bonuses were earned. To assume every single business unit at AIG was failing, and every single employee at the company was an incompetent moron, and not a single one was excelling at his or her job is just gross simplification. Though I'll certainly agree that it's highly likely that some amount of those bonuses were simply not earned, but were only paid because AIG was legally obligated to pay them.

[Daryl]

Edited for content. I would rather do this than lock the thread. Be careful fellas.

[Ed62]

2) In terms of these bonuses, we're talking $165 million. Yes, that's a very large number. But the bailout was $170 billion!

Sorry, but that doesn't make it OK in my book. I wonder if any of them would have the guts to sue for it.

I'll certainly agree that it's highly likely that some amount of those bonuses were simply not earned

I think Joe the bricklayer would probably agree with that.

Ed

[Alex Franke]

snip

We're supposed to steer away from politics, not steer into it...

Thanks Alex!

[Ed62]

We're supposed to steer away from politics, not steer into it...

Well said.

Ed

[smorris]

My view is probably not popular but here is what is upsetting to me about the bonus situation.

[carefully avoiding politics...my view only]
I find the witch hunt mentality which is being embraced by many to be very disturbing. Tours to take people to their homes with the predictable results, AG's who want to publish names to intimidate them in lieu of using the courts since they don't have a legal leg to stand on, these people had binding contracts. A likely unconstitutional writ of attainder being discussed against people who performed a legal albeit unpopular act. Attempting to publicly shame them by authorities. And the populace grabbing their pitchforks and torches. I had thought we were better than that, all we need are the dunking stools and fires to start. Welcome to Salem.
[/carefully avoiding politics...my view only]

[crokett]

I agree with smorris. How many here work for a large company? I do. My company is large enough that if a particular business unit did something that threatened the company I would expect that unit and its executive chain to face appropriate consequences. However, I fail to see why I should forgo a bonus for something I had no real control over. The bonuses paid were part of legally binding contracts, although I would expect them to be performance based, I know mine is. I also don't think anything illegal was done. Unwise? Risky? Yes, but as far as I know, not illegal.

[herb fellows]

I agree with Smorris. These things that have happened are terrible, but the first thing any law enforcement authority would tell you is 'don't break the law, work towards changing it'.

Now, we have the law enforcement agencies breaking the law, with 'the end justifies the means' as a credo. This is dangerous stuff!

[Daryl]

Well said.

Ed

The very nature of the thread is political. Maybe my transgression was that I dropped a couple names

[JR]

I guess there are more people who think like I do than would be indicated by the political rancor at the Capitol.

The people who are getting the most grief are the ones who worked in AIG FP, like Mr. DeSantis in the referenced email. They were told a year ago that AIG would be shutting down the division. Their services were needed to unwind the billions of $ in contracts, some of which were the egregious Credit Default Swaps, others of which (like DeSantis') were not. They were promised a backend payout if they stayed until their positions were unwound. In Mr. DeSantis' case there was no salary until the bonus was paid.

This kind of thing is common for common folk, too. A division shut down by a company may ask some personnel to stay on longer then their peers in order to facilitate the transfer of knowledge or technology to another location. For staying they are offered a bonus, just like the AIG people. Their bonuses may be one or two or three orders of magnitude different in size, but it's the same contract nonetheless.

I'm glad DeSantis has some backbone. He's getting royally screwed. It's not his fault the smart people on the CDS desk, and in management, were not as smart as they thought. Also this contract, and the intention to shut down AIG-FP, were obviously done in March, 2008, long before the bailout money became available. AIG did not mislead the government. In the end, only their people were misled.

Finally, when it was deciced that the TARP money would be used as equity investments in the big financial firms, as opposed to other forms of collateral, there was a very sharp discussion about what role the government woud play in managing those companies. Mr. Paulson and Mr. Bernanke were adamant that the government role would be as overseer and influencer, but that would not be involved in day-to-day operations and they would not have voting rights like other shareholders. It is now clear that these companies were misled. The government intends to meddle as intently as they can. Payments to AIG's counterparties are being questioned as to the propriety of full payment vs. haircuts, foreign vs. domestic, big banks vs. retirement funds ("preferably make the payments directly to the retirees please, so the big bad fund managers are not involved"). This is all wrong.

I'm as unhappy as the next guy that I've lost my job and my hoped-for retirement is now in jeopardy. I don't blame Mr. DeSantis, and don't think it helps to pillory him.

JR

[crokett]

The very nature of the thread is political. Maybe my transgression was that I dropped a couple names

No, it is not. This thread is about a letter a former AIG exec wrote to the NY Times concerning the bonuses that AIG paid. At least, that is how I see it.

[radhak]

I stand by my viewpoint : but for the bailout given to AIG, there would not have been any money for bonus. Maybe it's only $160 million, but it had to come from somewhere.

Let us imagine that AIG got no bailout money. $170 billion savings for us, a wrecked company for them. <stay with me please, and avoid all the doomsday predictions 'if AIG goes down' for now>. All those 'contracts' would have been null and void in effect, for the sheer lack of financials. For all the contracts they might have waved in the face of their CEO, for all the "you promised" they yelled, the plain fact would have been, "too bad, so sad, there's no money, just go home". If AIG were to pay the bonuses without taking any bailout, this would not even be discussed.

And how come we only talk of fair/unfair in the narrow context of a handful of people? How about judging against the rest of the world? Guess what, without the bailout, they would have been just some among the millions of others who actually did go home like that. Who were promised by their bosses they were safe, just keep working and you'd get your just rewards; but were cheated. When millions others could be cheated by their employers, what's so great if 18 more were too?

Like his own letter said, he was unfairly compensated early on; now it's payback time.