"Betrayed" AIG Exec Offers Public Resignation

Source: cbsnews

"Betrayed" AIG Exec Offers Public Resignation
CBS News
March 25, 2009
http://www.cbsnews.com/blogs/2009/03/25/business/econwatch/entry4891431.shtml

In a sometimes scathing, sometimes somber letter to AIG CEO Edward Liddy, an executive working in the company's scandal-plagued Financial Products division resigned his post, expressing frustration at being "betrayed" by those he tried to help.

In the letter, which ran as an op-ed piece in Tuesday's New York Times, executive vice president Jake DeSantis said he was leaving the company because "we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials."

Liddy appeared before Congress last week to answer for the $165 million in bonus money going to executives of the Financial Products division – the part of the company widely blamed for AIG's near collapse. Those payments, and their recipients, have been blasted by lawmakers and, notably, the attorneys general of New York and Connecticut, who have sought the release of their names.

DeSantis insists he was not involved in the credit default swaps that are at the root of AIG's problems, noting that most of those responsible "have left the company and have conspicuously escaped the public outrage."

Read more: http://www.cbsnews.com/blogs/2009/03/25/business/econwatch/entry4891431.shtml

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ummmmmmmmm...did anyone call the WHAAAAAAAaaambulance?

was THAT part of some elaborate scheme by AIG to wrongly classify high-level EMPLOYEES as "contract labor"??? So they would get out of paying payroll taxes on these guys???

Just curious. It's a major no-no to do that.

It's the kind of thing I expect to see coming from Republicans, not from good progressives. Why are people so ready and willing to believe that EVERYONE who worked at AIG (over 100,000 employees) was engaged in criminal activity? Don't people realize that AIG has been around for 90 years doing legitimate insurance business?

Hyperbole gets us nowhere, and only makes us look bad in the long run.

it seems.

Oh well.

in general, but it does seem to be the case when it comes to AIG. I've seen message boards here, on Huffington, etc, filled with the most awful, hysterical rants imaginable. Ultimately that kind of reaction is counterproductive.

:toast:

<snip>

"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."
<snip>

The people they've ruined don't have families? The people they've ruined weren't betrayed?

Let's all take a step back, take a deep breath or two, and think about what we're saying, rather than participate in the anti-AIG hysteria. AIG has become the favorite whipping boy of this economic crisis, and lord knows there are people there (or who were there) who deserve it, but it does not follow that everyone at AIG (or any other company being propped up or rescued by us taxpayers) deserves to be tarred and feathered.

Please, folks, I'm begging you, let's stay rational and reasonable here. Otherwise, we're no better than the irrational fools (e.g. GOP deregulators) who got us into this mess.

there are dozens of threads about this guy's letter... but precious few have bothered to consider what you're saying.

Disappointing, but hardly surprising.

while I "grieve" for this guy.

From what I understand, he "agreed to work for $1 a year", with the understanding that "if he stayed on he would receive a bonus of $760,000!.

You don't suppose he's learned how to tell "half-truths" just like the wingnuts on hate radio?

Say it isn't so!!!

He then goes on in his letter about "how he'll give his bonus to charity, but if they tax it at 90%, he'll have to give much less to charity."

My god! This guy sounds like a CEO version of "Joe the non-effing Plumber"

anything DeSantis says. What's your reason, other than the fact that he works for AIG-FP?

We are treading perilously close to McCarthyism here, friend. Let's not go all the way there.

he's extremely pissed that someone is finally shining a light on the idiocy that's been going on in Corporate America since Saint Ronnie put a nice grandfatherly face on greed, corporate malfeasence and fascist fuedalism.

How anybody....and I mean ANYBODY who was involved in the graft and downright corruption of A.I.G would still have a job is beyond me.

Run your company into the ground, and tell me if you get a nice fat bonus and world adoration for doing so.

We're supposed to feel sorry for this guy?

We're supposed to treat him as some benevolent overlord because he agreed to work for $1 a year, after spending the last 11 years hording as much of our parents retirement accounts he could stuff in an off-shore duffelbag????

I'll tell you what. I will have ultimate respect for Mr Desantis, the minute he appears in court, or before a Congressional committee and begins naming some "effing" names, and aiding in the prosecution of "those unamed people" he claims were responsible for this shit!

Until then, his little rant is the modern day equivalent of "let them eat cake"

Edited to add: I'll gladly offer my services of 10-12-14 hour days, for 1/5th of his $760,000 bonus. Hell, I'm already doing that in the Navy for a hell of a lot less.

What makes you think that DeSantis was ever involved in illegal or unethical behavior, beyond the fact that he worked for AIG-FP? Are you even aware of what AIG's core line of business is, or do you feel that insurance in general is inherently a corrupt enterprise?

I'm not asking you to feel sorry for DeSantis. I'm asking you to take what he says at face value unless you have some compelling reason to do otherwise, just like you would do with anyone else you don't know. You do give people you don't know that much courtesy, don't you? Or do you launch lengthy, nonsensical, prejudiced rants against them on a regular basis?

I understand your rage, but your rage is misdirected. We KNOW who to blame, for the most part, for this economic meltdown we're living through right now. You could start with the top management at AIG, who knew or should have known of the malfeasance going on at AIG-FP. Move next to the investment banks and rating agencies, who built an incredible pyramid out of fraudulently rated CDOs. Then continue with Congress, primarily though not exclusively GOP, and all of BushCo, who definitely knew what was going on but refused to do anything about it. Hey, if you want to single out someone in particular, Alan Greenspan would be an excellent choice.

My reply was to #32, so of course I read it. What's your analysis of #32 then?

year plus bonus. Even if the $760K was more than his prior salary, that would not be unusual in a retention situation. People often hasten to leave a company that is going down the tubes for a job with a company whose prospects look better. And his chances of getting a great job coming out of AIG a year ago would have been much better than his chances of getting one coming out of AIG now. The government and the Fed asked these people to stay and promised them certain things if they stayed. Now that they've kept their end of the deal, America wants to let them keep the $1 for a year's work and ruin their reputations and lives to boot.

As far as half truths, he is writig the letter to his boss. His boss knew exactly what he meant.

Sure $760K is a lot of money. But, not on Wall Street. The problem is not limited to this year or this guy. It's a culture of greed that's gone on for decades.

And because everybody was doing it. Remember what your mommy said? If everyone was jumping off a cliff, would you jump off a cliff?

He is NOT excused from decency because no one around him was decent.

that is what his letter says. Since he wrote the letter to his boss, and his boss knows who was involved and who wasn't, I have no reason to think he was involved.

What reason do you have to assume he's indecent?

It's no great revelation that there are reactionaries and rabble-rousers on both the right and the left. It's just a little disappointing to witness it firsthand.

BIG infestation lately.

Hmmmmmmm

<snip>
"I take this action after 11 years of dedicated, honorable service to A.I.G.

He didn't spill the beans on their fraud, did he?

<snip>
DeSantis criticized Liddy for not defending workers in the "face of untrue and unfair accusations" from lawmakers and "baseless and reckless comments" from the attorneys general of New York and Connecticut, Andrew Cuomo and Richard Blumenthal, respectively.


What unfair accusations? That they were crooked corrupt bastards who gamed the system and betrayed every single person in this country (and a fucking few others as well)??


<snip>

He said the decision to ask for the bonus payments back was a "breach of trust" and only came because Liddy faced political pressure. DeSantis said the promise of the bonuses was the only reason for some workers to stay on at AIG and try to manage its crisis.

Awwww, cry me a river. He's not living in a tent city or in his car, is he? He's not worried where his next meal is coming from or how will he feed the kiddies, is he? Or is trying to figure out what to do because the retirement fund is gone.

<snip>

"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," he wrote.

These bastids aren't fixing anything unless the fix is demanding more taxpayer money.


<snip>
DeSantis said he received a $742,006.40 bonus in March and would not return it.

Then he needs to shut the fuck up and fade back into the woodwork.

...and more guilt by association. What makes you think DeSantis knew anything about the shady CDS deals going on at AIG-FP before they became public? Why do you assume DeSantis is undeserving of the bonus money that was promised him? On what basis do you characterize DeSantis as a "crooked corrupt bastard"?

Careless, thoughtless hysteria - is that all you're about?

the list Timmy.

You can't put together a coherent argument to counter what I've said, much less a coherent reason for your hatred toward this DeSantis person, so you've twice resorted to derisively calling me "Timmy." Bravo.

The "nice try" was to thank me for attempting to inject some rationality into the discussion - didn't you bother to read beyond the headline?

With your type of thinking, you'd be quite at home in the GOP, I feel certain. Maybe you should consider switching.

Can ANYBODY give me a rational basis for all the vitriol directed at DeSantis here on this board, and elsewhere?

I haven't called anyone a scumbag, or made baseless, scurrilous assumptions regarding people about whom I know virtually nothing, or accused anyone of being childish, but if that's your idea of "adult" behavior, then I am happy to remain a child.

Now, do you have anything substantive to say, anything like a rational argument or facts to present? Or are you just another message board blowhard?

Because AIG made that promise not the American taxpayer. If AIG wants to honor those bonuses they can liquidate assets, take out a loan or go to court. Using OUR money to fulfill a contract WE had nothing to do with is why the public is justifiably angry. Bailout money means our money and it should not be used for bonuses when it was intended to keep the business afloat not execs in luxury.

If this isn't something the people at AIG are committed to, they need to resign. It's their choice to work this year for $1 with the hope of a bonus. I'm sure his experience at AIG will open many doors and opportunities for him. Publishing the letter of resignation is nothing more than a stunt.

It was the PROMISE of a bonus. The question is not whether DeSantis ought to be paid his bonus with bailout funds. The question is whether AIG should honor the promise it made to him when he agreed to work an entire year for $1. It looks to me like DeSantis held up his end of the bargain, and furthermore that he was not involved in the deals that sank the company. He should be paid what he has earned, regardless of where the company gets the funds.

On the other hand, the people who WERE engaged in high risk CDS dealing obviously do not deserve the bonuses they received, and by several accounts some have even had the decency to return them.

AIG could be belly up at anytime. Again, AIG owes those bonuses, not me the taxpayer. DeSantis learned an important lesson about working for corrupt organizations. What ever bonus he earned under contract with AIG in 2008, is not my responsibility or yours or any other taxpayer. He can take it to court if he disagrees.

First, AIG isn't going "belly up." The whole point of the Federal government bailing out AIG is that AIG CANNOT go belly up. There are, like it or not, too many dependencies in the business world on the services AIG provides - too much risk management that goes straight out the window if AIG's insurance coverage simply isn't there one day.

Second, I'm afraid you and I, the taxpayers, assumed the legitimate obligations of AIG when we took over 80% of the company, and the bonus DeSantis clearly earned is one of those obligations. As he details in his letter to Liddy, his business unit within AIGFP made a LOT of money for the company, as opposed to the business unit that was dealing in CDS, which did the opposite.

Third, there is no basis to conclude that AIG is a "corrupt organization." I think you could reasonably apply that term to the business unit engaged in CDS deals. So let's hold THEM, not DeSantis, accountable for what they did.

The government stepped in a few months ago. Are you really saying the American tax payers owe DeSantis this huge amount of money for a few months of work? This was a contract with AIG for 2008.

If they are too big to go belly up, then they can suck it up. This taxpayer doesn't owe them anything for fucking up the economy. DeSantis is lucky to have a job, a lot of Americans don't. If he's as valuable as you and he think he is, he will find new high paying work in no time. And this published letter of resignation is a stunt.

When the federal government is at your employer's door, it is time for you to get out. It doesn't matter what you think you were promised, the deal will never be as good as they will have you believe. This guy isn't stupid. He's been an exec VP for 11 years, but somehow wants us to believe he knew nothing of the crap that was going on at AIG. One business unit can destroy an entire company. Ask anyone who has had a branch of their corporation under investigation. It's the job of the company's leadership to know what is going on and have an ethics/compliance program in place to protect itself. Corruption trickles down from the top. It's not an isolated incident in a single business unit.

I don't owe this ass anything more than he owes me.... which is nothing.

That is, that when we bought AIG, we bought ALL of AIG - all assets, all liabilities. You don't have to like it, but that's the truth of the matter. It doesn't matter what you think AIG or DeSantis should have done, or what you think DeSantis should have known about what was going on in a different division of the company from his own, or what you think his future employment prospects ought to be, blah blah etc etc. He had an employment agreement with AIG and he fulfilled his obligations under that agreement. AIG owes him that money, and since we now own AIG, WE owe him that money. It's as simple as that.

We Bailed out AIG. We did not make that agreement with DeSantis or anyone else. We bailed them out a few months ago. How would AIG have paid these contracts without the bailout money? They would have sold assets, tried for a loan or settled this in court. Same deal with the bailout. Bailout money a.k.a. taxpayer money was spent to prop up the colossal failure, AIG, not prop up executives. This is a bankruptcy that wasn't allowed to happen because 'so many would get hurt'. The bankruptcy wasn't prevented so that AIG would not get hurt or feel any pain. They did this. There's no free pass and no protection for them. Under most circumstances they would have shriveled up and died. Too bad we didn't let that happen. The bailout isn't about them or for them.

DeSantis can take it to court. If his case is as simple as you seem to think it is, then it should be a cake walk. I owe this tool nothing, neither do my nieces and nephews or their future children.

something was afoul. As an executive, you are privy to an exceptional amount of information that is not reveled to an everyday worker, that is why you are on that level. So you keep saying that this one guy is not guilty, how do you know? What is the old saying about sleeping with dogs and getting fleas?

Remember, greed is not a conspiracy.

for commodities trading. He wasn't even in the same business unit within AIGFP as the people working CDS contracts.

I work for a large corporation (30,000+ employees - AIG has over 100,000). Do you have any idea how many VPs we have? It's several hundred, easily. The idea that any one of them would know the intimate operational details of work being done by people who aren't his/her direct reports is laughable, even if, or maybe especially if that work involved criminal activity - which the CDS activity was not.

but you want to give blanket immunity as fast as other people want to lynch him.
I worked for a large corporation and when there are only a few hundered top execs. you get a pretty good feel of how the company is running, even if your not the top dog.

"Blanket immunity"? When did I say any such thing? Immunity from what, exactly? DeSantis isn't charged with any crime, is he?

I think it's HIGHLY debatable whether DeSantis should have or even could have known what was going on in the business unit that was dealing in CDS, much less how it was affecting the company. The business unit DeSantis was running apparently was highly profitable, on the other hand. I think it is a HUGE leap to assume that he could have and should have been aware of the details of the contracts being entered into by a different business unit, AND that he should have understood what they were doing AND put a stop to it somehow.

It's just a ridiculous assertion. If the people in the CDS unit were his direct reports, you'd have a case. Given the reality before us, there's no reason not to take DeSantis at his word, but because he worked for AIGFP, people want to lynch him. You're right about that, and this sentiment is simply wrong.

He's from the fucking unit THAT CAUSED THIS MESS IN THE FIRST PLACE!!!

HE'S ONE OF THE CHIEF MUCH-PAYED CEOS!!!

I can't believe anybody is fucking DEFENDING this scumbag...!!!

Maybe you should read the letter DeSantis wrote, just for starters, before spouting off.

http://www.nytimes.com/2009/03/25/opinion/25desantis.html

He was in a different business unit within AIGFP and was not involved in the CDS activity. He was an EVP, over business development for commodities trading, not a CEO - do you understand the difference?

See my post #37 on this board, re misdirected rage. You have no basis for characterizing DeSantis as a "scumbag."

at Morton for another. Everyone I personally know worked at large, multinational firms. The EVPs are relentlessly ambitious and notorious for knowing, undermining and manipulating their peers' divisions in order to parlay their position into the "big times". They want to be CEO, they want to be on the board, they understand their corp like noone else.

I'm pretty dismayed at anyone rolling over and just accepting this guy's word that he "didn't know" about any shenanigans by his peer. This really smells like the "good" German defense. Sorry I just don't buy it. There's just not THAT many EVPs in ANY corporation. Even if there's say... 30 +/-, you KNOW those guys and what they're doing.

And this guy saying he didn't "know" what was happening at one of AIG's most sophisticated financial instruments divisions is bullshit.

He's doing a CYA.

This letter is nothing more than a glorified cover letter to the world financial society but I wonder who will buy it. Either the guy is a complete idiot and didn't bother to even try to understand the "company" and all it's workings, or he is/was willfully ignorant/lying.

I place my bet on lying. And furthermore, this guy gets hired asap as the banking community recognizes a fellow shark and snaps him up. If he lanquishes, you know he was the stupid sack of shit he's put out for public consumption.

Color me less than impressed.

And the ones I know aren't cutthroat bastards.

So there's no room in your view of the world for the possibility that this guy's actually telling the truth, eh? That's a real shame.

money and ran before all the crap hit the fan. He's saying the people who were not to blame, but who tried to clean up the mess, because Liddy and the government asked them to do so, are now taking all the heat.

You can disbelieve him, I guess, but he is writing to Liddy, who does know the full story.

that was taken down by several branches of the Federal gov for unethical/illegal behavior. I lost my job any way. I had only been there a few months and everything that happened took place long before I got there. There was no way I could have known they were in trouble. I picked myself up and began again. I was offered a large bonus to stay until the end when the contract could be transitioned some where else.

The higher up you are the more responsible you should be, but it doesn't always work that way. It's the little guy that suffers most. Let's face it. This guy still had a job. He's resigning not being fired. When your company is so bad the Feds have to step in, your best bet is to get out. The OIG, FBI, FEC, IRS or any other branch of the Fed Gov at your employer's door is not a good sign. Yes, you will be promised all sorts of crap to stay and finish out the 'contract' or whatever. The old guard will be tossed aside once the government learns enough to run it themselves, or hand it over to someone else to run. The smarter thing to do is leave.

Publishing a letter of resignation smells like a stunt.

retention bonuses. He's resiging because he worked for $1 a year at their request of Liddy, Bernanke and Bush in return for the retention bonus and now Congress wants to confiscate the bonus. Is that fair? And, not only that, mobs are after AIG employees who worked for $1 and no one is telling the truth: that the people who caused the problem are long gone and the ones who stayed did so because they were asked to do so.

since they accepted the bailout. The bonuses that were recently paid out were for last year. My company gives out bonuses in March for the previous year. Most people who are thinking about leaving, stay until March to get their bonus. The bonus this March is for 2008.

They are taking bonus money that AIG promised them not the American taxpayer. AIG needs to liquidate assets, take out a loan or go to court to cover these bonuses. It's a little soon for a retention bonus. We've only owned 80% of the company since when? a few months ago? These are 2008 bonuses which are AIG's responsibility not mine and not yours.

Again, publishing a letter of resignation smells like a stunt to keep the feeding frenzy going.

work for $1 a year. Working for $1 a year makes the retention bonus critical and helps ensure that you stay for the retention period.

When we bailed out AIG has nothing to do with obligations to employees. AIG made these binding agreements in 2008, with the approval of Bush, Paulson and Bernanke. Changing stockholders does not change the obligations of a corporation.

No one is going to loan AIG any money for anything, except for the U.S. And if AIG did take a loan, it would be insolvent again, so the US would have to pay off the loan.

I think you should read the thread again because the whole point of bailing out AIG was that thousands of contracts made AIG's insolvency an automatic default under the contract. The financial institutions in America were about to come to a standstill in September because AIG was underwater at that point.

As far as a stunt, the fact that your letter of resignation appear in a newspaper is legally irrelevant. He has a binding agreement. He fully performed his side of the bargain.

As far as it being too early for a retention bonus, in one breath, you say these contracts were made last March for the coming year. Yes, I agree, And that means the bonus was due this year. So, it's not too early for a retention bonusat all. The bonus is right on time.

of the recent bailout. The bailout was only a few months ago. Are you saying the retention bonus is for a few short months? Any retention contracts made a year ago were not made with the tax payer, they were made by AIG. It is neither my problem nor my concern how AIG goes about honoring the contracts they made with executives. What would they have done without the Bailout money? Liquidate assets? Try to get a loan? Get dragged to court? Those are the options they are limited to even with the bailout money. They are fortunate to be bailed out in the first place.

bonuses being paid now are being paid pursuant to contracts made in March 2008 between the employees and AIG and specifically approved by Bush and Bernanke and you keep coming back with a few months ago.

Your assumption seems to be that a change in stockholders eliminates obligations under legally binding contracts with employees that the employees have fully performed. That is, to put it kindly, totally contrary to law, even if the new stockholder is the government. And, make no mistake. The taxpayers are not the stockholders here, nor do they get a vote. The government is the stockholder, not you and I. You and I do not get a vote in corporate matters.

If we had allowed AIG to go bankrupt, worldwide economic collapse would have ensued, but the bankruptcy court still would have honored the employees compensation, which is a first priority in bankruptcy court. So, no clue where your belief about the source of the money comes from either.

As far as the bailout money, we specifically gave it to AIG without tying up these bonuses. Dodd first put limits in the TARP legislation, but took it out at the request of Obama's people, remember? That is strong legislative history indicating absence of Congressional intent to limit executive compensation.

Your anger should be directed at Presidents, Congress and regulations from the Reagan administration to the present, including Clinton and Democratic Congresses. They got us where we are, not the AIG employees. That would make a lot more sense, legally and factually.

No matter how many times you post the same claims, however, neither the law nor the facts are on your side, just some knee jerk desire to punish those who stayed on at the request of AIG and the federal government to try to help unravel the mess brought to you by almost thirty years worth of greed in both government and the private sectors.

Oh yes, and also because many Americans don't vote and many of those who do are ill informed, lazy and one issue voters.

He had no idea that fraud was going on?

I'm sorry, I just don't buy that. Either he's willfully obtuse, or lying (NOW!) to somehow escape the rabble that's infuriated at his 11 years of multi-million dollar salary whilst taking down the economy. He's amortized the amt he's already scammed from AIG and so $1 (cough PLUS $750K) per year was simply to look good to... who? Us? What fools he must think we are!

Don't kid yourself. This guy stayed on because he's even greedier. He thought he'd be able to wring out that last $750,000 and now that it's blown up in his face, far worse than he ever imagined, he's crying "innocent". I don't believe it. Not for a minute. He's just shocked at the public outrage, afraid for his family, and trying to CYA. But 11 years as a senior VP in that area means he knew exactly what was happening imho.

This is why whistle-blower protections are important, but let's face it: this gentleman already had plenty of "fuck you" money in the bank if his conscience was bothering him over his peers' abuse of the system.

Grab him now!

Oh wait--we aren't really interested in prosecuting this nonsense as crime, are we?

And besides, he's in the UK. Tough situation.

Sigh.

If the guys that know the complexities of these contracts all start bailing, AIG will lose most of that money. The result will be that AIG will never be able to repay their bailout loan.

The only way the taxpayers get that money back is for AIG to be successful again. To keep piling on them may make people feel good, but we (taxpayers) are cutting our own throat.

on CDS contracts if the underlying debt goes into default (or if, as was the case back in September, their credit rating triggers a demand for collateral). So if we're concerned about the CDS liability that AIG is facing, we need to do two things: (1) stave off defaults via renegotiation where AIG sold CDS to an actual stakeholder in the debt, i.e. legitimate contracts, and (2) CANCEL illegitimate CDS contracts, i.e. where the buyer is only a speculator making a bet.

There is no way the American taxpayer should ever have to shoulder the liability in the case where the CDS owner is just a gambler or speculator, and apparently there is quite a bit of that in AIG's CDS portfolio.

Was that illegal? If not, it seems like a canceled contract will just result in a lawsuit which will eventually yield damages.

of CDS.

And apparently AIG-FP wrote plenty of these things without having the cash to back them up. If you made a bet with someone, even a $10 Super Bowl bet, you'd expect them to be honest enough to have the money to back it up. Well, AIG-FP wrote these "insurance" policies without having the cash to pay off. They just figured they'd collect all these "insurance" premiums on something that they'd never have to pay up on. They figured wrong, and now we the taxpayers are the ones coughing up the dough.

If they did something like that in Vegas, it wouldn't be legal. On Wall Street, not so much.

I have a difficult time feeling sorry for the guy who wrote the letter. I'm sure there are many hardworking and honest people at AIG, even at AIG-FP. But there is damn little room in my heart for any pity for someone who has made the kind of money this asshole has made over the years when every penny of that money is made off gambling with other people's money.

Where was his sympathy six months ago for the auto workers who weren't making $1,000,000 bonuses but were asked to "renegotiate" their contracts in order to keep their jobs?

Where was his sympathy for the Bear Stearns and Lehman employees who were pretty much tossed on the street?

Where was his sympathy for all the honest Enron and WorldCom and Global Crossing and Tyco and Montgomery Ward and Circuit City employees?

I'm sure he thinks taking his kids out of private school would be an unreasonable "sacrifice." Let him talk to the "kids" who are being forced to put their college educations on hold indefinitely because their scholarships don't cover the rise in tuition and the university's cost-cutting measures have just eliminated many of the student jobs.

I'm angry, and I'm angry at smug, arrogant RICH asswipes like this guy who can, a la Linda Lay, take their whines public in a forum that few of the rest of us ever get access to. Where are the letters from the IBM employees whose jobs are being shipped to India and all they've been offered is the opportunity to follow the job for the same pay that the "natives" will be paid? Where's the outrage over that from the AIG-FP millionaires?

I have a nice little job that pays me less than $20K/year. It suffices for me and I'm glad to have it. But my job involves providing a genuine service, not merely shuffling numbers so I can grab someone else's money and call it my own. So have a really difficult time feeling sorry for this guy.



Tansy Gold

without reading them, but in general there are all sorts of ways a contract can be voided. Sometimes all that's required is the will to do so on the part of one or both (or all) of the parties. Another way, as a real estate attorney friend of mine, who also happens to have done many, many deals with AIG over the years, recently told me is when any basis for the contract is found to be illegal. In the case of AIG's CDS deals, one basis for at least some of them is prima facie fraudulent rating of mortgage-backed securities as AAA by Moody's and Standard & Poor's.

Moreover, now that the US government (read "you and I") own just under 80% of AIG, there ought to be many new avenues to pursue in voiding those contracts, e.g. "compelling public interest." At any rate, from the speculator's point of view, voiding those contracts is no different a result than if you or I place a $10 bet on a particular horse and the horse finishes out of the money. When you gamble, the house usually wins in the long run.

In the long run, the practice of selling CDS to outfits with no real stake in the underlying debt should be outlawed, and the CDS market in general heavily regulated.

You said:
"At any rate, from the speculator's point of view, voiding those contracts is no different a result than if you or I place a $10 bet on a particular horse and the horse finishes out of the money. When you gamble, the house usually wins in the long run."

It seems like this would be more like a speculator placing a $10 bet on a horse, and the horse wins. The house (AIG) then decides he wants to void the contract and not pay off because he really didn't think that horse was going to win.


As for the rating on mortgage backed securities, they were obviously rated incorrectly, but has there been any evidence that they were fraudulent? Doing a crappy job and legal fraud are very different.

We're not talking about CDS that have come due. Those contracts on defaulted debt have for the most part already been paid off. That's where most of the $180 billion, or whatever it's up to now, has gone. The remaining amount (I think you said it was $1.6 trillion) represents potential liability. Nothing more need be paid by AIG unless there are more defaults - and there may well be more to come. The legitimate contracts - the ones bought by entities who owned the debt being insured - should be honored if there is a default, but the illegitimate ones should be voided, and the sooner the better.

I think a very clear pattern of intentionally inflated ratings (and an incestuous relationship between the CDO sellers and the rating agencies) has been established. There are people I know in commercial real estate who say as much. I suppose it would have to be established in case law as such.

Since AIG doesn't have the money to cover their obligations to their clients, isn't bankruptzy a way for them to legally break those contracts?

Also, wouldn't that be a way to break up AIG while paying off whatever they can with their remaining asssets? Isn't that what usually happens when a company gets into financial trouble?

Then, rather than funnel the Bail-out money through a failed company like AIG to help them pay their debts (why should we?) use that money to start several new, smaller companies in their place.

Next, most importantly, restore regulations, out-lawing the kind of practices that helped bring them down, such as a company not needing to have enough money in reserve to cover the promises made to clients.

Last, vigorously investigate how this all happened and prosecute those who actually are responsible, which should go a long way towards stopping the hysterical blaming of anyone who worked for AIG.

Also, IF the economy depends on the success of those AIG owes money to, why not pay them directly? Why launder the money through a company that failed so miserably already?

automatic default under the contract. AIG is the insurer under many of those contracts. (So was Lehman. So is Merrill Lynch.)

That is basically why the govt. felt that it had to pump money into AIG. While you may be insolvent even if you have not filed for bankruptcy, you are definitely, and very publicly, insolvent if you file for bankruptcy (or get put into receivership).

but my question is, since the government is going to give AIG the money to make it solvent the objective being to ensure that its contracts are honored, (is that the objective?) why not just let it fail and put the bail-out money behind several new, smaller companies, allowing them to take over the contracts AIG had with its clients.

That would accomplish the same thing, and have the added advantage of breaking up a company that was 'too big to fail', while at the same time passing legislation that would prevent something like this from ever happening again, like restoring the Glass/Seagal Act, or something like it?

I guess I don't understand the need to have AIG, a failed company, be a middle man for the billions of dollars being loaned by the tax-payers. Who trusts them anymore?

I'm just thinking that if this effort fails, as some believe it will, then we are back where we started, with the fate of the country still in the hands of one company.

But if there are several companies in its place and one of them fails, the effects would be far less disastrous and much easier to handle. Also, having some competition might make them all a bit more careful about how they do business.

I don't know much about all this, but it seems to me, it's a great opportunity to break up a company that unbelievably had the power to collapse the entire economy. That should never have happened in the first place, imo, and should not be allowed to continue. No business should have that kind of power as everyone now knows.

into default, but the rest of your post says you do not understand.

The point of the TARP was not to save AIG, Goldman Sachs, etc. but to keep thousands of contracts from going into default, which would have brought financial institutions and dealings all over the world to a screeching halt. That was about to happen in September because AIG and others were insolvent.

The reason that we bailed out AIG and other insurers was o save the world's financial system, including our own--not bc we wanted to save AIG. In fact, I would be surprised if AIG is not dismantled if and when the situation stablizes.

I agree this situation should never have been allowed to happen in the first place. From Regan through Dummya, though, laws and regulations have been modified or abolished to enable banks, Wall Street, corporations, etc. to do whatever they damn well pleased.

A lot of those laws were put into place under FDR, after the Depression, to avoid another Depression. However, that did not stop anyone from getting rid of them--and guess what? We're in another Depression.
We also changed laws that would have kept a lot of these companies from getting too big.

Sure, it should not have happened. That's what happens when lobbyists for banks and corporations run the country, as they pretty much have since the 1980's.

However, it happen, and we cannot turn back the clock to the Carter Administration. So, we have no choice but to deal with it now, including by putting back some of the old laws and regulations and creating some new ones.

It would also help if Americans voter were not so damned ill informed and apathetic. That also helped create this mess, along with greed in government and the private sector. But most Americans don't want to hear that or accept any responsibilty whatever for what their government does.

Failure to perform due diligence is not necessarily fraudulent, but is still a very valid reason to void a contract.

were wrong largely for two reassons. (1) Not all the raters even understood the deals. (2) Whether or not they understood the deals, so damn much money was involved. Someone was going to get it, no matter what rating they gave.

If they gave a low rating, the deal would not go through and they would either not get paid. Or, if they got paid, they would not get the job of rating the next deal. So, to grab the business before someone else did, they gave the ratings they knew their customers wanted. No one had to say anything. All was understood.

As I posted elsewhere, everyone is desperate for a villian, be it Bush, Obama, the people taking the bonus, the rating institutions, even the people who did nothing more than take out a mortgage to buy a home. But the villian is the culture, the government and probably every single party involved in these transactions. Try as we may, we cannot legitimately put the blame on just one party.

volition. Based on that appraisal, I insure my home and pay all the premiums. The insurance company makes a pretty penny selling insurance. The home is struck by lightening and burns to the ground. The terms of my policy clearly covers all the damage. Turns out the appraiser overvalued because the appraiser believes that giving high appraisals usually results in more appraisal business. Do I have a right to collect on my insurance or not?


I think I do. Maybe the insurer has some cause of action against the appraiser after the insurer pays me, but I have a right to my insurance. In other words, just because there is a fraud by someone somewhere in the transaction for some reason, that does not mean that the entire transaction is null and void.

Your horse race analogy leaves out the insurer. Again, let's say I never in life would risk my money on a horse race. However, an insurer approaches me and says, "I will insure you against all your losses if you pay me premiums." I think, great. No way I can lose anything here, except what I pay the insurer. And I might win big."

So, with the confidence the insurance has given me, I place a bet I would otherwise never have placed. My horse loses. The insurer, who has promised me things and taken my money, now says says, sorry, I lied about insuring you."

paid premiums for that insurance. And entered into deals in reliance on that insurance that they never would have entered into without that insurance. I don't know how anyone tells them at this point that they cannot have the insurance they paid for and relied on.

Maybe some insurance company is dumb enough to sell Dick Cheney life insurance, with full knowledge of his medical info. He pays all his premiums on time. He lets his medical bills run up, secure that the policy will help his wife pay everything aftr he is gone. Then he has a fatal heart attack. Should the company not have to pay his wife, simply because the company was dumb to sell him the insurance in the first place?

And the government let these policies be sold. It also let AIG "get too big to fail."

There is no one wrongdoer here, much as the public is desperate for a scapegoat.

The culture of greed and materialism.

The culture, in both business and government, that says business is always good and government is always bad.

AIG.

The companies that sold the derivatives.

The Presidents, Reagan through Dummya, and the Congresses that allowed all this.

Trickle down economics.

Tax cuts for the rich.

And on and on.

The focus on the bonuses is ludicrous, IMO. and exactly what the MSM is trying to achieve, to distract everyone from the Republicans' role in this economy.

AIG didn't just sell Dick Cheney an insurance policy on his life. They sold me one, and they sold you one, and on and on. They sold CDS coverage to people/institutions that had no interest whatsoever in that which was being insured.

Why would they do that? Because they pocketed some very nice premiums for coverage they believed they'd never have to deliver. They along with the CDO traders believed in the fairy tale model of perpetually rising real estate values. That's what it was all based on, and when the defaults came and property values fell at the same time, all those lies put them upside down in a big hurry.

post that said that AIG should not have to pay the insured if the insured was speculating. I was suggesting that the speculator was not necessarily to blame. What you are saying now supports my argument all the more.

Selling to people with no insurable interest is evidence of bad behavior on AIG's part, not on the part of the people who took AIG up on what it was offering.

shouldn't have to pay on a legitimate claim. I'm saying these illegitimate contracts should be canceled before the underlying debt has a chance to default, thus triggering a claim which the US taxpayer will ultimately have to pay. The speculators and gamblers didn't buy a CDS to protect themselves from loss or to mitigate risk, which after all are the purposes of insurance. Yes, AIG knowingly sold them CDS essentially as wagers, but that was then and this is now. The company is under new ownership, that being you and me. So cancel the contracts of this type now, before it's too late. Refund the premiums, with interest. That will be one hell of lot cheaper, far more just than the alternative, and the CDS buyers will have lost nothing.

perfectly legal. Nothing illegal, or illegitimate went on. These people paid premiums for insurance that AIG was very unwise to sell. But that was AIG's fault. It's not as if these people duped AIG. AIG was a highly sophisticated player. So far, you have not explained what these people did wrong. Saying "that was then and this is now" or the company changed hands still does not explain why people who simply bought what AIG was selling should not get what they bought.

That said, I have no moral problem with giving them less. Not just the premium back, though. They did not have the use of the money and they may have invested in something that would have been profitable, so there is a lost opportunity cost that they did incur by giving AIG the use of the money.

if a contract is based on illegal activity, it can be declared null and void, and there is a very good case to be made that the rating of the mortgage-backed securities which AIG insured was done fraudulently. Whether anyone could successfully argue for the voiding of CDS contracts on that basis, I have no idea, but it seems to me it's worth a try.

Beyond that, I'm expressing an opinion regarding the legitimacy of the speculative CDS contracts, the ones sold absent any insurable interest. What did the buyers do wrong? In a nutshell, they bet big on disaster, just like naked short sellers do. This likely will become very heavily regulated if not entirely prohibited activity in the near future. It wasn't illegal before, but that doesn't mean it wasn't wrong.

I have not objection to going to court to try to get contracts declared void. It will take years and lots of money, and my not work at all, but, who knows, the risk it may be worth it.

Don't let the door hit you ...
and so on.

Names, Liddy?... Let's have some specifics, if you please..

Liddy is being dragged in front of vindictive Congressional committees, but Cassano appears to be skating...

from the House Oversight Committee. He is in London, so I don't know how that will work out. However, here's an article from TPM about what's happening with him:

http://tpmmuckraker.talkingpointsmemo.com/joseph_cassano/

Source: Cassano In Congressional Investigators' Sights
By Zachary Roth - March 24, 2009, 4:47PM

Another set of investigators is hot on the trail of Joseph Cassano, the man who walked away with a multi-million dollar golden parachute after spearheading the credit default swaps that brought down AIG.

Investigators for the House Oversight committee intend to interview Cassano about his role in the firm's collapse, and have already contacted his lawyer, a committee staffer told TPMmuckraker.

He has the same lawyer as Ebbers from Worldcom:

Earlier today, we told you that in the view of one expert, some of the allegations about former AIGFP chief Joe Cassano echo those in the WorldCom case from earlier this decade, which ultimately sent former CEO Bernie Ebbers to jail -- in particular the charge, made in at least one investor lawsuit, that Cassano obstructed the work of his firm's auditors.

To have the full weight of the US government come down on them for not doing anything illegal? Like *that* is a good use of the government.

To be able to have people throw things at their houses? Threaten their kids? Make sure they suffer for what they almost certainly thought were sound, sure bets? Oooh, such progressive thinking.

No, wait. I recall situations in which the children of the wealthy were punished, and innocent wealthy people were persecuted, simply because of who they were. People considered it the height of morality. It was neat--if your parents had money, you'd be denied entrance to college or decent jobs. And just because somebody had a title--even if they were poor--it was grounds to discriminate. Finally, after all the large stashes of cash were confiscated and the holders punished, they got to smaller "tycoons"--if your parents produced food and had land they'd deny you a roof and let you starve in the street.

Alas, such days are over. WWII ended that kind of thinking in Lenin's pre-NEP and in Stalin's Russia, and Khrushchev was too hung up on corn to worry about persecuting the offspring of the wealthy.

Morally speaking, how is that different from denying entrance to college or decent jobs if your parents *don't* have money?

And we all know that happens every day in the land of the free.

Betrayed....trying to wrap my mind about this concept...a highly paid exec in the firm that broke the company feels betrayed because he didn't get to keep his "bonus" for bad behavior....

Oh, the pain! Not trying to wrap my mind around anything so incredibly stupid again!

government asked to unravel the mess after those who were responsible had left.

At least this guy is admitting he's at fault. And for that maybe he'll escape prison. Most of the other financial hyenas shouldn't.

I'm not sure how he "admitted" he was at fault.

BTW according to the letter, the division/unit he manages has earned 100's of millions of dollars without a loss.

I'm sure he doesn't think twice about them.

Welcome to life Jake.

My bonuses were based on my individual performance but when the whole company was hurting I didn't get shit. I took it to mean that I should do more to motivate and encourage my underperforming colleagues and to crack down on slackers and people who wanted to cut corners.

And my base salary wasn't six figures either. At least you still have a damn job unlike nearly 15% of Americans these days.

The problem with playing everybody in a company - even here where some of the work of the company may still take down world financial systems - is that there are people who worked in completely different areas. This does not mean they deserved bonuses. There are many people who did excellent work last year and because their companies were struggling at the end of the year didn't get bonuses.

The fact is that if you were an AIG exec, who had nothing to do with the problem, you likely were embarrassed last week. If you lived in CT, you might have had a bus tour past your house. This is mild for mob mentality - it isn't the French Revolution, but there is some mob mentality going on here.

AIG is a large company, and it's quite likely that one side of the house had no idea what was going on elsewhere. I work for a company with 30,000 employees spread halfway across the state. I sure as hell wouldn't want to be held responsible for the actions of every other business unit.

To the extent that this guy is telling the truth about his situation, I'm sympathetic to his point. He lost a bundle of his own money in this fiasco, and now he has to deal with people who are (justifiably) furious over something he didn't do.

In a big company, you may have absolutely no idea what other areas of your company are doing. Even within your department you would not have the detailed information to even know that a project is developing problems unless you had some connection to it.

What is clear is that very few people in ANY company understood what credit swaps or derivatives were beyond the one line definitions we all now know. That would not be enough to have any idea they were unsafe.

what was going on?? For 11 years??

Does anyone else find this just a tad bit... incredible? I smell a liar. A liar who's scared out of his wits that the rabble has caught on and he's desperately trying to avoid the shit hitting him and his family.

I absolutely do NOT buy his story. Even if you believe his story, think of it this way, you'd have to believe this ignoramus didn't catch on to the details of what was going on for 11 years. He's been paid MILLIONS Of dollars over the past 11 years to be the dummy.

Either way, he's either a liar or an idiot. Perhaps both. I have no sympathy for him.

on us (meaning Democrats) for not articulating that point.

I am sick and tired of demonizing people when those responsible escape scrutiny. I want those that are responsible to be held accountable - I am not looking just to have a poster boy, I want the poster boy.

to work for the company for $1 a year, how noble.....oh...and...uh....a $760,000 bonus! And when there is threat to tax that bonus he bails. Nice sense of duty to the company and public.

a bonus at the end of the year if he stayed for a year. He had a perfect right to look for a job with a company that could promise him a future, a much better move for him personally. He stayed only because he was asked to do so and was promised a bonus if he did.He agreed and he did stay for the year.

Now that he has fully performed his end of the bargain, we want to say "Pysch! All you actually get is the $1." What on earth is decent about that? And why shuldn't he leave now?

What does "retention bonus" mean then, Jake?

where you work an entire year for $1 in return for a bonus to be paid when you are done. Read the letter.

http://www.nytimes.com/2009/03/25/opinion/25desantis.html

$1 for 2,400 hours worth of work seems a bit low.

... IF he did what he said he did, and IF what he says is accurate, then he deserves his bonus. In the big money financial industry, there are a lot of folks who take little to no salary because their compensation isn't calculated until the end of the year. It's the way it's been, right or wrong.

I'm a (or rather, THE) software developer for a small publishing company. I develop every bit of the software architecture that goes online, and it gets used hundreds of thousands of times a day. Until last year, I had argued that we needed to place ads on our sites as a way of drawing revenue for the company and supporting the business. However, as a publishing company, the way we make money is through ad sales. I do not have any say-so in how the ads are sold, or what the ad packages are.

Our ad salesmen are all print ad salesmen. They don't understand the internet, don't understand how profitable internet ads can be, and generally will decline to sell the internet ads because they've always worked on the model of comping their good customers instead of charging them for all advertisements. In short, some of the ads they could be selling, that could generate well over a quarter million in sales, are not being sold because to them it's not worth their time to put in the effort. If I ran the company, I would demand that they sell these ads or find another job. But I'm not in charge.

So since we're already in a down market, where companies are cutting back on advertising, when the numbers came back from last year on the profit for the internet side of the business, guess who gets the finger pointed at when they consider letting people go to try to save money? It isn't the ad guys. It's me. All I can do is build the infrastructure and try to push for them to sell, but I can't make them do the right thing. The CEO just makes a simple connection: internet isn't making much of a profit, and I'm the internet guy.

Same thing with this guy. He might be a VP, but there are probably hundreds of VPs at AIG. Apparently this dude hasn't even met the CEO. That's how big AIG is. If what he's saying is true, then he could have been doing the right thing, making money for the company in a section of the financial products division that had nothing to do with the reason that AIG is in such a mess. If he truly is leading a section of the company that is pulling in 100 mil a year in profit, then his bonus is justified.

My personal belief is that the government should be the only insurance issuer in America for ANY type of basic or business insurance (to me, the profit motive is what makes insurance so expensive and so unreliable), but that's another thread altogether.