Dear AIG: I Quit !
Fantastic, must read OpEd in the NYT today by Jake DeSantis, the soon-to-be-former head of equity trading at AIG.
DeSantis argues that anyone not involved in the CDS side of FP was entitled to their contractual bonus, and that penalizing those people with nothing to do with bringing down AIG is counter-productive. He makes a very persuasive argument:
“I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.”
The bonuses are a flea on an elephant’s arse, a few million dollars out of trillions, and the tail was wagging the dog. On the radio yesterday, I tried to make the point (over a very insistent interviewer) that we are in danger of missing the bigger crisis.
Unfortunately, this is an easily understood concept, where as how we got here is not.
Go read the full DeSantis piece . . .
>
Sources::
Dear A.I.G., I Quit!
Jake DeSantis
NYT, March 24, 2009
http://www.nytimes.com/2009/03/25/opinion/25desantis.html
Barry Ritholtz Of Fusion IQ Calls AIG Bonuses “Minor Issue”
RTTNews
http://www.rttnews.com/Content/AVDownload.ashx?ID=28423&url=Audio2/2009/March/24/INTV-RITHOLTZ-AIG-03.24.09-lbr.mp3
March 25th, 2009 at 10:03 am
I worked as a trader for 15 years and it was always understood that the firm as a whole had to make money in order for anyone to get paid a bonus. That was always the clear message and I don’t see why that shouldn’t apply to AIG, Citi, or any other bankrupt firm. This shouldn’t be too hard to understand.
March 25th, 2009 at 10:03 am
Jake does have a point. Let’s have a cage match. DeSantis v Cassano. Sell tickets. Profits to Uncle Sam.
Excellent MacroMan today, on the “success” of QE so far in the Banana Republic of America (BRA).
http://macro-man.blogspot.com/
March 25th, 2009 at 10:10 am
I just read the article and while he makes some very good points, he’d likely be out of work (with no bonus) if AIG were wound down by the feds and nationalized (for real, not faux-nationalized without control). That’s how others are treated in the real world – the company does well and you do well, you get a bonus. If the company shits the bed and goes out of business, then nobody gets a bonus because nobody has a job anymore. Too bad for him that he worked for a crappy firm, excuse me, a criminal enterprise.
March 25th, 2009 at 10:15 am
Dear debt based central banking system:
I QUIT!
I don’t think my job and I should have to pay for the recent foolishness of hundreds of millions worldwide. I can even document my criticism on many a blog and message board out there for YEARS thus I am proven to have been on the right side of this crooked game.
What do you mean NO?!
Well, I guess it looks like we’re in the same boat there Jake buddy
March 25th, 2009 at 10:15 am
Simply the best piece I’ve seen on BonusGate.
March 25th, 2009 at 10:18 am
Poor baby. Talk about a nation of whiners. It’s tough living in your car isn’t it dude…
March 25th, 2009 at 10:18 am
On Wall Street, if you are a profitable trader, or can manage other traders, you can always find work.
March 25th, 2009 at 10:19 am
Would his bonus have been protected in bankruptcy? Maybe, maybe not, depending on how liquidation or reorganization had played out.
Any anyone astutely managing risk (and someone actually in the risk-management business ought to know something about it), both personally and professionally, should well know that nothing, but nothing, is guaranteed in life. It appears that he is upset that he trusted AIG’s word, but as Lou Reed once observed, “…[sometimes], you can’t even trust your mother…”
March 25th, 2009 at 10:20 am
People want the financial system to fail, Senators want businessmen to “off” themselves, GOP spokesman Gov. Bobby Jindal wants our president to fail… what’s wrong with America? What did the last eight years of Bush’s power do to create such a political culture of schadenfreude, resentment, and hostility?
It’s like the whole country’s wearing the Cheney snarl.
March 25th, 2009 at 10:21 am
@Myr,
These were contractually obligated per other performance measures. Regardless of whether AIG made money or not, there were other issues that affected their bonuses. So, by that reasoning, if Mr. DeSantis and his team meat their goals and were entitled to the bonus, they’re contractually obligated to receive it even though AIG lost money as a whole.
Perhaps if Mr. Liddy had explained that the employees receiving bonuses weren’t involved at all with the CDS side, maybe Congress and the public would have taken a second look. I’m sure people in their insurance group are quietly receiving bonuses.
March 25th, 2009 at 10:24 am
Mannwich.
What the government is doing now is essentially assuring bankruptcy of AIG. As a result, we the tax payers will now shoulder a much larger loss as the capable employees will now exit the firm. Even in bankruptcy, a judge would likely approve the $1 salary/bonus structure these individuals were working under.
We have a Congress that is more concerned about populous opinion versus doing the right thing. This is surely a train wreck waiting to happen as the government gains more control of financial firms. Their success at running Fannie and Freddie is what may be in store for the rest of the financial industry.
As Barry said yesterday regarding Rosenberg leaving BAC/Merrill:
…the real best and brightest usually end up bailing for greener pastures, while the mediocre (zombies) stay behind to go through the motions (or “go with the flow”)…
March 25th, 2009 at 10:26 am
@Barry Ritholtz Says: March 25th, 2009 at 10:18 am
On Wall Street, if you are a profitable trader…
If you were a profitable trader you wouldn’t need Wall Street.
At least that is what is behind my goals.
I figure the day my bank comes knocking on my door looking for me to do for them what I am doing in my private trading accounts, I won’t be needing them any more
March 25th, 2009 at 10:30 am
looks like we wil be going to daily bonuses–before a company can go BK or be nationalized (definition left to you)
So, if you are a great super start employee in a lousy organization, get the hell out! Be a great employee at a great organization!
There is a Team concept and if the team is great–why are so many places in financial trouble.
All this says is we have entitlements and moral hazards at all levels in the economy and society.
the name of the game is to win amnd win consistently–and if you take big chances with OPM knowing that it wil blow up one day–why shoudl these arrogant folks get bonueses all along?
Why shoudl brokers get trailer fees for putting people in mutual funds and doing nothing for years?
March 25th, 2009 at 10:31 am
“He makes a very persuasive argument:”
No, he doesn’t. As a common man, I cannot generate any sympathy at all. The bonus he is returning is 20 times my annual income. TWENTY TIMES! And he can afford to just send it back? and he wants me to see how unjust that is???
The outrage is that I can’t afford to give back a cent. I can’t afford to give back 20 minutes, 20 days, 20 months or 20 years of my income, and that this guy can flippantly just mail back what is equal to what is equal to 20 years of a $38k annual income. Does he know that people who make that much read the NYTs? Obama was right, these guys have to get out of New York and see the world.
Just as the outrage was settling down, this ridiculous letter comes along. Can you imagine this guy getting any sympathy from Joe the Plumber?
March 25th, 2009 at 10:37 am
Off topic, but I am sure BR will post on it later today…
The “great” news on “excellent” new home sales….
337,000 in Feb. 2009, up from 322k in Jan. 2009. Sounds great, eh? Of course, I just looked it up and Feb. 2008 was 590k. Why can’t anyone in the MSM understand seasonality?
HCF
March 25th, 2009 at 10:38 am
I hope Mr. DeSantis takes Sen. Grassley’s advice. The Japanese knew how to handle people like him.
Letter to Mr. DeSantis:
“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.”
Hum? Can’t the autoworkers at GM say the same thing? What about GM’s retirees, who worked for 50 long years under contracts only to see those contracts voided in old age, when they’re at their most vulnerable? And you know what? @ssholes like you CHEERED AS THESE CONTRACTS WERE VOIDED! We know you, and we know people like you: Guys like Tim Seymour who were on Fast Money and were absolutely giddy at the thought of a GM bankruptcy because it was an opportunity to “break the workers” (that’s a quote).
Mr. DeSantis, you deserve what you got, because you never earned that bonus. I’d be willing to bet that you never did an honest day’s work in your life. Do the honorable thing, Mr. DeSantis, and be prepared to explain yourself to St. Peter when he asks you “What have you done with the life you were given?”
Hint: I really doubt St. Peter will smile and open the gates of Heaven for you when you say “I singlehandedly destroyed the global economy and killed millions of people through the poverty my greed created.”
March 25th, 2009 at 10:38 am
@DisciplinedInvesting: I hear you but as someone pointed out, he wouldn’t need a Wall Street firm if he was worth his salt investing and besides, if he is worth his salt, he will easily find another job. Why stay behind at a failing firm then? Maybe because he still wants to stay on the gravy train sucking off the gov’t teat? That would be easier than actually “earning” one’s money at a firm not on the gov’t dole, no? Sorry to be so harsh, but that’s how I seet it. People are screwed out of bonuses and money all the time (heck, I know firsthand and have been screwed several times in my business, most recently to the tune of $40-$50K by the dishonesty of others). That’s life. As Simon Cowell would opine, “Sorry”.
March 25th, 2009 at 10:41 am
The Wa Po series of articles on AIG make a pretty good case that the CDS part of AIGFP was the problem. To the contrary everything else the AIGFP did was supposed to be fully hedged and was.
As for Desantis, life’s not always fair. I doubt we need to have tag day for him any time soon.
March 25th, 2009 at 10:42 am
There is a very nerdy engineering-ish web comic, called XKCD. They had a recent cartoon that is sort of on topic to this post: in terms of missing the point about bonus sizes versus size of the bailout.
It is a little vulgar, so I’m just posting a link, not the actual cartoon. Barry, you might like it.
http://imgs.xkcd.com/comics/1000_times.png
March 25th, 2009 at 10:42 am
@Myr:
“I worked as a trader for 15 years and it was always understood that the firm as a whole had to make money in order for anyone to get paid a bonus. That was always the clear message and I don’t see why that shouldn’t apply to AIG, Citi, or any other bankrupt firm. This shouldn’t be too hard to understand.”
Great Point! I have said this on other blogs and couldn’t agree more. I worked for years in high tech and the overall company success/failure was the basis for any bonus plan I participated in. This is more about executives who have no feel for what is politically/ethically the wrong thing to do and not in any way the amount of money being spent in the bonus pool. If there were contracts in place for bonuses with no clause saying that they depended on the success of the company, that is nothing but stupid management decision making and greed within a bunch of executives looking to pay each other off. The “retention” card they are playing is just a smoke screen. If these guys agreed to work for a $1/year, why would they believe the bonus plan was still valid?
March 25th, 2009 at 10:42 am
The letter goes on to use the analogy that if a plumber comes to fix the pipes and an electrician later does work that results in the house burning down the plumber should not be held responsible. The “but” that was left out is that in this case the plumber and the electrician work for the same company. If the company goes broke because of shoddy work one employee does, the whole company suffers. In this case the electrical fire not only ruined the company, it burned down the whole neighborhood. It’s not a persuasive argument, not in the least.
March 25th, 2009 at 10:42 am
for those looking for an analog of this kind of tape –
http://1.bp.blogspot.com/_RHwzqq5yGy0/ScowPbtjmiI/AAAAAAAAAiU/pa-noPQQCcA/s1600-h/spx.jpg
March 25th, 2009 at 10:44 am
I worked in a non-financial industry, big Pharma actually, for which my timing was quite good. In terms of bonus payments, these were understood to be on the basis of exceptional performance and calculated on performance of Country/Division/Region/Corporate on the basis that ultimately if the Corporate entity made nothing, then you couldn’t expect much. Stock options were awarded to vest after 5 years, suggesting both a retention element and a need to contribute over the long-term for the Corporate good and, in so doing, for your personal good also. This seems to make sense?
The problem is, IMHO, Wall Street compensation systems IN GENERAL got scewed towards “Make money today, who cares how you make it or about the long term because we are all dead in the long term and I’ll reward you for it now”. AKA greed.
That may be OK for Private equity (AKA Leveraged buyouts, AKA Asset stripping) but it’s NOT OK for a Public Company because it misaligns the interests of employees and shareholders. As the shareholders of most Financial Institutions have recently discovered?
March 25th, 2009 at 10:44 am
Thank you, franklin411. Couldn’t have said it better myself. Good grief, the whole world has gone insane. Shows us all the level of entitlement (and clueless tone deafness) on Wall Street. Pathetic.
March 25th, 2009 at 10:45 am
@doug 86…
I understand your point, but he has an uncommon job, and is paid uncommon wages…
Benefits and wages have always been the subject of anger and jealousy….
Should the president make 5 times what the average family makes?
Should Warren Buffett be a billionaire?
If you measure happiness by money, then these sorts of anger-generating situations occur…
Both you and I could have gone to work at AIG when he did, and perhaps done as well as he did..
Or we could have invented Windows and even if we looked like Kermit the Frog, have been one of the richest men in the world…
…It just doesn’t get you anywhere to be angry about what the next guy is doing..
March 25th, 2009 at 10:46 am
this is the hourly chart of the current market – (bkx)
http://2.bp.blogspot.com/_RHwzqq5yGy0/ScowD_7SCbI/AAAAAAAAAiM/_5YFVGpP_NU/s1600-h/bkx.jpg
CCI shows exhaustive nature of the move. it will collapse upon its own weight very soon.
March 25th, 2009 at 10:47 am
My favorite part is where he insists that he comes from a proletariat family. How he worked hard through MIT using a government program to pay for it. And then how as- as a bourgeoisie douchbag- he simply concentrated wealth for AIG for ten years. Now he wants his cut.
His parents created wealth by being schoolteachers – he created nothing and lives so high on the hog that he can piss away 700k. I’m sure he is just giving away his money so he looks good to a future employer.
March 25th, 2009 at 10:47 am
Getting back to the market, we are looking at a possible break of the sticky SPX 825 level here. This will be an interesting afternoon, for sure.
We are thinking about some SRS later in anticipation of profit taking after the surge in CBG. Here at Schadenfreude Asset Mgmt we enjoyed the fire sale in crude oil this morning and we filled our boots. Our car gets much better mileage with gasoline than gold.
March 25th, 2009 at 10:50 am
Thought this was very interesting yesterday when I read it. I really think it’s very applicable to the pickle we’re in today…..
http://www.theamericanscholar.org/the-disadvantages-of-an-elite-education/
March 25th, 2009 at 10:52 am
I’ll ask what I think is an even more fundemental question. I do not disagree with the author, but WHY does AIG, an insurance company, have an equity and commodity trading department in the first place??? If they’d stuck to their knitting, this fellow wouldn’t have worked there. And he was apparently operating as an independent source of income, not just handling their book investments.
March 25th, 2009 at 10:52 am
“Off topic, but I am sure BR will post on it later today…
The “great” news on “excellent” new home sales….
337,000 in Feb. 2009, up from 322k in Jan. 2009. Sounds great, eh? Of course, I just looked it up and Feb. 2008 was 590k. Why can’t anyone in the MSM understand seasonality?
HCF”
Obama is right, people don’t understand basic maths anymore, and there is something wrong with the way we are educating. Is the concept of a Moving annual total or a moving average so difficult to understand? Anyway, if this dumbing down has already reached financial journalists, whom were rumoured to be fairly intelligent, then I suppose we can at least console ourselves to trading some profits on the back of such ignorance?
March 25th, 2009 at 10:56 am
blame congress for f’ing this up with more ill-advised policy decisions, and the lack of foresight to anticipate these issues.
March 25th, 2009 at 10:57 am
@Keith D
We’ll have to see if those contracts were legal contracts. That’s what Mr. Cuomo is investigating. We shall see.
March 25th, 2009 at 10:57 am
Interesting, yes, fantastic? Hardly. In fact, I think it was rather poorly argued. Frankly, I was actually more simpathetic to many at the Tarp-related companies prior to reading this self-serving, narcissitic letter. Consider this argument:
“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. ” First, cheated is the wrong word and really just is more indicative of someone who is too close to the situation and is acting out emotionally. Second, Jack fails to understand that in this case, the plumber (Jack) and the electrician (AIG-FP) both work for the same general contractor. Thus, if one of the general contractor’s subcontractors made a mistake, the general contractor is completely responsible for all damages.
Tim
March 25th, 2009 at 11:01 am
It seems the financial crisis is largely due to the moral decay of wall street executives caused by violent video games and rap music.
March 25th, 2009 at 11:02 am
OK, OK, throwing contracts out the window is poor precedent. And the outrage to BonusGate is not in proportion to the relative size of bailout money being wasted… BUT the issue is obviously critical in the minds of many, many common people whose firms are not being funded 10,000% by the federal government; therefore, it will color the entire bailout dialog we’re just now getting around to as a society.
If AIG had gone chapter 11… no bonus, right? Well AIG is still bankrupt, so why should these bonuses be paid? ISN’T AIG JUST A NON-PROFIT, GOVERNMENT OWNED, ENTITY AT THIS TIME? Who in the non-profit world makes that kind of money?
March 25th, 2009 at 11:05 am
Jeff,
w/this: “By William Deresiewicz
It didn’t dawn on me that there might be a few holes in my education until I was about 35. I’d just bought a house, the pipes needed fixing, and the plumber was standing in my kitchen. There he was, a short, beefy guy with a goatee and a Red Sox cap and a thick Boston accent, and I suddenly learned that I didn’t have the slightest idea what to say to someone like him. So alien was his experience to me, so unguessable his values, so mysterious his very language, that I couldn’t succeed in engaging him in a few minutes of small talk before he got down to work. Fourteen years of higher education and a handful of Ivy League degrees, and there I was, stiff and stupid, struck dumb by my own dumbness. “Ivy retardation,” a friend of mine calls this. I could carry on conversations with people from other countries, in other languages, but I couldn’t talk to the man who was standing in my own house.
It’s not surprising that it took me so long to discover the extent of my miseducation, because the last thing an elite education will teach you is its own inadequacy. ..”
no doubt. what’s even more amazing is that those between ‘the Plumber’ and this dude think that these guys–the ‘best n’ brightest’ populate all levels of Wall St. and WDC..
there’s a flip-side to this: Barry Ritholtz Says: March 25th, 2009 at 10:18 am
On Wall Street, if you are a profitable trader, or can manage other traders, you can always find work.
many, on Wall St., and WDC, are utterly clueless, just another fish from the school..more like Mackerel, than their, over-imagined, self-portraits as Barracuda..
the solution to both these issues is the same: “Defund to Defend”. the pools of liquidity we allow them to bathe in are too deep, they need to be dried out. If they’re, really, any good with their fins, they’ll find a way to swim upstream, or, if dammed, walk to the nearest pond..
yes, Hydropower, it’s Free/Green..suure
March 25th, 2009 at 11:08 am
@Hoffer: I thought that article was so on point and gets to the heart of the current true “leadership” void (and tone deafness to anyone that’s not in their club) that we have in this country today in the corporate and political worlds.
March 25th, 2009 at 11:09 am
If I worked for AIG and I got a bonus I’d keep it tell the gov to go screw themselves. This is America. It’s every man for himself.
March 25th, 2009 at 11:12 am
How do we know that the hundreds of millions that he claimed to have made for AIG were actually real. I’m sure that if this was two years ago and some other part of AIG had blown up, Joseph Cassano would have been telling a similar sob story — I’ve made nothing but money for AIG and now they are taking away my well deserved bonus.
http://fattailsandleverage.wordpress.com/2009/03/25/missing-the-point-jake-desantis/
March 25th, 2009 at 11:13 am
@mudpuppy: You’re right, which is likely why we see vitriol everywhere these days. It is every man for himself but it really has been for quite some time now. Only now some of the royalty on Wall Street are starting to participate. I probably would keep it too, but I know that I also sure wouldn’t want my crying, braying email resignation letter published in the NYTimes for all the world to see my tone deafness. That’s for sure.
March 25th, 2009 at 11:19 am
I’m being cheated out of retirement money I thought I had saved, out of my ability to buy a house, out of my ability to afford a better level of education for my kids.
What I see happening right now is Geithner’s Posthumous Insurance Plan is assessing my future through inflation, likely tax increases and a long-term drag on US business because he feels obligated to pay out so other people can profit off investments they made that are already dead. I wish I could get that kind of a deal, but I can’t because it is only for certain businesses and certain people. If my company goes belly-up, my job is toast. Two-tier America is not my America. Sorry.
I don’t have sympathy for the people who put me here and if that lack of sympathy cuts too broadly, so be it. Sometimes you have to make broad cuts to get all the cancer out.
March 25th, 2009 at 11:20 am
Jeff,
you make a good point by mentioning the S&P500/Corporate end of it, as well.
people, if they only paid attention, while paying for what they purchase, could/should, readily, defund those flukes, as well.
http://www.thefreedictionary.com/fluke
see: “I was surprised more recently when I saw Burt’s Bees products everywhere — in grocery stores, drug stores, corner bodegas and big-box stores like Target and Wal-Mart. I thought to myself, fantastic; the marketplace is working, and good for Burt. He has made his mark, and the demand for his products is on the rise.
Needless to say, I was shocked when I recently found out that Burt’s Bees is now owned by Clorox, a massive corporate company that has historically cared very little about the environment, but whose main industry is directly associated with harmful chemicals, some of which require warning labels for legal sale.
Clorox; yes, that’s right — the bleach company with an estimated revenue of $ 4.8 billion that employs nearly 7,600 workers (now bees) and sells products like Liquid-Plumr, Pine-Sol and Armor All, a far cry from the origins of Burt.
I now understood. The reason Burt’s Bees products were everywhere was precisely because they now had a powerful corporation in the driver’s seat, with big marketing budgets and existing distribution systems.” as ex.
http://www.alternet.org/story/131910/
March 25th, 2009 at 11:23 am
@ MRegan: I posted some case cites and quotes re: swap immunity from stay under the Bankruptcy Code under Barry’s thread from the other day. http://www.ritholtz.com/blog/2009/03/bernanke-bombshell-aig-insurer-exposed-to-fp/
Just impressionistic research. Whaddaya want for nothin’ — a rrrrrrrubber biscuit???
March 25th, 2009 at 11:29 am
@Drewburn – you don’t think insurance companies take your premiums and just bury them in the backyard or stuff them into mattresses do you? That money has to go *somewhere* to generate a yield.
March 25th, 2009 at 11:29 am
wally,
w/this: ” Sometimes you have to make broad cuts to get all the cancer out.”
you might wonder why that violates the Hippocratic Oath.
“…I will apply dietetic measures for the benefit of the sick according to my ability and judgment; I will keep them from harm and injustice.
I will neither give a deadly drug to anybody who asked for it, nor will I make a suggestion to this effect. Similarly I will not give to a woman an abortive remedy. In purity and holiness I will guard my life and my art.
I will not use the knife, not even on sufferers from stone, but will withdraw in favor of such men as are engaged in this work…”
http://www.pbs.org/wgbh/nova/doctors/oath_classical.html
March 25th, 2009 at 11:30 am
As someone pointed out, the electrician that burned down the house was your drunken brother-in-law that you insisted to the homeowner that he would do a good job.
There are people making barely above the minimum wage who have lost their jobs because of people in the AIG-CDS group and similar. They thought they had stable jobs. They were made promised.
People invested for retirement and have now lost half their nest-egg as they approach the time when they will have to start living on it.
You lost your bonus? See if any of the billions that was sent from AIG to Goldman Sachs can be recovered so it might be paid. Or the latest blob of taxpayer funds which seems to go in the door of AIG and right out to the various zombies and vampires of the financial system.
If your one tiny division was with the angels, you should have tried to have it sold off to an honest company. If it was truly that profitable and performed that well there should have been a buyer.
But as an old bromide states: “When the whorehouse is raided, even the piano player goes go jail”.
Maybe you were only playing piano, but you were playing piano at the wrong place.
You should have questioned the CDS side (there were plenty of people pointing out the impending crash) and then quit two or more years ago before all this happened and tried to warn others. Maybe the warnings wouldn’t be heeded, but you would be in a better position.
Apparently there was a legitimate trading operation below Madoff’s ponzi scheme office.
Enron did do things to supply energy and Worldcom did build a lot of communication infrastructure.
But a lot of innocent people suffered there too. You should have asked AIG go bankrupt, then the financial undead would be on the hook or in the same line of creditors with you, or your profitable section would still be running and the stuff you point out as the evil AIG twin amputated.
March 25th, 2009 at 11:48 am
@ philipat:
> Is the concept of a Moving annual total or a moving average so difficult to understand?
> I suppose we can at least console ourselves to trading some profits on the back of such ignorance?
Apparently, basic mathematical principles are difficult to understand for most people. Actually, it’s probably lack of interest or lack of trying rather than intrinsic intelligence, come to think of it. As I recall, in school, most people would say, “Why do I need to learn math anyways? We have calculators and stuff.”
Not to say I agree with exploiting people due to their lack of basic math skills, but I do I have to say that if they don’t pay attention, we shouldn’t be surprised if they are robbed blind!
HCF
March 25th, 2009 at 11:49 am
w/this: ” Sometimes you have to make broad cuts to get all the cancer out.”
you might wonder why that violates the Hippocratic Oath.
Well, Mark, I think that if you found a drug that actually fed the cancer, that would be the worst thing you could do. And that’s what Geithner has decided to do.
Since I’m performing here without a net, I really don’t see why people wealthier than me should have one.
March 25th, 2009 at 11:49 am
The Dao Movement:
Grasp a medium-size ball. Stand still. Extend your arm and hold ball.
Observe ball. Conceive of it as ‘the earth’ held in space by your omnipotent power.
Accept that the only things original and fixed are the things created by nature…oceans, streams, continents, mountains.
Know that every word in every language on that globe is “made up”.
Know that every currency for every nation on that globe is “made up”
Know that every valuation and price placed on everything is “made up”.
Know that human-made financial systems involving printed or digital money are only deemed ‘real’ because there exists a working majority of humans agreeing it is ‘real’, backed by the power of human enforcement. Otherwise, ‘money’, ‘currency’, ‘valuations’ and ‘price’ are no more real and no more significant than the poem in digital memory on a flashdrive; the value placed on that poem by its writer carries no weight with others who do not acknowledge that value.
Study the earth held at arm’s length and realize nothing NOT made by nature or physically fabricated by humans is truly real on that planet, let alone permanent or unchangeable by a change in human consensus or a change in the power of human enforcement.
Now we may begin to fix our financial problems.
March 25th, 2009 at 11:52 am
That someone believes they deserve a bonus because they personally made a profit in a bankrupt company is a little ridiculous. If he doesn’t like it, leave. This bonus issue isn’t a pimple. It’s symptomatic. No one has to worry that we will lose site of the bigger issues. We see them every day.
The government should have told AIG, if you want the bonuses, take us to court. And, be assured we will air our grievance in the court of public opinion before we get to the court of law. AIG would have melted.
March 25th, 2009 at 11:53 am
mannwich
….Here, too, college reflects the way things work in the adult world (unless it’s the other way around). For the elite, there’s always another extension—a bailout, a pardon, a stint in rehab—always plenty of contacts and special stipends—the country club, the conference, the year-end bonus, the dividend. If Al Gore and John Kerry represent one of the characteristic products of an elite education, George W. Bush represents another. It’s no coincidence that our current president, the apotheosis of entitled mediocrity, went to Yale. Entitled mediocrity is indeed the operating principle of his administration, but as Enron and WorldCom and the other scandals of the dot-com meltdown demonstrated, it’s also the operating principle of corporate America. The fat salaries paid to underperforming CEOs are an adult version of the A-. Anyone who remembers the injured sanctimony with which Kenneth Lay greeted the notion that he should be held accountable for his actions will understand the mentality in question—the belief that once you’re in the club, you’ve got a God-given right to stay in the club. But you don’t need to remember Ken Lay, because the whole dynamic played out again last year in the case of Scooter Libby, another Yale man…..
If everybody doesn’t read this article, they are really missing out.
March 25th, 2009 at 11:54 am
And now, over at Naked Capitalism, isn’t this wonderful?
Wednesday, March 25, 2009
AIG Aircraft Lease Unit Says Survival at Risk, May Need Government Funding
March 25th, 2009 at 11:55 am
I think the argument of whether or not these bonuses should ever have been paid (or at what level) needs to be separated from whether they should be paid now. These people agreed to work at AIG to unwind the business for these payments. They were reassured many times by both AIG and apparently those in charge on the government side. The impetus was on the government to make the right decision as to what payments were acceptable at the outset, not a year into the contracts. If the government thinks that these people should be paid $50,000 a year instead of what they were given, the employees should have had the chance to walk away. Given that it appears that only a handful of people were actually involved in the CDS operation, it strikes me as counter to the principles of our nation to now go after people who were, and currently are, running successful parts of the AIG-FP business.
If you ask yourself how you would expect to be treated in this situation, I doubt you would be hanging your head in shame in their shoes. These people appear to have run successful operations (over a number of years), and it appears were not involved in the transactions that brought AIG down. I would imagine that many of them would have been happy to walk away when the government took over or would have stayed for smaller sums of money, but they were offered what they were offered. To be asked now, a year later, to return what they were offered is out of line. The government dropped the ball when it came to determining proper pay, and we are now a year into these contracts. If these had been the people responsible for AIG’s demise, the outrage might be justified. Given that they aren’t, I find it hard to make a case that the current outrage and punitive actions are justified.
March 25th, 2009 at 11:56 am
@Foghorn: Probably the best article I’ve read in months. That passage really hit home. Everything makes so much sense to me now.
March 25th, 2009 at 12:02 pm
HCF,
speaking of old bromides–”If you aren’t Paying attention, it’ll Cost you..”
Wally,
of course Geithner is feeding it, it’s his role, whether we care to Know it, or not. His Job is to Continue the Looting..again, it’s why it’s called: “The Obama Deception”.
bdg,
has the right approach, if AIG wants the Money, they should go on “Oprah” and explain it to her audience..if they can’t make it understandable to them, they’re lying/hiding something–it’s that Simple.
TT Timmy should be put to the same Test..as well as his Comrade in Arms, yon’ BenBer..
March 25th, 2009 at 12:11 pm
more
…What happens when busyness and sociability leave no room for solitude? The ability to engage in introspection, I put it to my students that day, is the essential precondition for living an intellectual life, and the essential precondition for introspection is solitude. They took this in for a second, and then one of them said, with a dawning sense of self-awareness, “So are you saying that we’re all just, like, really excellent sheep?” Well, I don’t know. But I do know that the life of the mind is lived one mind at a time: one solitary, skeptical, resistant mind at a time. The best place to cultivate it is not within an educational system whose real purpose is to reproduce the class system….
Baaa
March 25th, 2009 at 12:11 pm
@ Bruce N Tennessee Says:
I understand your point, but he has an uncommon job, and is paid uncommon wages…
Should the president make 5 times what the average family makes?
Should Warren Buffett be a billionaire?
Or we could have invented Windows and even if we looked like Kermit the Frog, have been one of the richest men in the world…
——————————————–
I not mad that he made more money than me. I mad that he is whinning about it.
Warren Buffett isn’t making public resignations in the NYTs. DeSantis is clearly trying to explain to the world how wrong we are to be angry at AIG execs. But rather than mea culpa, he goes looking for a sympathy vote by graciously returning his bonus. The tax payers will take the bonus back thank-you-vurry-much, and we’ll take a pass on the sympathy.
March 25th, 2009 at 12:16 pm
Nice to be unemployed by choice.
DeSanits: Blow me!
March 25th, 2009 at 12:23 pm
At least Jake’s job wasn’t outsourced to India. My guess is we won’t see any braying, self-pitying emails from those at IBM who get the axe.
News Alertfrom The Wall Street Journal IBM is expected to inform a large number of U.S. employees in its global-services unit that their jobs are being eliminated, with some of the work being shifted to IBM employees in India. The planned cuts show that even companies that are successfully navigating the global recession are continuing to slash costs–some of them by taking advantage of cheaper Asian labor. It couldn’t be determined how many people are losing their jobs in the IBM action. IBM typically avoids public disclosure of layoffs, and a spokesman declined comment on the plan.
http://online.wsj.com/article/SB123799610031239341.html#mod=djemalertNEWS
March 25th, 2009 at 12:23 pm
The initial justification for the bailouts was (for those gullible enough to believe it) that we faced annihilation of our financial system if we didn’t do it. Bailout advocates are now in the position of having to explain why we face annihilation of our financial system if Mr. “X” doesn’t get his million dollar bonus. It’s a more difficult sell.
March 25th, 2009 at 12:39 pm
Base salary for a neurosurgeon in NYC: $425,000
http://tinyurl.com/c7axaf
What is Mr. De Santis’ base salary?
March 25th, 2009 at 12:40 pm
I don’t get this at all. If Mr. DeSantis feels so strongly about this, he simply should have kept the money. OK, maybe he would have ended up in court, but wouldn’t that really have been the proper place to make this argument?
On the other hand, I have this notion that anyone making more than the President of the United States is probably being paid too much. Say what you will, that person certainly cannot claim his work contributions are more important. Now if they want to also say that perhaps the President should make more? Heck, I’m open to that idea.
March 25th, 2009 at 12:47 pm
Barry,
The larger issue That is the DOG! Which is misplaced in the AIG issue, is that America sees all these assholes making shitloads of money, doing nothing. Guys like John Thain who work for a few months and walk away with some obscene amount of money. Or guys like the Management of GM who run the company into the ground, and are paid Millions. If the line worker at GM doesn’t build cars, or destroys the Line to get a Weekly Production bonus. He gets fired! The office worker who doesn’t turn in the TPS reports gets fired.
These guys at AIG are doing work and deserve to get Paid. But the broader issues are the lack of accountability and pay for Nonperformance. In the early 80’s a guy could be an ok worker, and get paid what a union worker made. Now it’s not even close.
This is the rage that is spilling over into this AIG issue.
Since the MEME is that america isn’t going to get the money back anyways, why would america want to pay these guys to unwind the trades.?
A Frequently asked question as we have a political shift in the country, is “We need to save Capitalism”, but the real question is “who is going to save capitalism”….
you think all the service workers who don’t have health insurance are going to do it?
How about the Laborers who are making $10 an hour?
certainly isn’t going to be the employees of the secondary mortgage market.
The boomers who just puked up their remaining stock so they could pay off their overvalued home?
I guess it’s up to those who received all the rewards from the system that are going to have to save it.
March 25th, 2009 at 12:55 pm
This is preposterous and not persuasive at all. This is just more of the individualism “island-think” that so many delusional people are wont to perpetuate. This man was part of a larger enterprise. You can’t completely separate one’s contributions from the whole. Should the losing traders have received negative salary so that this trader could be “justly” compensated? When you go into business with others, whether it is in a partnership or a corporation, you are at risk of not receiving the gains that you feel are solely attributable to your own efforts. What is controversial about this? It is delusional to think any other way.
There is risk in the world. Very few people are ‘justly’ compensated (for a wide, wide variety of reasons). AIG should have been allowed to fail and this guy would have been an SOL unsecured creditor. I am appalled that anyone would find any of this persuasive.
March 25th, 2009 at 1:02 pm
Here is an informative site.
The name says it all.
He updates 4 times a day.
http://www.layoffdaily.com/
March 25th, 2009 at 1:05 pm
Barry, the questionable AIG bonuses are estimated at $218 million.
The entire federal spending for elderly and low income heating assistance to the State of Maine in 2008 was $79 million; and that amount of funding was not nearly enough to fill the actual need.
There is something fundamentally wrong with a society that forces elderly people to choose between food, medicine and heat while giving $218 million in our tax money to people who already have more money than they can possibly spend in their entire lives.
March 25th, 2009 at 1:09 pm
I hate to post twice, but the irony is so thick and delicious, I can’t help myself.
This guy doesn’t understand the counterparty risk inherent in his own employment contract. And he’s a trader! A trader who feels he’s undercompensated! Even though he doesn’t even understand counterparty risk! Genius!!!
March 25th, 2009 at 1:09 pm
TransorZ-
Just saw your message, grabbed the comment from the other posting and will be working on it. Sorry for the silence- life intrudes. I imagine that many others here are grateful for the info and appreciate your efforts.
I reproduce TZ’s comments here for the curious:
Transor Z Says:
March 25th, 2009 at 11:19 am
@MRegan: If you’re still interested, here are some cites for Bankruptcy cases dealing with 11 USC ss 548, 560 et al (safe harbor for non-bankrupt CDS counter-parties):
In Re National Gas Distributors, 369 B.R. 884 (Bankr. E.D. N.C. 2007) Judge Small cited to the Morrisson & Riegal article I cited above and also wrote:
“Congress determined that there are legitimate reasons for creating, in the financial markets, these special exceptions to the overall protections and policies of the Code. The court understands that if contracts traded on a financial market are unraveled, the market itself could become unstable and a domino effect could occur. See H.R.Rep. No. 484, 101st Cong., 2d Sess. (1990). “ [This last cite provided by Judge Small is to the House Report on the 1990 Bankruptcy Code amendments, which first added a limited number of swap-type agreements to the safe harbor protection.]
The case didn’t hinge on applying the Code to CDSs in a bankruptcy setting, but as I suspected, there aren’t a lot of bankruptcy cases that even mention this issue.
In Re Marketxt Holdings, 376 B.R. 390 (Bankr. S.D. N.Y. 2007) (stating that qualifying swap agreement payments are immune from creditor challenges under 11 USC s 546(g))
A helpful pre-2005 case is In Re Thrifty Oil, 249 B.R. 537 (S.D. Cal. 2000) (interpreting the 1990 Amendments protecting swaps):
“Several provisions in the Bankruptcy Code reflect a strong Congressional policy of protecting interest rate swaps, termination damages and the swap market from the effects of bankruptcy. In 1990, Congress amended the Bankruptcy Code to exempt interest rate swaps from provisions which could otherwise frustrate a creditor-counterparty’s ability to exercise the contractual rights conferred by an interest rate swap agreement. See Act of June 25, 1990, Pub.L. No. 101-311, 104 Stat. 267 (1990) (”Swap Amendments”). The legislative history of the Swap Amendments plainly reveals that Congress recognized the growing importance of interest rate swaps and sought to immunize the swap market from the legal risks of bankruptcy. The Judiciary Committee Report to the Senate version of the bill observed that swap agreements are “a rapidly growing and vital risk management tool in world financial markets,” frequently used by financial institutions and corporations “to minimize exposure to adverse changes in interest . . . rates.” S.Rep. No. 101-285, at 3 (May 14, 1990). Representative Schumer explained that swap agreements “offer borrowers the ability to carefully manage the interest rate or currency risks they undertake, making it easier and safer for companies . . . to raise the capital necessary for economic growth.” 136 Cong. Rec. H2284 (May 15, 1990). The House Judiciary Committee Report confirms that Congress enacted the Swap Amendments to ensure that the swap markets “are not destabilized by uncertainties regarding the treatment of their financial instruments under the Bankruptcy Code.” H.R.Rep. No. 101-484, at 1 (May 14, 1990), reprinted in 1990 U.S.C.C.A.N. 223, 223; accord 136 Cong. Rec. H2281, 2283 (May 15, 1990) (remarks of Rep. Fish) (”The swap market serves essential functions today-including reducing vulnerability to fluctuations in exchange and interest rates. Explicit Bankruptcy Code references to swap agreements will remove ambiguities that undermine the swap market.”); 136 Cong. Rec. S7535 (remarks of Sen. DeConcini) (”The effect of the swap provisions will be to provide certainty for swap transactions and thereby stabilize domestic markets by allowing the terms of the swap agreement to apply notwithstanding the bankruptcy filing.”). [bold mine]
Congress addressed these concerns by bestowing preferential treatment on the creditor-counterparty who seeks to terminate a swap agreement and collect termination damages from the bankruptcy debtor. Although the Swap Amendments do not directly address the relationship between interest rate swaps and unmatured interest, they provide two policy principles applicable to the interpretation or application of any Bankruptcy Code provision. . . . . At a minimum, federal courts should avoid interpreting [the Code] in a way that would either (1) needlessly discourage the innovation and flexibility that has made interest rate swaps such a valuable risk management and financial tool, or (2) inject unnecessary legal uncertainty into the swap markets. “
Here’s a juicy little nugget from CSX v. Children’s Inv. Fund Mgmt (UK), 562 F.Supp.2d 511 (S.D. N.Y. 2008) (not a bankruptcy case but very interesting illustration of swap trading involving JPM, GS, ML, and UBS ):
“Joe O’Flynn, the chief financial officer of TCI Fund told its board . . . that one of the reasons for using swaps is ‘the ability to purchase without disclosure to the market or the company.’”
I could have days and days of fun digging around but gotta to do some real payin’-client work.
March 25th, 2009 at 1:13 pm
OT to those who may or may not care:
Inka Kola News (a blog on Latam equities etc) posted a note about a likely announcement from Lula da Silva concerning a govt sponsored housing buildout, the number being bandied about is ONE MILLION HOUSES (do yer own Dr. Evil impression).
That sort of thing may affect GAFISA (GFA) in which Sam Zell plonked down some of his hard-weaseled money. Worth having on the radar screen.
jdamon33- ACAS? XL? not even a fruit basket…
March 25th, 2009 at 1:21 pm
MR,
you wouldn’t happen to do any Portuguese, to go along w/ your Espanol, would you?
March 25th, 2009 at 1:22 pm
@ Avl Dao
“Know that every currency for every nation on that globe is “made up”
Kurt Vonnegut made up a word for that which is just “made up” by humans, things like money.
He said, imagine an inflated balloon, now take away the balloon’s skin, what is left is a granfalloon.
March 25th, 2009 at 1:33 pm
MH-
My Portuguese is good enough for reading and writing but with my short Irish nose as vocais nasais don’t come out so well and my wife hates my tone de palhaso brincadaiero. Can I help in some way?
March 25th, 2009 at 1:51 pm
MR,
that’s funny, I hear you. though, as a matter of fact, you just might could. if you wouldn’t mind, send me a ping, and I’ll furnish additional detail.
this: “de palhaso brincadaiero” though, I find no handle to..
March 25th, 2009 at 1:55 pm
joking clown. goofball maybe.
As to a ping, hmmm.
Can I reach from here?
http://www.blogger.com/profile/05618986236607603703
March 25th, 2009 at 1:55 pm
If someone went to BankOfAmerica and robbed their main vault for 180B in cash, and then later agreed to return all the money except for 165M they would get to keep for being such nice and reasonable bank robbers, would we then also say that the 165M was peanuts or fleas on the elephants behind? Or would we say that we were rewarding bank robbers for robbing banks?
I know which view I think is reasonable. If we do not confiscate the 165M, we are basically saying the following: Hey, you’d better lose a really HUGE amount of money, because then we will ignore that you are keeping 0.1% of the losses as a premium for your criminally reckless activity.
Yeah, that’s the ticket.
March 25th, 2009 at 1:58 pm
Barry,
to continue my analogy: Yes, the bigger crisis is all the bank robberies, but if you do not remove the incentive to rob the banks then all the robberies will continue, or recur at a later time.
We should work both on trying to recover the money from the bank robberies, AND to make sure that none of the robbers get rewarded for their criminal activity.
March 25th, 2009 at 2:14 pm
Transor Z-
Can I tell you something about the resource you used to gather that case info? Maybe you already know.
1. Go to ’search’ tab
2. Under option 2 choose first tab ‘legal’
3. In that field under ‘Legislation & Politics’ click on ‘view more sources’
4. Click on Legislative Impact & Regulatory Impact
5. Hit continue- you might like what you find
All of this depends on whether or not I guessed your resource correctly. The one that didn’t start in Minnesota.
March 25th, 2009 at 2:16 pm
What arrogance of privilege!
Substitute everything he says about being a “successful trader” now with someone who was a “successful programmer” back during the Nazcrash.
No one gave a rip then and I guarantee you, no one gives a rip now.
The only difference now is that somehow, the AIG trader has the bully pulpit of the press to shout his rage to the world.
March 25th, 2009 at 2:17 pm
MH-
All good.
March 25th, 2009 at 2:22 pm
Welcome to the world of the little people, Mr. DeSantis. It’s not pretty, it doesn’t feel good, and it certainly isn’t fair. When you work for MegaCorp and the corner office screws up, there’s collateral damage. You’re collateral damage, if a rather novel form. You had a good run pushing paper around a monopoly board up until you didn’t, and you’ll most likely continue to do so somewhere else. You’re a whiner. Shut up and move on to your next overpaid position.
March 25th, 2009 at 2:33 pm
I for one am not feeling any remorse for this dude. Ok he worked two cubicles away from the brilliant crooks who swindled our nations future. Does that excuse him, Who cares? The whole country is going down the tubes and this dude thinks he can get on the NY Times and make people feel sorry for him? He can get in line behind all the newly homeless folks asking for spare change.
I like ZackAttacks idea about substituting ’successful programmer’ with ’successful trader’ although
I would like to point out that programmers are expected to debug their programs, and try things like inserting negative variables just to see what happens, or documenting what they’ve engineered so that other people can read it and understand.
I think the problem is is that a lot of people think of an MBA as roughly the same as an Engineer but in a different field. This fiasco has proven how wrong that assumption is.
March 25th, 2009 at 3:13 pm
@MRegan: different resource
But now you’ve got me curious.
March 25th, 2009 at 3:19 pm
TZ-
Not a big secret or anything, just a route to Potomac Publishing Company.
I noted in the 2nd case you referenced that legis. action from 1990 was in play. I thought it might be of interest. Shumer’s presence not so surprising.
Westlaw was out of Minnesota, or at least had an operation there in Eagan?. LN came out of Dayton, Ohio I believe.
March 25th, 2009 at 3:30 pm
Diane Brady of Business Week has an EXCELLENT point by point rebuttal of DeSantis’ letter. Definitely worth a read:
The Mindset of an AIG executive
Business Week
Posted by: Diane Brady on March 25
http://www.businessweek.com/careers/managementiq/archives/2009/03/the_mindset_of.html?chan=top+news_top+news+index+-+temp_news+%2B+analysis
March 25th, 2009 at 3:34 pm
I felt very sad last night when I saw what an extraordinary President we now, miraculously, have and what a mess the situation he is in the middle of is. Reading Matt Taibbi in Rolling Stone is all you need to know about who and how we got where we are. It is, alas, possible that these folks will doom the Obama presidency. Can Obama get out from under the Goldman Sachs mafia that seem to be everywhere and put other players in place. Taibbi is right that the players have created a lexicon that leaves the rest of us in the dust so that only they can make the key decisions. We are still saving, rewarding the very people who have destroyed our system, our savings, our confidence in the system. Something will have to happen to clear the air in a big way. Obama is special, and he will have to be the one who speaks to us, not Summers with his bluster and arrogance and Geithner with his confused and comprimised position. I hope Axelrod, Volker, and other will ballast Obama so he can get out ahead of the losers who are still in charge.
March 25th, 2009 at 4:03 pm
Funny how now that the bonuses of Wall St. traders are in question we’re treated to endless lectures about the sanctity of contracts. I don’t seem to remember that happening when dozens (hundreds?) of pensions and retirement health plans were gutted.
March 25th, 2009 at 4:52 pm
>> The bonuses are a flea on an elephant’s arse, a few million dollars out of trillions
Barry, bailing out AIG is about stabilizing the system, while the AIG bonuses are the equivalent of war profiteering. That’s why people are angry about the bonuses.
Do you agree with that statement, at least?
March 25th, 2009 at 5:06 pm
About a year ago, the small company (150 employees) I work for was purchased by a much larger firm (15,000 employees). We used to get a sizable bonus plus salary increases on a yearly basis. The small company was (and still is) very profitable and growing. Now that we are small part of a much larger organization, we no longer receive a yearly bonus and our salaries have been frozen for this year because the larger company is not doing so well.
All I can say to this guy is: “Welcome to the club, pal”.
March 25th, 2009 at 5:08 pm
On this one, BR, it appears you’ve succumbed to Tri-State Syndrome.
Wall Street as represented by DeSantis is like the idiot kid who throws rocks at the tigers at the zoo.
The only question now is whether the Street stops throwing rocks before the tigers jump the fence.
To the Street: Accept some public shame in exchange for maintenance of the bulk of the status quo. STFU while you still have an ass left to get your head out of.
March 25th, 2009 at 5:44 pm
wunsa-
it isn’t about ’stabilization’, it’s about Looting.
’systemic risk’ is the new ‘Phantom’ of this Opera meant to placate you by distracting tales of Fear..
http://www.thefreedictionary.com/placate
http://www.thefreedictionary.com/distraction
yes, def. #3
March 25th, 2009 at 6:52 pm
The user comments attached to the NYT article were more interesting than Jake’s letter.
March 25th, 2009 at 7:05 pm
The reason this sounds like so much whining is because there’s a real question about what is the fundamental economic value of all of this trading. Let’s stipulate that DeSantis is very good at what he does, and that he’s a shrewd futures trader. (Some people are really good poker players too.) How much does all of this super leveraged futures trading really benefit the economy. As the financial markets have grown and the financial “industry” has grown, what are we really accomplishing? Perhaps DeSantis would tell us that he’s making lots of money and paying lots of taxes, but isn’t this the proverbial economy of everybody doing everyone else’s laundry. Our emphasis on trading at the expense of real productivity is at the core of the problems in the United States. A vibrant productive economy needs efficient capital markets, but somehow we’ve let the tail wag the dog. As we bail ourselves out of this mess we’ve got to create a regulatory framework that creates incentives to make products that the rest of the world makes. We don’t want a race to the bottom, but some guy stitching tee shirts in Guangdong may just be creating more wealth than some of our futures traders. My advice to DeSantis if he doesn’t think he’s getting paid enough is to try something that produces: maybe go to school and learn engineering
March 25th, 2009 at 7:08 pm
I agree with BR since he is making an analogy only in the relation to the scope of the $$$ involved.
The letter which refers to the sanctity of the contracts are good examples of what the banksters try to do to maximize profit. They try and get as many positive black swans as possible from the individual divisions but forgot that one negative black swan could bring down the whole institution.
March 25th, 2009 at 7:17 pm
The guy worked for a company that was so mismanaged it allowed a subdivision of the company to crash the whole financial world and he feels shorted after being very well paid for years based upon profits that were to be realized in future years. Only on fucking Wall Street could people operate like that.
Millions of people in the U.S.A who had no part in AGI whatsoever have lost half their lifes savings while this guy and his asshole associates in AGIFP were paid hundreds of thousands of dollars per year for decades.
The fact he’s quit and is giving the bonus away shows he’s overpaid.
Fuck’em. let AGI go down. We did OK before AGIFB and we’ll survive after it.
March 25th, 2009 at 9:04 pm
Barry,
I’d been impressed by about everything you’ve posted up until now – you really feel like this guy is making a legitimate argument? You really don’t get the vibe that there’s a little bit of the banality of evil going on here? Your take on things looses a fair amount of esteem in my eyes if you really think everything that guy’s said is legitimate.
If you don’t follow the “banality of evil” idea, there’s a discussion going on about it here:
http://www.doomers.us/forum2/index.php/topic,42323.0.html
March 25th, 2009 at 9:58 pm
MEH,
I understand your perception but don’t share it. As I did with the neocons, I may disagree with the government’s strategies but understand their motivations and rationale. That is, I do *not* believe the “AIG bonus” issue is a cooked-up story to obscure the billions going out to counterparties. I do *not* believe the government’s purpose in stabilization is to help private actors “loot” anymore than Cheney’s purpose in going to Iraq was to enrich Halliburton. I believe the government wants to stabilize the financial system because they believe the consequences of not doing so will be more expensive.
If anything, awareness of the bonuses helps the GOP and libertarian causes, because they’re the ones who usually argue things like “we should cut out welfare because someone’s getting rich over it (and we’ll pretend we’re powerless to combat that)”. I wouldn’t be surprised to learn that the people who originally pushed this story were ideologically on the economic-right. It’s unprovable. So, it will have to remain my suspicion.
March 25th, 2009 at 10:16 pm
Wow this op-ed made me mad. I did a quick write up and stopped before I got TOO angry but I got my point across: http://soyouthinkyoucaninvest.blogspot.com/2009/03/aig-aint-it-great.html
Quick note:
This is exactly why you let failing institutions go bankrupt. When you bail them out, you have employees walking around acting like they deserve something. What exactly would Mr. DeSantis feel he “deserved” if AIG went bankrupt back in the fall? That answer would be decided in a bankruptcy court, where he would have had to stand in line with the company’s debtors, customers and other stakeholders.
March 25th, 2009 at 10:34 pm
I second on what Al wrote above.
People like Jake only sees themselves in the mirror. BTW, who writes almost 1,500 words and their life story just to resign? I smell another “Rick Santelli” copycat here…maybe Jake will on a world tour?
Bottom line is, people whom have absolutely no ties to AIG whatsoever lost their life-saving, houses, etc. vs JAKE, whom thinks his contract should be honor because 1) he earn it with “past” success and 2) decided to stay on for $1 salary during the last 12-months?
$742,006.40, after taxes… and he still haven’t figure out why taxpayers are mad? An U.S president only earns $400,ooo a year… Jake is doing such a great job at AIG that he is better than our president?
I wonder what makes people think they are smarter than the rest of us…I’ll give him a point for narcissistic.
March 25th, 2009 at 11:36 pm
it’s incredible the number of people here and in the NYT comments section who said that AIG they lost their jobs or savings because of AIG. that is scarier than the financial crisis in itself. we’re screwed. we definitely got a Congress for the people and by the people. this country also deserved and elected George W. Bush!
March 25th, 2009 at 11:41 pm
The bonuses were the carrot that the wagon train followed off the cliff.
Furthermore, I find that the salaries made were such a minute part of the big picture sickening. Trillions of dollars lost because a handful of selfish jerkoffs wanted to be able to say, “I made a million last year.” And for the record, you’ll never here me complain about A-rod, or anyone else’s salary until I have to pay it.
As Common man says, “If you were a profitable trader you wouldn’t need Wall Street.” Right on.
What you’ve got here is a Self-Esteem Bubble.
March 25th, 2009 at 11:53 pm
Payment was agreed upon before the work was done. Contracts were signed. Work was performed. If the payment is being denied the issue should be resolved in court.
That’s it.
Everything else is an emotional drama and mudslinging.
The mob is filled with anger and envy.
March 26th, 2009 at 12:29 am
March 25, 2009 @ 11:36pm,
Why do you say it is so very sad some on TBP, myself included, feel AIG was a crucial conduit in the perfection of destroying our and the worlds financial underpinnings by — outrageously — exploiting the repeal of the Glass-Stengall Act and the Commmodities Modification Act or whatever that was called?
CDS’s were explicitly named such to avoid using the word “insurance” so as to cut corners in having to keep reserves in those CDS instruments to assure they had an underlying value that would assure the CDS investmet vehicles would make whole counterparties in the event of a default without unduly putting the losses to such an outrageously broad swath of stakeholders in the investment community.
Who else can you point to, other than Cassano of AIG, that so exploited the vulnerabilities that the repeal of the aforementioned firewalls made bare? Firewalls that were taken down without anyone in finance or government oversight taking the due dilligence to stop and say, why the fuck are we taking down the stop signs our forefathers erected. Nobody asked why where these stop signs put up and why are they being taken down without the proper dialouge, rather then there being repealed so swiftly and yet so in the dark until the results were so apparent to the world?
If you can’t see that many, many people at AIG and in finance in general knew this was all bullshit or had a really good sense what AIGFP was doing was bullshit then you sir are in capable of finding your ass with both hands.
I’m not playing Monday morning Quarterback. After spending 30 years trading paper, scrap paper, I’ve learned nothing stays the same and natures way is a way of increasing and decreasing value cycles and also, as anybody who has been in combat can tell you, it’s when things are going well is when you should be thinking about what needs to be done when the shit hits the fan.
March 26th, 2009 at 2:23 am
hey Al, let’s just say that AIG never created the FP division, and then there would be no derivatives and counterparties related to AIG and no “$170B” bailout and no $165M in bonus to return, would we still have a financial/credit crisis?
What locked up the financial system in September when Lehman went under? Was AIG involved in that?
Is AIG responsible for Bear Stearns, Citi, Merrill, Wamu, Wachovia, the Auto Industry, the Housing Bubble, the massive amount of consumer debt?
AIG sold cheap insurance without adequate reserves for sure, but someone took out mortgages for their inflated McMansions, which enabled Wall Street to pool those mortgages to sell to investors, who along with speculators bought CDSs from AIG. Along the way, there was the lack of oversight from Congress, the Fed who started the ball rolling by keeping interest rates at 1% … well Barry is writing a book on the entire daisy chain …
March 26th, 2009 at 5:53 am
Al – well put history lesson @ 12:29am
Tonight on tv Senator Dorgan (D-ND) talking on his 1999 warning the rpeal of safeguards with the Graham Bailey Lesh Act would be what we have today. He claims to be not clairvoyant just observant to history, sighting 1920s.
So what do we need to do for the generation of 2070? An Amendment to the Constitution? Hangings* today? Seems we need to set some policy in stone or set fear in some minds. If not solidified – Mr Slick of the future will get his payday again at someones expense. One way blocks a specific legislatable activity the other way curtails a generality.**
* prefer drowning (less violent at the cross moment) ** prefer generality laws rather than vigilante justice
March 26th, 2009 at 6:40 am
wunsa-
see: “…The passage of time has only worsened the situation: the size of the challenge has grown and the time to address it has shrunk. The longer we wait the more painful and difficult the choices will become, and the greater the risk of a very serious economic disruption.
It is understandable that the Congress and the administration are focused on the need for a short-term fiscal stimulus. However, our long-term challenge increases the importance of careful design of any stimulus package—it should be timely, targeted, and temporary. At the same time, creating a capable and credible commission to make recommendations to the next Congress and the next president for action on our longer-range and looming fiscal imbalance is called for.”
February 15, 2008
http://blog-pfm.imf.org/pfmblog/2008/02/david-walker-ga.html
http://www.gao.gov/docsearch/repandtest.html
be free to choose, though, obviously, it is well known/knowable what/where our problems lie.
you want to talk ’stabilization’, I’m suggesting we move our House off the seashore, there’s real work to be done. That it isn’t discussed/acknowledged, in any serious way, tells, me, at least, there’s something else afoot..
we are entreated to tertiary tales of Phantoms meant to enrage, not to engage..the transmission is suspect, and gains us no traction, let alone, purposeful, action.
though, as I said, feel free to believe what you need..
March 26th, 2009 at 6:46 am
It’s all been said above.
But I sure wish someone would take out Christopher Dodd, with extreme prejudice. That slime-ball weasel, sleeping with the fishes, might wake up a few others who have been repsonsible for this travesty.
And Mr De Santis can go to hell.