Letter from an AIG bonus recipient
March 25, 2009 6:09 AM   Subscribe

Letter from an AIG bonus recipient - The resignation letter of an AIG executive explaining his point of view on the bonus furor. The proverbial other side of the story.
posted by Argyle (293 comments total) 18 users marked this as a favorite
 
The whole bonus brouhaha is nothing more than a convenient distraction for press and politicians who are scared to death that they have no remedies for our very real financial mess.
posted by caddis at 6:17 AM on March 25, 2009 [28 favorites]


The whole notion of taxing the AIG bonuses was a sad spectacle of populist outrage. The problem here is the word "bonus." To most of us, a bonus represents something that you receive only if you have achieved certain results. In the case of AIG, however, these were bonuses were in name only. The employees of AIG were guaranteed these payments, so they were effectively assured compensation. For most purposes, there is little difference between the bonuses and the standard salary.

In other words, employees would have been justified in making spending decisions based on their expectation. If we're going to tax these bonuses away, why stop there? Why not tax them all down to minimum wage? Sure, many of them will lose their houses (to the satisfaction of the torch-wielding mobs), but so what? It's all their fault, right? Everyone at AIG should suffer horribly, right? Because they work at a place called AIG. Talk about getting hung up on words...

On top of that, the bonuses were about a tenth of a percent of the bailout money that AIG received. But people are easily confused by words ending in "-illion." More confusion about words.

One thing I will say against AIG and the entire industry: calling a contractually guaranteed payment a "bonus" hints at some of the broken culture on Wall Street. But that is neither here nor there, since taxing AIG employees 90% of their bonus isn't going to fix anything.
posted by Edgewise at 6:25 AM on March 25, 2009 [19 favorites]


Just when I was starting to gain some sympathy for these guys one of their executives has go public with his childishness. Does he seriously not realize that any unfairness in his current situation is exactly what most people have to deal with in this economy, some even in the best of times? Why should he, working at the epicenter of fuckup and turning a blind eye, get special treatment? Does he not understand that accepting a $1 salary just to get a lump sum later is incredibly deceptive to most people, and will further ill-will?

Pretty impressive that even after all this, the bubble in which financial executives live has not popped.
posted by Llama-Lime at 6:26 AM on March 25, 2009 [36 favorites]


Llama-Lime - What did he turn a blind eye to? Do you know what's going on in other areas of the organization you work at? Would you continue to work for a salary of $1 at an organization where you are putting in ridiculous hours?
posted by sid at 6:31 AM on March 25, 2009


~I agreed to work for a dollar, and a million dollar bonus~

sounds like you agreed to work for a million+1 dollars, not a dollar. It's not a bonus if you can count on it when times are bad.
posted by nomisxid at 6:31 AM on March 25, 2009 [26 favorites]


people are easily confused by words ending in "-illion."

Like "cotillion." And "brazillion." And "nathanfillion."
posted by grubi at 6:32 AM on March 25, 2009 [34 favorites]


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.

At first blush, that makes sense to me. But were the contracts and the size of the bonuses based on the expected income of the shady credit dealings to the company? So the plumber was promised a certain amount of future cash based on the assumption that the electrician's kickass light display would bring in more revenue to the house. When the electrician instead burns the house down, that income turns to ash as well and the plumber is left shit out of luck.

If I were an AIG exec who had nothing to do with their current situation, I'd be really pissed that after constant promises that my contract/bonus would not change it suddenly does hours before my CEO goes down to Washington to get his face gnawed off. It's not just the 700k (!) bonus that buys loyalty, it's the willingness of upper management to step up for me.
posted by robocop is bleeding at 6:34 AM on March 25, 2009 [3 favorites]


I wonder how much he would have donated if it wasn't for the media spotlight. I have significantly less money (i.e., I'm practically broke), but I have trouble sleeping at night sometimes because I have a few grand in the bank and people are starving. What's happening to him is unfair (same goes for people losing their jobs, etc) and I think what he's doing is the best solution, but his hand is forced. A man's character should be judged on how he acts when no one is looking...not when a fucking mob is lighting their torches.
posted by milarepa at 6:35 AM on March 25, 2009 [1 favorite]


I read this last night and was torn.

Let's face it, not every single executive nor employee was a party to this nonsense. The writer of the letter is probably right, it probably amounts to a handful of people. So then we the people have all this misdirected rage. AIG bonuses are not what we should be waving pitchforks and torches about. Realize how little of the money AIG is receiving went toward these bailouts. Even if they return the bonuses, it's just symbolic. People have a lot to be angry about, but this just seems like a media misdirect to me.
posted by IvoShandor at 6:35 AM on March 25, 2009 [3 favorites]


Why should he, working at the epicenter of fuckup and turning a blind eye, get special treatment?

It sounded like he wasnt asking for special treatment. He was upset that his department was villified (by the entire country) along with the real screwups in AIG, and his CEO did nothing to defend them.
posted by milestogo at 6:36 AM on March 25, 2009 [6 favorites]


Pro:You answered your country’s call and you are taking a tremendous beating for it. ...
Con: I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust.
posted by acro at 6:37 AM on March 25, 2009


"The profitability of the businesses with which I was associated clearly supported my compensation."

Let's all try to use that line in our next review period and see what response we get. Laughter? Blank stare? A suggestion to go fuck myself and the horse I rode in on?
posted by Cool Papa Bell at 6:37 AM on March 25, 2009 [13 favorites]


On top of that, the bonuses were about a tenth of a percent of the bailout money that AIG received. But people are easily confused by words ending in "-illion." More confusion about words.

The guy who writes XKCD made a similar point the other day (as has Rick Santelli). I think that this is probably incorrect. The charitable interpretation of the outrage is not that people do not understand the ratio of the bonuses to bailout funds - those paying attention to this situation are probably at least of middling intelligence, and are not easily thrown by the similarities between 'million' and 'billion'. Instead, people are angry as a matter of principle. It strikes them as unfair that, while the average person finds themselves in a financially weakened position, those agents who they deem as being partially responsible, correctly or otherwise, are receiving large paychecks at (what seems to be) taxpayer expense.

The conversation has been framed in terms of bonuses, for it allows a quick response: bonuses are for those who achieve something, and these guys haven't done anything of the sort. But I would think that the outrage would likely have been of a similar order had the story been framed in terms of the take-home pay of top AIG officials.
posted by Tullius at 6:39 AM on March 25, 2009 [14 favorites]


@Llama-Lime

Does he seriously not realize that any unfairness in his current situation is exactly what most people have to deal with in this economy, some even in the best of times?

So what? I guess if I end up on the street picking seeds out of shit, I should realize that many people in Bangladesh have to go through this everyday, and stop being so childish. If it is, as you say, unfair, then why should he be any more content with that than you or I would be?

Why should he, working at the epicenter of fuckup and turning a blind eye, get special treatment?

You mean special treatment like receiving that which you were contractually promised? And who said he turned a blind eye? Just because he was working at AIG doesn't mean he was in any position to do anything about CDS's, or even knew or understood anything about them.
posted by Edgewise at 6:40 AM on March 25, 2009 [1 favorite]


Does he seriously not realize that any unfairness in his current situation is exactly what most people have to deal with in this economy, some even in the best of times?

So just because some people are suffering, it is A-ok to engage in a campaign of ugly demagoguery to make sure that everyone does? If you lose your job because your company fails, that's one thing. If you have your contractually mandated compensation taken away because of the baying of the mob and a deliberate campaign of demagogic rabble rousing - that is something else entirely.
posted by atrazine at 6:42 AM on March 25, 2009 [9 favorites]


I have a friend who , for a number of reasons, moves in some of the same circles as the AIG executives. She said she couldn't believe how they act. If you told her before how they carry on in thier clubs, she said she would have dismissed it as some crude, 19th century Carticuture. But no! there they are, smoking cigars, drinking at noon, moaning about how mean people are and don't they understand how haaaaard they work and begging to drive hot rods and trying to score coke off the young girl at the party. Lame-ass Thomas Nastian dorks who can't even think of interesting ways to piss away people's entire life savings.
posted by The Whelk at 6:44 AM on March 25, 2009 [7 favorites]


I read his letter as a plea for sympathy; in this I think it fails miserably. If it's not that, then I retract my criticism, but if it's not why is it getting published as an op-ed? The situation that is so onerous to him that he must quit is a situation that many people are in, except that most people haven't been paid so handsomely in the past that they have the option of quitting and resting on their laurels.
posted by Llama-Lime at 6:45 AM on March 25, 2009 [1 favorite]


The reason his contract should no longer be honored is because the company he worked for is bankrupt.

The only reason why A.I.G. has any money to spend on bonuses - or even on paper clips - is because we the taxpayer gave that money to them. We didn't contract to pay him any goddamned bonus.
posted by Joe Beese at 6:47 AM on March 25, 2009 [75 favorites]


Let's all try to use that line in our next review period and see what response we get. Laughter? Blank stare? A suggestion to go fuck myself and the horse I rode in on?

I suggest you find work elsewhere.
posted by atrazine at 6:47 AM on March 25, 2009 [2 favorites]


Wasn't it a london office that screwed up and cost AIG billions? My understanding was that the outrage was related to the fact that the same department which lost hundred of billions received 165 Million in bonuses (total pool was 1.2 billion, I think). So my question, and the one that I haven't seen pointed out by the press, is just how many of the department in question are actually US tax payers? I can't say for sure, but there's at least a chance the folks who ruined AIG are keeping their bonuses and the US based employees, who didn't cause AIG's failures, are being forced to give back 90% of their bonus.
posted by ShadowCrash at 6:49 AM on March 25, 2009


Well if you simply walk away from the bus stop you're less likely to be thrown under the wheels of a considerably large vehicle....
posted by samsara at 6:50 AM on March 25, 2009


acro
Pro:You answered your country’s call and you are taking a tremendous beating for it. ...
Con: I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust.
Turning the con into a somewhat-pro is the next sentence: Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
posted by vivelame at 6:50 AM on March 25, 2009 [1 favorite]


Let's all try to use that line in our next review period and see what response we get. Laughter? Blank stare? A suggestion to go fuck myself and the horse I rode in on?

You presumably won't need to use it because your boss won't try retroactively to alter the terms of your contract of employment, to reduce how much money you are paid for hours you worked in the past.

I'm not going to over-exert myself feeling sympathy for AIG executives, but this guy's case is pretty sound, and donating the money to good causes in the face of public fury is better than not donating it to good causes at all.
posted by game warden to the events rhino at 6:52 AM on March 25, 2009


As someone who has an enormous sense of entitlement, a taste for the finer things in life, and is morally bankrupt, I'm starting to think I picked the wrong profession.
posted by adipocere at 6:52 AM on March 25, 2009 [15 favorites]


sid: The question is rather, why does he have to put in ridiculous hours?

AIG, and a lot of other companies, is firing lots of talented, hardworking people. How can anybody defend, under the current circumstances, to continue to paying a few people insanely high remunerations (regardless of whether you call them salaries or bonuses), while asking them to perform well beyond what is humanely reasonable, and to simultaneously dispose with half the staff?

Also, there are plenty of very skilled people who also work very long hours. Medical and paramedical staff comes to mind. They will not work for 1$ salaries, but neither will they expect a multi-million dollar income. The mistake, and the essential hypocrisy, was to pretend that these high-fliers were going to keep working for one dollar, all the while safeguarding their guaranteed "bonuses" of several million dollars in average.
posted by Skeptic at 6:52 AM on March 25, 2009 [2 favorites]


The reason his contract should no longer be honored is because the company he worked for is bankrupt.

No. Imagine if AIG had declared bankruptcy, and the court appointed trustees had then guaranteed these payments to key staff - to keep them from quitting. They might do this so that the business could be wound down in an orderly fashion, to protect the creditors - that's you, American taxpayer! This is the job of a bankruptcy trustee.

This is effectively what has happened here. Without the formality of a bankruptcy proceeding. Liddy was appointed to wind down the derivatives positions, sell off profitable units (like the one headed by the writer of this letter) and close up shop. These retention agreements do not predate the failure of AIG and thus would not necessarily have been voided even had there been a formal bankruptcy.
posted by atrazine at 6:53 AM on March 25, 2009 [2 favorites]


The causes of these problems were systemic. Yes, this guy probably did turn a "blind eye" to them, but then so did most the population of the northern hemisphere. Yes, it probably was only a handful of people at AIG who made the very specific decisions that tipped the company over the edge, but they're like the torturers at Abu Ghraib - they're just the ones who happened to be caught red handed. In fact the problem was absolutely inherent in the system in which they operated and was inevitably going to happen at some point, regardless of the moral fortitude of any particular individuals - people had been doing that job before them, and if the collapse hadn't happened when it did then some other individuals would have been in the driving seat making pretty much the same decisions until the system did collapse and it would be them that took the blame. That's because, given the way the system of capital was set up, these people really didn't have much choice but to make the decisions they made. The people who rose to the positions of power in the system were the ones who made the most returns for shareholders - and they were inevitably the ones who inflated the biggest bubble. It's an automatic self-selecting process. The system is what's fucked up here.

However it's only because the system is so fucked that people like this could expect such obscene salaries in the first place, so frankly I find it hard to have too much sympathy for the guy.
posted by silence at 6:55 AM on March 25, 2009 [3 favorites]


DeSantis first complains about not being paid what he was owed, then he admits he was overpaid and doesn't need the money. Obviously he's unhappy because his sense of rectitude has been violated.

Horse puckey.

If matters of principle were so important to him, he should have left AIG when the situation first became evident. All of his heroic efforts since have served only to help bail out the bad actors who caused the crisis. A worthy endeavor? I think not.
posted by sensate at 6:56 AM on March 25, 2009 [5 favorites]


What I'd like to know is, how is it that this guy didn't know about the credit default swap transactions? He is/was "an executive vice president of the American International Group’s financial products unit", which is the unit that was responsible for the credit default swaps.
posted by sotalia at 6:57 AM on March 25, 2009 [1 favorite]


Lame-ass Thomas Nastian dorks who can't even think of interesting ways to piss away people's entire life savings.

This is the part that has always bugged me about our rich, too. Dammit, they should be tooling around in Zeppelins, not dicking around with polo ponies and young women.
posted by notyou at 6:58 AM on March 25, 2009 [5 favorites]


"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...

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes."

If he had a sense of duty to the company he would have turned down the bonus after it became obvious that they are a huge public relations disaster. If anything else this fiasco has probably lost AIG billions in brand value, built up through very expensive advertising.
posted by afu at 6:59 AM on March 25, 2009 [1 favorite]


I'm tired of these guys talking about how hard they work and defending their compensation by saying they can't help it if the market chooses to reward them that way. The market is readjusting once again and now they're whining about it.

I'm not convinced he's all that hard of a worker or exceptionally talented in some way.
posted by anniecat at 6:59 AM on March 25, 2009 [3 favorites]


I wish every time I did something nice for someone that I could alert the New York Times.
posted by KevinSkomsvold at 7:01 AM on March 25, 2009 [7 favorites]


yeah, well tell it to the employees of Enron. if AIG hadn't been 'rescued' by the government, what would have happened to his contract in bankruptcy?

What Mr. DeSantis has just learned is that despite the big bucks he is still basically an employee and will get thrown under the bus when push comes to shove...

tough luck, right?
posted by geos at 7:01 AM on March 25, 2009


I know it's hip to hate Wall Street these days, but I thought DeSantis' letter at least did a nice job of clarifying the "bonus" nomenclature being hurled about in support of the administration's overall agenda. The media maelstrom is too intense, it seems, for anyone to be willing to acknowledge that difference, but I appreciated it. We aren't dealing with Bud Fox here, ya know.
posted by njbradburn at 7:02 AM on March 25, 2009


atrazine: " Imagine if AIG had declared bankruptcy, and the court appointed trustees had then guaranteed these payments to key staff - to keep them from quitting. They might do this so that the business could be wound down in an orderly fashion, to protect the creditors - that's you, American taxpayer!"

Maybe the coffee hasn't kicked in yet... but I don't understand this part.

Leaving aside for the moment the question of whether it would have been the best course of action or not, let's say that we had stood by with folded arms as A.I.G. went bust during its crunch several months ago - as many people wanted. We're not creditors in that situation, are we? And I'm assuming that in this economy, a bankruptcy judge would be able to find plenty of people to turn out the lights there for less than our scrupulously clean-handed editorialist wanted in bonus payments.
posted by Joe Beese at 7:04 AM on March 25, 2009


It's also interesting that the man was paid three quarters of a million dollars to, essentially, trade things back and forth. (it looks like they're also trying to sell the company, so I imagine he had plenty to do with getting it ready for sale -- this is more pointed at the general case of these very high salaries.)

There's some economic utility in this kind of trading, but mostly, he and AIG are just extracting value out of the economy. And the economy has gotten so messed up that trading, instead of production, pays on the order of 20 times the average wage.

That $700K he was paid is a claim on real goods and services, and I doubt very much that he's providing even close to that kind of utility to the system as a whole. As far as I can see, most of what they do is simply taking from other people; for every dollar they win, the system as a whole loses. Again, there is some value there, because commodity traders help constrain volatility (buying low and selling high means that they help move their chosen commodity back toward true economic value), but that kind of compensation seems wildly excessive to me.

It's the nature of capitalism that things get out of adjustment, but there's a difference between ordinary maladjustment and downright dysfunction. The modern Wall Street is largely based on fiction, and they can use that fiction to take vast amounts of wealth from the world.

I'm not saying that janitors should be paid $700k; I am saying that when speculation pays better than real investment, real investment doesn't happen. Many of the brightest people go where the money is, and if that area is wealth-subtractive, we all suffer.
posted by Malor at 7:04 AM on March 25, 2009 [29 favorites]


Seconding the disgust with the populist outrage. This employee doesn't care what public opinion is. You don't get to have a referendum on rich people's business contracts.

You think $1 million is a lot for this guy to make? If the government thought it was worth almost $200 billion to keep AIG operating, ask yourself what it is worth to the government to prevent all of the employees at AIG from quitting right now and effectively shuttering the company. Hint, it's worth at least $200 billion + economic effects of a collapse of AIG.

The reason the government bailed out AIG and the other banks is because if they didn't, you would suffer in the ensuing catastrophe. Rich people would be fine. They don't live paycheck to paycheck, they don't spend beyond their means. They have money. They can go to Switzerland or Shanghai tomorrow and live a nice life.

The bailout of the financial industry was done to preserve the entire economy. You depend on that more than the rich. They have money, you don't. These guys are deferring their compensation to unwind these screwed-up businesses in an orderly fashion so the businesses don't unwind in a disorderly fashion and destroy the world's financial future.

In other words, the government bailed out the financial industry to cover your ass, not the bankers'.

Guys like this could go to work for any of a number of private investment firms. He mentions that he turned down other offers to work at AIG because of the company's promises to make good on compensation. It doesn't matter how much he makes. What matters is that the CEO is backing off on a deal he made with his employees, and making the employees question why they are even bothering to worth there for nothing. They can make nothing sitting at home.
posted by Pastabagel at 7:07 AM on March 25, 2009 [10 favorites]


If I understand it correctly, he went to work for $1 salary + bonus. Calculated risk IMO because As I understand it, you don't get bonuses when your company goes under. AIG went under by most any definition. And he thinks he should still be paid a bonus by tax payers? When by his own admission he doesn't need the money? Astounding.
posted by anti social order at 7:08 AM on March 25, 2009 [2 favorites]


Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored.

If this is actually true, they must be the only people in the country who are turning down job offers. But if it's so easy for him to get a new job, what does he care about AIG?
posted by hydropsyche at 7:09 AM on March 25, 2009 [2 favorites]


Here's what's wrong. If you can only make a million dollars because someone else does something wrong you are not worth a million dollars. His hard work is not useful enough to be worth a million dollars. Absent him there would not be a million more dollars worth of value in the world. He is not that good at anything. He is not that useful. That he thinks that he is mental illness or stupidity.
posted by I Foody at 7:15 AM on March 25, 2009 [4 favorites]


It's the nature of capitalism that things get out of adjustment, but there's a difference between ordinary maladjustment and downright dysfunction. The modern Wall Street is largely based on fiction, and they can use that fiction to take vast amounts of wealth from the world.

Can we stop saying things like "fiction". In that vein, an iPod that costs $100 to make but is sold for $400 is fiction, because the user can't possibly extract an additional $300 of utility out of the device than he could compared to another $100 device. The product (all products) is purchased on the basis of an emotional (i.e. irrational) decision.

Trading is important because it creates information. If GE stock drops 5% on a day when everything else does well, that tells you that there is something wrong with GE.

Without this "fiction" we'd be living in caves. We would not be using gold, because gold is as useless as dollars, unless you make jewelry or semiconductors.
posted by Pastabagel at 7:16 AM on March 25, 2009 [3 favorites]


A. The bonus brouhaha is mostly theater. It is not the first move in a socialist overthrow of Wall Street.
B. This immensely privileged individual has suffered nothing more than the frustration of a busted contract; neither he nor his family will go without, and there are, he claims, several other companies out there eager for his services.
C. Nope, no sympathy here.
posted by emjaybee at 7:22 AM on March 25, 2009


The letter was definitely an important perspective to hear. Everywhere you look - there's people.

But as already pointed out, his outrage rings a bit hollow. Mainly - AIG is currently a corporate fiction, its bloated corpse barely afloat because of the rushing torrent of government money. Had it gone under, it's hard to know whether he'd have been paid in full, though VPs often have mystical powers for coming through these things fully intact.

Which is the next point - as a VP in that division, where's the responsibility for actions happening on his watch? Or was he just VP of office products?

His analogy about the electrician and the plumber is especially ironic. The hypothetical plumber would have been paid because the putative house was INSURED against fire. But ... what if the insurance company was a big fraud and couldn't meet its policy obligations? Oh, snap!

Having said all that... I would arrange to pay DOUBLE his bonus if he would finger and testify against those who he claims are responsible, and make clear the trail of the money.
posted by Artful Codger at 7:22 AM on March 25, 2009 [1 favorite]


I have no sympathy for this guy. The collapse of AIG is not his fault - but the ship he was sailing on did sink, and sorry pal, but everyone on board goes down with the ship.

Did the auto workers on the assemble cause the problems at GM? Can't they make the same arguments as this guy about their contracts being re-worked?

Your company does not have the money to pay your bonus. Live with it.
posted by Flood at 7:22 AM on March 25, 2009 [14 favorites]


Anyone defending this guy's bonus, or honoring of the contract ... please familiarize yourself with the term force majeure, which is almost certainly in his contract.

Typical force majeure clauses specify acts of governmental nationalization as a valid reason to invoke the clause. If you don't think that counts here, well, I can't help you.

although, perhaps the feds can bail you out...
posted by Cool Papa Bell at 7:22 AM on March 25, 2009


Caddis' comment seems spot on. It's clear the people running things really have no clue what the fuck they are doing. They have the same blind faith in capitalism all the other dumb asses who came before them do. This video is scary as fuck. Apparently American's just need the strength of character and the will to march forward, capitalism will take care of itself.
posted by chunking express at 7:22 AM on March 25, 2009 [1 favorite]


Nobody minded these guys not getting paid their minimum wage for about eight years, and I'm supposed to feel for DeSantis, who probably would have spent that money redecorating his bathroom?

Trading is important because it creates information. If GE stock drops 5% on a day when everything else does well, that tells you that there is something wrong with GE.

I think Jim Cramer already discussed that part.

Without this "fiction" we'd be living in caves.
Um, no. No, we wouldn't.
posted by anniecat at 7:25 AM on March 25, 2009 [6 favorites]


I'm rather taken aback by the majority position in this thread.

I can't speak for all Americans, but this has nothing to do with the number of dollars.

I am not "outraged" by the bonuses, but I did find them rather eyebrow-raising. None of us have access to those contracts, but I would be shocked if those contracts did not have some sort of clause that can be called during times of emergency or financial destabilization.

I run a company with only about 70 employees, and I have those clauses for the employees who have "contractual bonuses". I think I do a pretty good job, but I refuse to believe I am more savvy than the entire legal department of AIG.

In other words, it is highly unlikely those bonuses were contractually obligated to be paid "no matter what" or come hell or high water.

And the fact that any of you were swayed by the drivel this multi-millionaire wrote in his sappy, woe-is-me appeal to emotion is disturbing. I guess it is a testament to why certain personality types are able to ascend to the highest levels of large organizations, a personality type that has been shown to perhaps be similar to sociopaths.

This man makes $800,000 a year (after taxes, remember) in bonuses because he is good at what he does, which is convince people he deserves $800,000 a year in bonuses.

Also, you need to understand this guy is a "small fish". Some of the bonuses were much, much larger.
posted by Ynoxas at 7:26 AM on March 25, 2009 [12 favorites]


If I understand it correctly, he went to work for $1 salary + bonus. Calculated risk IMO because As I understand it, you don't get bonuses when your company goes under. AIG went under by most any definition. And he thinks he should still be paid a bonus by tax payers? When by his own admission he doesn't need the money? Astounding.
posted by anti social order at 10:08 AM on March 25


AIG didn't go under. The government spent billions to make sure it didn't go under. If it went under, he wouldn't be working there, because there would be no 'there' at which to work. He would be working at one of the other firms that offered to hire him.

And are you kidding with "paid a bonus by taxpayers"? Most of the income taxes, like 60%, are paid by people like this guy, the top 5% of wage earners. The average American taxpayer (the lower 50% of taxpayers) pays next to nothing in taxes (roughly 3%). That's why the government can cut their taxes (Obama's famous 95%) and not really feel the pinch.

Unlike voters, not all taxpayers are equal. Be careful about claiming to speak on the taxpayers behalf, because the real taxpayers might decide to start speaking on their own behalf.
posted by Pastabagel at 7:29 AM on March 25, 2009 [6 favorites]


That $700K he was paid is a claim on real goods and services, and I doubt very much that he's providing even close to that kind of utility to the system as a whole.

This is just a cousin of Godwin's Law, insofar as any reasonable economic discussion cannot continue once someone begins arbitrarily determining how much another's work is worth.
posted by wabashbdw at 7:30 AM on March 25, 2009


Letter from Executive Vice President of A.I.G.-F.P. to Chairman of the Board-
"You and I have never met or spoken to each other..."

How far down the org chart can you be and still get $742K?
posted by MtDewd at 7:31 AM on March 25, 2009 [4 favorites]


So just because some people are suffering, it is A-ok to engage in a campaign of ugly demagoguery to make sure that everyone does? If you lose your job because your company fails, that's one thing. If you have your contractually mandated compensation taken away because of the baying of the mob and a deliberate campaign of demagogic rabble rousing - that is something else entirely.

As others have said, AIG failed so miserably that without the bailout they would have had to shut everything down and start paying creditors by auctioning off their assets. When your company goes under, you get screwed, even if it wasn't your fault. That's how it works for everyone else. If you're unlucky enough to work for a company that goes belly up, a lot of times you'll stop getting paychecks for a few weeks while the leaders of the company scramble to get a last minute loan to keep the lights on. Eventually you'll drive to work one day and there will be somebody there saying everyone is fired, and employees will start walking out with office furniture while they think about how they are going to keep paying their mortgage.

So when a guy who made more money in this debacle than I'll probably make in my entire life whines about not getting a bonus he's promised, I agree that it's not really fair but I don't have too much sympathy for him. If he's not a complete idiot then he has a significant amount of money saved and won't have much trouble financially, instead of having to live off of unemployment while desperately trying to find other work like normal people do.
posted by burnmp3s at 7:31 AM on March 25, 2009 [2 favorites]


I'm happy to work for 90% of $1 million for 6 months (September when the bonuses were promised to March when they were paid). I'll even put in 10-14 hour days for it.
posted by ryoshu at 7:31 AM on March 25, 2009 [1 favorite]


So if the government ends up bailing out GM, it can just ignore those pesky and expensive union contracts, amirite? After all, those workers wouldn't have jobs if not for the public money.
posted by Slothrup at 7:34 AM on March 25, 2009 [3 favorites]


He didn't know what was going on? Oh plueeeeeeeeese... I knew the housing bubble HAD to crash.
Years ago. The only thing a borrower needed to buy a loan from these crooks was a pulse.
posted by chance at 7:35 AM on March 25, 2009


You don't get to have a referendum on rich people's business contracts.

Actually I do, because you and I own 80% of AIG. So fuck those guys.

They can make nothing sitting at home.

I say, go right fucking ahead and sit at home. There are plenty of other people willing to have that job.
posted by mark242 at 7:36 AM on March 25, 2009 [1 favorite]


I'll swap places with him this very instant.

Right now. Seriously -- DeSantis, give me a call. I will be your public face for the next five years, if you want. Any other AIG exec feeling hurt, same offer stands. I am also prepared to be the CEO of any, yes any financial firm that's feeling a bit down.

...mind you, I'm going to require that we also swap total net worths, to reflect the differing salaries over the past few years and thus the attendant realistic risk being taken here, but I'm sure we can work that out in a relatively tidy lump-transfer.

No? We can't? Huh. Wonder why.
posted by aramaic at 7:37 AM on March 25, 2009 [1 favorite]


chunking express: " This video is scary as fuck."

The "money" quote, as it were:

It just requires will. It's not about ability. And we just need to keep at it.

Sounds like Bush about Iraq, doesn't it.
posted by Joe Beese at 7:37 AM on March 25, 2009


Having said all that... I would arrange to pay DOUBLE his bonus if he would finger and testify against those who he claims are responsible, and make clear the trail of the money.
posted by Artful Codger at 10:22 AM on March 25


Wait a second, do you think the problem in the economy is that the money was somehow stolen? The money disappeared by virtue of accounting, not fraud. The problem is that the government chose not to regulate an industry it was fully aware of, companies wrote contracts that were levered to underlying assets under the assumption that the underlying assests would not all become worthless at the same time, and then a substantial number of underlying assets became worthless all at once. Shit happens.
posted by Pastabagel at 7:40 AM on March 25, 2009


Pastabagel, can you tell me a story how someone in finance can actually generate the one million dollars worth of value that they get paid without utilizing huge amounts of leverage that are incredibly risky and they are only able to wield because of their position rather than any human capital that they bring to the game? What can someone know how to do that makes him worth this kind of money?
posted by I Foody at 7:40 AM on March 25, 2009


Which is the next point - as a VP in that division, where's the responsibility for actions happening on his watch? Or was he just VP of office products?

Even if it didn't happen on his watch--even if it was a completely unrelated division in a completely separate office a thousand miles away--he agreed to work for $1 a year + a bonus, and was an executive vice-president who watched as another division in his company manufactured value out of the aether. There's no conceivable way that this entire mess happened in such secrecy that he didn't know about it; no one earning that kind of money in that kind of position could possibly be that tin-eared. I'm a peon at my company, but I manage to keep my ear to the ground enough to be able to spot huge, glaring gaps in logic perpetrated by other groups. Don't you think that if you know another division is cooking the books, and that if you know your compensation is dependent on no one finding out that the other division is cooking the books, that you would have the small amount of common sense it takes to know it's time to get the hell out of there before your bonus evaporates? He's apparently being offered jobs left and right now that the tower has collapsed; why wasn't he accepting them somewhere else back when AIG's reputation hadn't been ground into the dirt and he could leverage his experience there? Sweet christ, even without the class-warfare undertones, this guy is either being horribly disingenuous, or is dumb as a sack or rocks.
posted by Mayor West at 7:40 AM on March 25, 2009 [4 favorites]


It just requires will. It's not about ability. And we just need to keep at it.

Sounds like Bush about Iraq, doesn't it.


Yup. That very neatly sums up the attitude of the last few years: corporations wanted "deciders". Whether they actually were knowledgeable enough to take those decisions was less important. In fact, knowledge was, if anything, a drawback: quick decisions were paramount, and taking your time to collect and process all necessary information takes time. Due diligence was for suckers.
posted by Skeptic at 7:42 AM on March 25, 2009


This is just a cousin of Godwin's Law, insofar as any reasonable economic discussion cannot continue once someone begins arbitrarily determining how much another's work is worth.

This is so true. Just the other day I was bitching about AIGFP's former CEO, Joe Cassano, getting a $1 million/month consulting salary from AIG in 2008. How could the guy that was at the epicenter of AIG's meltdown deserve $1 million a month? Here's a guy who used to work at Michael Milken's firm back in the junk bond days (right around the time Drexler developed CDOs) and he was able to bring down the world's largest insurance company with gambling. Somehow Cassano thought writing $2.7 trillion in unhedged insurance on less than $100 billion in assets was a great idea. And he made around $300 million dollars doing it and possibly committed fraud.

Now I realize it was just like comparing someone to a Nazi.
posted by ryoshu at 7:44 AM on March 25, 2009 [5 favorites]


Hi Jake. That check for $750k? You wouldn't have gotten it at all if AIG collapsed last year. You *did* get it because me and lots of my friends, who have never seen a bonus of any kind (I got a $20 turkey coupon one Thanksgiving, does that count?) let alone a seven figure annual income, bailed the firm out. I'm sympathetic to your plumber/electrician scenario, but it's like you want the firefighter to pay for the nifty bath fittings you installed.
posted by CunningLinguist at 7:45 AM on March 25, 2009 [2 favorites]


The only thing a borrower needed to buy a loan from these crooks was a pulse.

And I'm not even sure of that. When the forensic teams start weeding out all the fraudulent mortgages, I bet that quite a few of them were granted to deceased and imaginary homeowners...
posted by Skeptic at 7:45 AM on March 25, 2009 [1 favorite]


I say, go right fucking ahead and sit at home. There are plenty of other people willing to have that job.
posted by mark242 at 10:36 AM on March 25


And be paid what? If it's so easy to be an equities trader, open up an etrade account, and show us how its done.

When your company goes under, you get screwed, even if it wasn't your fault. That's how it works for everyone else.

When your company goes under, it can't bring down the entire US economy along with it. That's why he is different. AIG has no assets even approaching the amount of money they owe.
posted by Pastabagel at 7:45 AM on March 25, 2009


And be paid what? If it's so easy to be an equities trader, open up an etrade account, and show us how its done.

If only there was some way to trade equities with large amounts of other peoples money so that I wouldn't sunk by transaction costs, leveraged with large credit lines so that I could get a big return off of small fluctuations in prices. Also please personally insure me against any risk should my heavily leveraged deals end up not panning out. Thanks I'd be happy to.
posted by I Foody at 7:54 AM on March 25, 2009 [8 favorites]


I don't feel sorry for him, but at the same time I feel that he got it pretty rough. However I can't respect him or anyone else in the financial sector who cashed out and quit leaving the whole industry in such a fucking mess. He needs to suck it up and get back to work.
posted by Allan Gordon at 7:56 AM on March 25, 2009


Joe Breese: Yikes! Geithner's cash express is the Bush Plan verbatim and my working definition of insanity... doing the same thing and expecting different results.

Skeptic: I'm afraid you must be right. What was I thinking? Why limit loans to the living? Who, after all, is more stable than the dead?
posted by chance at 7:59 AM on March 25, 2009


Pastabagel: You're displaying an unusual unwillingness to look at this issue, as well as a rather forceful defense of not only this person, not only this firm, but the entire financial system as a whole.

Do you happen to work in the financial industry?

You've always struck me as a passionate, but usually reasonable guy. Do you play golf with these guys or what?

I don't want to burn their houses down, but come on, the financial services guys have blood all over their hands. They at least need a good spanking. And the only way to spank them is to take away some of their money.
posted by Ynoxas at 8:00 AM on March 25, 2009 [4 favorites]


> Wait a second, do you think the problem in the economy is that the money was somehow stolen?

...no. I think it was gambled and lost, but the bookies did quite well. I also think that if the internal workings of these companies could go under the microscope, a) you would know better what happened, and b) you'd probably find a select group that was more responsible than others.

'Shit happens' is most often the retreating cry of people trying to evade scrutiny for the shit that just happened. Moreover, shit is still happening, especially the banks refusing to let daylight in on how much crap paper they hold and what it's truly worth.

I think it's very healthy to make CEOs and chief executives very uncomfortable right now, til they get onside.
posted by Artful Codger at 8:03 AM on March 25, 2009 [2 favorites]


None of us have access to those contracts, but I would be shocked if those contracts did not have some sort of clause that can be called during times of emergency or financial destabilization.

The AIG "Bonus" contract is online. Not only there is practically no reason for them to be denied the "bonus", they were supposed to be payed the same amount as the year before regardless of results. Also, they capped the losses arising from the CDO portfolio.

In fact, the introduction to the contract basically acknowledges that there might be severe losses on the way (this was 2007) and so this contract was to make sure they'd get payed in any case:

Objective #2: "to recognize the uncertainty that the unrealized market-valuation losses in AIG-FP's super-senior credit derivative and originally-rated AAA cash CDO portfolios have created for AIG-FP's employees and consultants."
posted by lucia__is__dada at 8:05 AM on March 25, 2009 [2 favorites]


He was winning at the game of Capitalism, and everything was fine. When he found out he was playing for a team that cheated, he got upset because he was on the same team as the cheaters, and folks thought he was a cheat.

That is teamwork.
posted by QIbHom at 8:05 AM on March 25, 2009 [1 favorite]


Pastabagel: IIn other words, the government bailed out the financial industry to cover your ass, not the bankers'.

What a pile of bullshit. Our welfare is the last thing on their minds. You just don't print your way to prosperity, and anyone with even vague financial literacy knows that.

You print your way to bailing out your fucking rich friends, while the poor people, the ones who can't defend themselves against currency devaluation, starve.
posted by Malor at 8:06 AM on March 25, 2009 [3 favorites]


Do you happen to work in the financial industry?

"Are you now, or have you ever been... ?"
posted by Slothrup at 8:07 AM on March 25, 2009


Sorry for the typo there: Pastabagel didn't type "IIn", that was me. Apologies.
posted by Malor at 8:08 AM on March 25, 2009


@ Pasta - Who paid how much into the tax pool isn't really the issue that offended me. The issue is that some of the few dollars we have are going to people that don't need them in the same way that others need them. This is poor use of limited public resources in a time of scarcity. The guy even admits several times he doesn't need the money.

So the problem with taking it back is...?

Be careful about claiming to speak on the taxpayers behalf, because the real taxpayers might decide to start speaking on their own behalf.
What?
posted by anti social order at 8:08 AM on March 25, 2009


chance I'm afraid you must be right. What was I thinking? Why limit loans to the living? Who, after all, is more stable than the dead?

Also, it's always a growing market. Guaranteed till Kingdom come.
posted by Skeptic at 8:11 AM on March 25, 2009


Two contradictory pieces of information make me think this guy is a lout:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

And from Anniecat's link:
Jake DeSantis’s Specialties:
Commodities. Energy. Derivatives.


Here is a guy from M.I.T. that works chiefly in finance, has a strong background in financial derivatives and he knew nothing about any improprieties by AIG in regards to his specialty.

I'll strike that... I've known a bunch of brains from M.I.T. there are about 5% who are absolutely brilliant but absolutely unable to look to the left and the right of what they are doing... clearly that is the quality you want in an A.I.G. executive...
posted by Nanukthedog at 8:12 AM on March 25, 2009


This guy still doesn’t get it. I’ve been an employee of a company that went bankrupt. Twice. Each time, the group I worked for had nothing to do with the reasons the company went under. Each time, the company owed me significant back pay - in a way, each time the bankrupt company did exactly what Jake DeSantis is whining about - they didn’t fulfill their contractual obligations to me.

Dear Jake, welcome to life. That’s the way a company works when they’re in bankruptcy proceedings. And because of some unfathomable reasoning I still can’t follow, AIG isn’t called bankrupt. Yet. Because they are “too big to fail” whatever the fuck that means. Employees lose money when their employer folds, even when the folding is as slow as it is with AIG. It sucks. Get over it, you’re not entitled the way you think you are.
posted by DreamerFi at 8:12 AM on March 25, 2009 [9 favorites]


Each time the bankrupt company did exactly what Jake DeSantis is whining about - they didn’t fulfill their contractual obligations to me.

Did they expect you to continue to work there afterwards?

You the taxpayers own AIG. How many employees do you think you'll be able to hire if you're not going to pay them? And if your answer is that you'd let AIG fail, then your real beef is with the politicians who decided to save it, and not with the people who were repeatedly told that their compensation was safe, only to lose it to an angry mob.
posted by Slothrup at 8:17 AM on March 25, 2009


DreamerFi, if the US government stopped your company from going bankrupt, would you want the money that was owed to you?
posted by chunking express at 8:18 AM on March 25, 2009


And that video I linked up thread is short and really worth watching. People don't know what the fuck to do.
posted by chunking express at 8:19 AM on March 25, 2009


Unlike voters, not all taxpayers are equal. Be careful about claiming to speak on the taxpayers behalf, because the real taxpayers might decide to start speaking on their own behalf.

With all due respect, this absolutely reeks of entitlement and you're throwing numbers around to make it look like the super-wealthy are overburdened by our marginal tax structure. The rich give up a third of their income to federal taxes. Everybody else gives up between a quarter and a third. If they are responsible for 60% of the tax base, it is because the top 5% of wage earners are obscenely wealthy and not because they are overtaxed.
posted by JohnFredra at 8:20 AM on March 25, 2009 [17 favorites]


I missed this:

Pastabagel: Can we stop saying things like "fiction". In that vein, an iPod that costs $100 to make but is sold for $400 is fiction, because the user can't possibly extract an additional $300 of utility out of the device than he could compared to another $100 device. The product (all products) is purchased on the basis of an emotional (i.e. irrational) decision.

No, we can't stop saying things like fiction, because that's what most of the banks are currently running on. The derivatives they used as 'assets' to lend against aren't actually assets, and they have no fucking money. This whole thing has been building for about twenty years, and it got very bad over the last twelve or so. Our economy turned into a game of swapping ever-larger IOUs for houses, and with the Fed's full backing, those derivatives ended up functioning more or less like money. The whole complex was bullshit; it was fiction. Wall Street is built on a house of cards, based on the smoke and mirrors of fiscal manipulation, rather than wealth generation.

iPods are real. They're consumptive devices, so a $400 iPod purchase is probably not that great for the economy; if the consumer is going into debt to buy it, it's probably a net negative. Debt for consumption items is usually a bad idea. If they were spending $400 on power tools to work with, even if they borrowed to buy them, chances are pretty good that it's a net positive for the economy. (at least, averaged over many such transactions.)

This has nothing to do with the fiction I'm talking about, swapping debt that's no good to pull wealth out of the economy, leaving the last person holding the bag to go broke.

Trading is important because it creates information. If GE stock drops 5% on a day when everything else does well, that tells you that there is something wrong with GE.

Sometimes it does. Nearly always, it's noise. And I'd argue that all the 'information created' over the last ten or fifteen years, that of constantly-spiraling prices for businesses that weren't actually getting that much stronger, was DISinformation.

Without this "fiction" we'd be living in caves.

LOL, that's just completely stupid. We had a very solid economy that wasn't based on very much fiction as late as 1970. You might remember 1970. We had cars then, with actual rubber tires. And roads, and checking accounts, and even central heating and air. We didn't have this newfangled Internet thing, and wore onions on our belts, but almost anyone reading this could go back to the pre-economic-fiction era with little pain.

Wall Street was a lot smaller then. There was a reason for that; the economy was focused on making things, not shuffling IOUs around.
posted by Malor at 8:21 AM on March 25, 2009 [25 favorites]


The derivatives they used as 'assets' to lend against aren't actually assets, and they have no fucking money.

"You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets."
posted by Slothrup at 8:25 AM on March 25, 2009 [5 favorites]


"I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G."

Welcome to the club, chump.
I was in no way involved in the bad decisions that drove 2 dot coms that I worked for into the ground. Nor did I approve of the expansion into a crappy neighborhood by that restaurant I worked for years ago.
But those things happened and I was out of a job, and off to find new work and life lessons.
You aren't special. Hell, you aren't even close to being poor.
So have a nice big mug of shut the fuck up and do what the rest of us do - make the best of a shitty situation and try to enjoy the simple things in life. If you can pull down a nice pay check again someday, buy yourself something nice.
But please have some self respect and quit whining. Or just go kill yourself.
posted by 2sheets at 8:27 AM on March 25, 2009 [7 favorites]


I feel sorry for the guy. Genuinely. It doesn't matter especially that he is paid a ton of cash. He has a contract, and a system for how he earns his money and that deal has been broken.

But I'm not disgusted with the public brouhaha over this. In lots of companies, belts are being tightened, wages frozen, workers laid off, discretionary bonuses going unpaid.

The difference in those companies is that employees there typically haven't been able to define their financial worth to the company as transparently, and negotiate payment on the back of it. It doesn't make them any less victims. For the good ones, it actually makes them more of a victim, because their wages have been depressed by subsidising less profitable colleagues or areas of the business.

That's life. I'll grant the guy that it's unfair, but he displays a remarkable lack of awareness of how lucky he has been to have worked in an organisation where good luck or skill was actually paid to the people that earn it.

He also doesn't seem to take on board that... but for the charity of the taxpayer (and I accept this guy is one of those taxpayers) his bonus wouldn't even be up for debate. He'd be turfed onto the street the same as every other person whose company failed to survive.
posted by MuffinMan at 8:28 AM on March 25, 2009 [2 favorites]


@ chunking - there is a difference between someone who needs every paycheck to feed their family or keep their mortgage and someone who can promise roughly $700k to charity due to bad publicity.
posted by anti social order at 8:28 AM on March 25, 2009


What sort of bonus would a bankrupt AIG be paying out?
posted by Benjy at 8:29 AM on March 25, 2009


Wait a second, do you think the problem in the economy is that the money was somehow stolen? The money disappeared by virtue of accounting, not fraud. The problem is that the government chose not to regulate an industry it was fully aware of, companies wrote contracts that were levered to underlying assets under the assumption that the underlying assests would not all become worthless at the same time, and then a substantial number of underlying assets became worthless all at once. Shit happens.

Bullshit. When AIG wrote CDSs to "insure" a mortgage backed security that security would automatically take the rating of the insurer, in AIG's case AAA. This is despite the fact that the underlying mortgages were known to be junk by AIG and that CDSs were in no way insurance since AIG never had the collateral to pay up in case of default. So when the investment bank went to sell these securities to investors like pension funds, they were mislead to believe that they were as safe as a normal AAA bond, while AIG and the issuer of the security knew this was not the case.

This might not be fraud in the strict legal definition, but it is clearly fraud in the broader sense. If you think this happened merely by "virtue of accounting" there is something wrong with your head, (or maybe you are a securities lawyer).
posted by afu at 8:29 AM on March 25, 2009 [9 favorites]


And if your answer is that you'd let AIG fail, then your real beef is with the politicians who decided to save it, and not with the people who were repeatedly told that their compensation was safe, only to lose it to an angry mob.

Have you seen the terms of the contract that make his compensation safe?

It's a contract and apparently it's unbreakable. I'm all for honouring contracts. But I don't think the angry mob will be appeased by knowing that he signed a contract that said "I know you're concerned that the mortgage derivatives will make you lose money but, don't worry, we'll give you a million dollars if you promise not to quit. Really. That's all you need to do."

That said, the angry mob has better reasons to be after the guy who represented AIG in this contract. The employees were doing the natural greedy thing to do. I don't know that many people who would refuse easy money like that.
posted by lucia__is__dada at 8:30 AM on March 25, 2009


And that was to be in response to the "would you like to get paid" thing. Needs vs wants etc.


Clearly if I want to contribute I need to learn more than two finger typing.
posted by anti social order at 8:32 AM on March 25, 2009


Dear Financial Executives: None of you make more than $250K in salary despite bringing home mult-millions per year. The balance is tucked away neatly in your "bonus" so you can avoid paying 40% tax rates on it. Cry me a fucking river if mere mortals don't seem to understand your very special definition of "bonus" and are a tad upset that you're still getting them.

Maybe we'd be more sympathetic if you'd just man the fuck up and pay your taxes. But probably not.

--mere mortals
posted by butterstick at 8:35 AM on March 25, 2009 [8 favorites]


It's a contract and apparently it's unbreakable.

Apparently, no contract is unbreakable in the face of public outrage. But the honest thing to have done at the time of the first bailout would have been to renegotiate all of these contracts and give the employees an opportunity to seek work elsewhere if they didn't like the new terms.
posted by Slothrup at 8:36 AM on March 25, 2009 [1 favorite]


Pastabagel--

I would like to see a citation for that obscenely low 3% number. From what I've read, most American's already pay ~40% of their income in taxes when you include the whole shebang. (Granted, article is from 2007 so recent legislation has changed this slightly...though not by much). And yes, that includes the low earners scraping by on $20,000 a year.

What becomes obscene is when when CEOs and other executives are compensated at a rate that bankrupts* their companies' pension plans (if they even have one) and ability to pay fair wages to the lowest earners (if they aren't already laying people off). This is especially obscene when the executive compensation remains unchanged, even as their companies' are failing.

The fact is, if the minimum wage had gone up at the same rate as executive pay since 1980 (from a 42-1 ratio to a 400-1 ratio), then the minimum wage would be $22 an hour. And that article is also from 2007, though in the last two years there have been no drastic cuts in executive pay and the gross greed among executives has remained the same.

I understand the whole "keep the bank going" but the fact is that people's outrage comes from a very real pain. This is about fairness, in the smallest degree. These AIG guys need to bear a little of the punishment for this mess, because THE REST OF US ALREADY ARE. A lot of regular folks are already being punished by all these banks' mistakes and speculation through the loss of their own jobs, and asking those most directly responsible for running their business into the ground to take a cut in their expected pay is not too much to ask (especially considering how inflated that pay was to begin with). Every single person who has been laid off has essentially taken a "cut in their pay" to the nth degree because of the fallout from these companies failing. Asking the people in those companies, who were responsible for those companies, to bear some of the brunt of their poor business dealings is not, at all, ridiculous.

*On Pilgrim's Pride. Note: "On November 28, 2008 Pilgrim's Pride decided to get rid of 335 employees to make way for a new CEO and his salary of $1.5 million per year plus a $3 million sign on bonus. On December 1, 2008, Pilgrim's Pride filed for Chapter 11 bankruptcy protection."
posted by whimsicalnymph at 8:37 AM on March 25, 2009 [9 favorites]


The balance is tucked away neatly in your "bonus" so you can avoid paying 40% tax rates on it.

I don't know about you, but I've always had my bonuses taxed the same way as salary. I assume there's *some* tax advantage to structuring compensation that way, but other than deferring the estimated tax payments until the end of the year, I don't know what that advantage would be.
posted by Slothrup at 8:39 AM on March 25, 2009 [1 favorite]


DreamerFi, if the US government stopped your company from going bankrupt, would you want the money that was owed to you?

Want? Yes. Expect? No.
posted by DreamerFi at 8:40 AM on March 25, 2009 [1 favorite]


vice presidents are a dime a dozen in the finance industry - an executive vice president isn't much better, so yes, it is indeed conceivable he didn't have as much access to information about his division as you'd think.

There are two kinds of bonus I think - the kind someone gets for actually doing something good, and the kind that are built into employment contracts as a way of paying someone more than HR says you are supposed to. His bonus sounds like the latter.
posted by awfurby at 8:41 AM on March 25, 2009


I was asked to work for an annual salary of $1

This payment scheme, this is the problem. Why, when AIG is collapsing all around you, would a company say "we'll pay you no salary but a big fat bonus sometime in the future"? Why would an employee agree to that? I guess it made good theater when it was done ("we're so committed, we're not paying ourselves!") but obviously has backfired entirely when it came due.

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.

This is a false analogy. He's not some contract blue collar working man swinging a hammer, he's one of the executives running the company. Damn right he should suffer the consequences if one of his colleagues running the company burns the company down, incidentally catching the entire neighbourhood on fire. The thing about getting paid millions of dollars a year is it gives you higher responsibility to the whole company.

I get the betrayal he feels, and I'm sorry he feels a year later he's wasted his time. Sort of ironic, sounds like he made a bad loan to AIG.
posted by Nelson at 8:46 AM on March 25, 2009 [2 favorites]


That's how it works for everyone else. If you're unlucky enough to work for a company that goes belly up, a lot of times you'll stop getting paychecks for a few weeks while the leaders of the company scramble to get a last minute loan to keep the lights on.

Except when you're the guy who built one of the valuable businesses the creditors are trying to sell to recover some of their money. If you're that guy, you'll get paid retention money and probably a success bonus.

Have any of the people here dealt with a company whose managers have abandoned it? I'm dealing with a company now whose founder/CEO is dying of cancer and has essentially abandoned the business. It's a disaster. No one knows where anything is or how certain things are done. All the employees can do their little piece of the business, but there is no one to orchestrate all those individual pieces into a functioning business. This company was solidly profitable to start with, but now the creditors will be lucky to get 50 cents on the dollar. In theory, a company shouldn't be so dependent on a few key people--but, guess what, reality ain't usually like that.

Typical force majeure clauses specify acts of governmental nationalization as a valid reason to invoke the clause. If you don't think that counts here, well, I can't help you.

WTF? Whether or not AIG or the government has a legal justification to break the contract is irrelevant. They asked this person to stay and help wind down a business in return for a bonus payment. He's done the work asked of him and now AIG and the government are threatening to clawback his money. Just because that may be legal doesn't mean it's right or fair. If I were in this guy's shoes, I'd take a hike too. He doesn't want sympathy, he just doesn't want to be declared guilty by the masses who don't know his side of the story.
posted by mullacc at 8:46 AM on March 25, 2009


Pastabagel:
An iPod sells for $75-$400. A high end iPod may consist of $100 worth of off the shelf components, it may consist of more - We'll run with your figure. A cheap ipod probably consists of $30 worth of components. Additional cost of a given consumer product includes development costs of this product as well as maintenance costs which this company will incur from the public: technical support, warranty service and securing replacement parts for the actual expected lifetime of a product. Some products are designed as throw-away. Some are designed as a long term support. Customers will have an expectation about both life expectancy, reliability and support based on the price point of a given product. A company's favorability (consumer - not financial) status generally trends with how well their products track, regardless of price point. Short and sweet: there is easily a 200% increase over material cost in actual cost of a product. The margin between the total cost ($300) and the actual cost ($400) is what the company bankrolls into further development, profit sheets, and crazy spending. If a product cannot be produced that maintains a reasonable production and support cost, then no company will release that product. There is little fiction in electronics pricing.

What does this explination have to do with AIG? Nothing; however, if a company is failing to minimize its support cost (exec bonuses in this case), then their product will not survive to market... which incidenally has been the case.
posted by Nanukthedog at 8:51 AM on March 25, 2009 [1 favorite]


Did they expect you to continue to work there afterwards?

I think a lot of you are missing out on this fact. When you work for a company that goes BANKRUPT you DO NOT STAY THERE....you go up and look for another job.

However if the company tells you

"Banker XYZ...we want you to stay here regardless of what happens...here is a contract that attests to that"

Then you keep on working because of that agreement you had with the company...then this guy is a 100% right.

Now all of you are mad because he makes significantly more than you do, that is not his fault or yours, that is just how the system works. And just because you lost your job, your company went under and things are not fair for YOU doesnt mean that things need to be unfair for everyone (and yes the concept of fairness does apply to the very rich)...

Do you really think those guys were betting with the knowledge that their company was going to go under in a couple of years.....I mean I am not saying they did a great job but it is their job to make investments that for the most part DO NOT LOSE MONEY...so as smart as they were they really thought that the odds of this happening were low enough for them to make their bet.....

If the company would have gone bankrupt and he didnt get his money FINE but it did NOT! and it was not his choice for that to happen either (nor yours I assume)

BY the way I dont work in finance, nor I am an investment banker....i am getting no BONUS whatsoever....but I understand the implications that if I ever aspire to work for a place that guarantees me something I'd rather get it and if I am going to lose it, it better not be to an angry mob that wants me to go down/understand their levels of misery or hardships they experience in their life...
posted by The1andonly at 8:53 AM on March 25, 2009 [2 favorites]


But if it's so easy for him to get a new job, what does he care about AIG?

It seems as if the intent of his letter was to do what Edward Liddy should have: tried to protect those bonused employees were uninvolved with those divisions of AIG that caused its collapse. Those bonuses were contractually guaranteed to them because they were asked to stay in their positions and help the company restructure and recover.

As DeSantis points out, two states' AG's (NY and CT) threatened to publicly release the names of people who received bonuses, to deliberately incite a massive, populist witchhunt.

As an aside... as far as I'm concerned, Cuomo and Blumenthal should be removed from office immediately. How can an Attorney General possibly retain his or her post after demanding that a group of potentially innocent people be condemned in a court of public opinion, rather than given due process in a court of law?

I must have missed the part of their oaths of office where they both said, "except in cases where side-stepping due process will make me look good on television."
posted by zarq at 8:56 AM on March 25, 2009 [2 favorites]


Seems to my unschooled eye, Capitalism has devolved to its inevitable lowest common denominator, a bubble economy being, at heart, a ponzi scheme requiring eternal, and therefore, unsustainable expansion. Ask the environment. No surprise. And no surprise they want to jam another nickle in the merry-go-round and go again.
posted by chance at 8:57 AM on March 25, 2009


"You mean special treatment like receiving that which you were contractually promised?"

You mean like retirement pay that retired auto workers were forced to renegotiate, which had long been settled?
posted by krinklyfig at 9:00 AM on March 25, 2009 [12 favorites]


Things should be shitty for everyone!

It's like people suddenly learned capitalism is mostly horse shit.
posted by chunking express at 9:03 AM on March 25, 2009 [1 favorite]


They asked this person to stay and help wind down a business in return for a bonus payment.

That work started 12 months ago, long before this problem came to a head.

He's done the work asked of him and now AIG and the government are threatening to clawback his money. Just because that may be legal doesn't mean it's right or fair.

At the same time, it is neither "right" nor "fair" for the government to keep AIG out of Chapter 11, where this is normally handled, and for AIG to presume that business can continue as usual when someone else is paying for it.

These kinds of situations are precisely why force majeure clauses exist. If I employ you under contract to make widgets for me, and a meteor hits the widget factory, I can escape our contract and not be additionally burdened by having to pay your salary while I'm digging my factory out from under the rubble. You KNEW this when you signed the contract. This is the risk you take when you sign an employment contract.

Now replace "widget factory" with "financial market" and "meteor" with "enormous global fuck-up," and you see where this comes into play.
posted by Cool Papa Bell at 9:04 AM on March 25, 2009 [2 favorites]


He's not some contract blue collar working man swinging a hammer, he's one of the executives running the company. Damn right he should suffer the consequences if one of his colleagues running the company burns the company down, incidentally catching the entire neighbourhood on fire. The thing about getting paid millions of dollars a year is it gives you higher responsibility to the whole company


Ok so this guy got 1 million? You know how much Joseph Casanno (the guy who supposedly took the decissions in the London Office of AIG to swap CDS stocks) made?

About $250 million.....

Thats about 249 more million than the guy who wrote the letter....this guy is not his "colleague", they dont go down to starbucks during their breaks and get caramel machiattos, This guy is merely an EMPLOYEE, who was following orders to

a) Make as much money as his can.
b) Do it in legal way.

Once again I dont make nowhere close a million but I hate it that just because a lot of people will never make it, the implications are that people like you assume that those that do belong to different class/level of responsibility

Fairness is a fairness no matter how much you make.......
posted by The1andonly at 9:04 AM on March 25, 2009 [1 favorite]


"Now all of you are mad because he makes significantly more than you do, that is not his fault or yours, that is just how the system works. And just because you lost your job, your company went under and things are not fair for YOU doesnt mean that things need to be unfair for everyone (and yes the concept of fairness does apply to the very rich)..."

Dude, if we weren't bailing them out, they'd not only be getting no bonus, they'd be UNEMPLOYED!

When taxpayers have to throw hundreds of billions of dollars at a company to keep it afloat, it would be nice if there is some shared sacrifice going on on the part of the company which is the recipient.
posted by krinklyfig at 9:04 AM on March 25, 2009 [1 favorite]


"Fairness is a fairness no matter how much you make......."

Fairness would be to allow AIG to tank. Since we're not, we'd all appreciate it if the people getting bailed out would tighten their own belts and stop thinking of their own wallets. We're all hurting, bud, but we need to help each other, and that includes making necessary sacrifices so that your company doesn't keel over. If you want to retain your bonus in bad times, work for yourself, and don't ask for bailouts.
posted by krinklyfig at 9:06 AM on March 25, 2009 [1 favorite]


Dude, if we weren't bailing them out

That is the big "IF"

Unfortunately we "ARE"

I say going forward you draft a new agreement...No more bonuses for anyone under companies that have been bailed out.....

That way whoever wants to jump ship can do so now......instead of being surprised a year later.......and then being crucified for it.
posted by The1andonly at 9:07 AM on March 25, 2009


"Do you really think those guys were betting with the knowledge that their company was going to go under in a couple of years." ~ The1andonly

"Betting" is the operative word here. These "guys" played into their losses suicidally past the point of diminishing returns. Wall Street is a text book example of mass gambling addiction. How do you think, "bailing them out" is going to help?
posted by chance at 9:09 AM on March 25, 2009


God, there's a lot of stupid here.

First off, "bonus." These aren't bonuses in the same way that your boss slips you an extra c-note for Christmas. They're performance-based incentives. Even though the Washington Nationals sucked ass last year, Ryan Zimmerman's still getting performance-based incentives, because his performance was pretty good. More than that, the predominant form of compensation at financial institutions is performance-based. If this was just a salary of $1 million, there's be grousing, but it's the mistaken characterization of this as a "bonus" that leaves people emotional.

Second, the argument that they're bankrupt is specious—we stepped in explicitly to avoid bankrupting AIG because it keeps Credit Default Swaps from coming due, which would require other businesses to post collateral and make illiquid vast sums of cash. In a tight credit market, and under the fairly justified assumption that many other firms couldn't cover their bets, it's best to try to stem the chain reaction. In order to do that, we partially nationalized the company, and all now have a vested interest in its success. Refusing to honor contracts because in an alternate reality things could justify not honoring contracts is absurd.

Third, while Malor's down his yellow brick road again, the fundamental argument for these salaries is sound: If you make me $5 million, I have no problem paying you $1 million. In maximizing the benefit that we, as owners, get from selling off pieces of the company, this guy's salary is worthwhile, and engaging in demagoguery is counter-productive and futile.

You guys may be well-served by checking out Fivethirtyeight.com's continuing coverage of the issue.
posted by klangklangston at 9:11 AM on March 25, 2009 [15 favorites]


"That way whoever wants to jump ship can do so now......instead of being surprised a year later.......and then being crucified for it."

Nobody is getting crucified. Stop with that pathetic talk.

This is the reality. AIG is getting bailed out, or it would die. Since we're in that extraordinary situation, we all have to make due. Sorry to burst your bubble, but if you work for a company which is bankrupt, don't expect to retain your current pay if you make it through. Anything else says to me that these people need to work for themselves, not someone else, because nobody is an island unto themselves at AIG or any other company. And they are more than welcome to do so, and I'll shed big crocodile tears at their predicament, I'm sure.
posted by krinklyfig at 9:12 AM on March 25, 2009


It works out like this... even the Nazi party had a few good, honorable, generals. The fact still remains they were part of the Nazi party. This guy and "screwed over" Execs are still part of the business/group that had a large part is causing this mess. For him to lose his "well earned contractual bonus" (I use the term loosely) is not going to cause me to lose any sleep tonight. This good guy caught in the crossfire is going to retire to his villa in southern France and live the rest of his life well off while us in the real world have to deal with the fact of "how in the world are we going to make next month's rent?" Or my favorite "My 401K is worthless now! How am I going to retire to my 2 story house in the middle of the city?"
posted by Mastercheddaar at 9:12 AM on March 25, 2009


"They're performance-based incentives. Even though the Washington Nationals sucked ass last year, Ryan Zimmerman's still getting performance-based incentives,"

But in most financial services companies which were not profitable, nobody got bonuses, even if they're considered part of their pay, more or less. These guys want to have their cake and eat it, too.
posted by krinklyfig at 9:13 AM on March 25, 2009


In the past years AIG employees are lighting cigars with hundred dollar bills this year the want the money back.

Pastabagel: I'm bent dick broke and my credit is shot now, so what would happen to my ass if AIG and other too big to fail companies did fail?
posted by pianomover at 9:14 AM on March 25, 2009


"Third, while Malor's down his yellow brick road again, the fundamental argument for these salaries is sound: If you make me $5 million, I have no problem paying you $1 million."

So, the question remains, can AIG cut down the money they're asking for if they asked their employees to sacrifice and cut their bonus until they're profitable again, like the rest of us who sacrifice in order to pay for them? Like the UAW auto workers in the GM/F bailout? Why do financial service employees get to keep their large paychecks and union auto workers don't even get to keep their meager middle class benefits?
posted by krinklyfig at 9:15 AM on March 25, 2009 [1 favorite]


Interesting discussion on the topic.

The posts that discuss 'fairness' and whether DeSantis created enough 'value' to warrant his pay are most interesting to me. I really like the word obscene being used to describe executive pay, nothing like hyperbole to start the day.

Here's a little pro-tip to all you beautiful or unique snowflakes:

There is no such thing as 'fairness' in terms of what people get paid. People get paid what the market will bear for their services. That's simply the reality of the world we live in. To expect otherwise is to reside in fantasyland.

You may not like it, but you cannot apply some sort of measuring stick to people's work to draw equivalencies and attempt to balance compensation based on anything else than what the marketplace says it should be. You can nibble around the edges with things like a minimum wage (which helps society in general), but doing more than that in the name of 'fairness' has been tried many times, in some cases by entire countries for decades, always ending in failure as the 'invisible hand' of the market takes control.

Again, you probably hate this truth, but it is the truth.

To me the issue is: Are executives within a company accountable for the actions of others within the company, even if there is no direct responsibility link? It appears that Mr. DeSantis has one view, while others, including the President have another.
posted by Argyle at 9:15 AM on March 25, 2009 [1 favorite]


What he doesn't understand is that the blood-boiling rage that's been aimed at him and his colleagues isn't just about the money and the failure—it's about the vast and bottomless sense of entitlement that well-heeled Wall Streeters can't seem to shake. When he describes the AIG retention contracts as "ethical and useful," and when he compares himself to a "plumber" being "cheated" of his payment because an electrician burned down the house, he seems to be discovering for the first time that life is not fair. Also, he fails to understand that in this case, the humble plumber works for the electrician who burned down our house.

Most people who earn less than $700,000 a year have understood for some time that life is not fair. It's a hard lesson to learn, and it's generally a good idea to speak out in the face injustices large and small. But when the economy is cratering because of the company you work for, and unemployment is heading to double digits and everyone is scared out of their wits, to complain about how hard you work and make a show of being wealthy enough to turn away $742,000 is not the note you want to hit. You are not a plumber, Mr. DeSantis. You are a fabulously wealthy and fortunate man, and you ought to appreciate that and give your money away, if that's what you want to do, without aggrandizing yourself in the process.

posted by Joe Beese at 9:17 AM on March 25, 2009 [2 favorites]


Since we're in that extraordinary situation, we all have to make due.

No we dont.....this is capitalism not freaking socialism......tell me that i am not going to get anything for my work or that I am going to be working for YOU, that way I can go somewhere else and make actual money......

Contracts should not be broken unless the possibility of this happening is written in said contract (which was not)....

I dont agree with the bailout but since we are HERE the best course of action is to outline everything GOING forward instead of reacting to the bad decissions of the past after they've taken course..
posted by The1andonly at 9:17 AM on March 25, 2009


But I don't think the angry mob will be appeased by knowing that he signed a contract that said "I know you're concerned that the mortgage derivatives will make you lose money but, don't worry, we'll give you a million dollars if you promise not to quit. Really. That's all you need to do."

Yeah, that looks more like a hand job than a contract.
posted by ryoshu at 9:18 AM on March 25, 2009 [1 favorite]


"But in most financial services companies which were not profitable, nobody got bonuses, even if they're considered part of their pay, more or less. These guys want to have their cake and eat it, too."

If your performance pay is based on the performance of the overall company, yes. But I'd like to see a cite on the argument that no one got performance pay at financial services companies that were not profitable.

"Oh, I see now. Since AIG performed so well over these past few months..."

See, and this is what I meant by stupid. DeSantis is not all of AIG, and punishing DeSantis for all of AIG is over-broad and unfair.
posted by klangklangston at 9:20 AM on March 25, 2009


Except when you're the guy who built one of the valuable businesses the creditors are trying to sell to recover some of their money. If you're that guy, you'll get paid retention money and probably a success bonus.

My point was exactly that though, the vast majority of people are not in this guy's position. He was promised a huge bonus by a failed company that was given a large bailout from the tax payers. He accepted a $1 salary in addition to the huge bonus as an empty PR gesture. When it came time to get paid the bonus, the tax payers, who were angry about the whole situation in general, were not happy to see people at the failed company getting huge bonuses. His boss tried to tell all of the executives to give back the bonuses to help with damage control. He didn't like that, donated the money to charity, and quit.

Yes, that is a story of a guy who makes massive amounts of money losing out on getting another massive sum of money that he earned. Yes, his work was important in squeezing whatever value was left in his company to limit the damage to the economy. Yes, he ended up working for a significant amount of time without really getting paid for it, and donated a lot of money to people who need it.

But as far as victims of this overall economic disaster go, he walked away without really losing anything, even though he was one of the people closest to the epicenter. My friends and family who have been laid off during this recession have hard a lot harder time, and that's seen as business as usual. He made a big deal about how he didn't have anything to do with the credit default swaps and earned the bonus, but in my opinion a lot of other people hurt by AIG's practices have earned the right to get medical treatment when they are sick, or feed their kids something other than McDonalds, or to be free from any of the various hardships that they are currently enduring because of few of this guy's friends screwed everything up.

To me, this would be like someone complaining that their limousine was destroyed in Hurricane Katrina, even though they still have their mansion to go home to. Yes, that's a shame, but come on, just be happy that you're not one of the people that actually had their lives destroyed in this mess.
posted by burnmp3s at 9:23 AM on March 25, 2009 [3 favorites]


So if the government ends up bailing out GM, it can just ignore those pesky and expensive union contracts, amirite? After all, those workers wouldn't have jobs if not for the public money.

Wasn't one of the conditions of the auto bailout was that the domestic manufacturers brought their costs in line with non-union foreign manufacturers in the south? UAW went back and renegotiated their compensation to hit the targets specified (~$53/hr including benefits).

Just remember kids, its OK to force blue-collar workers to renegotiate their compensation, but thats not OK for white-collar workers.
posted by SirOmega at 9:23 AM on March 25, 2009 [16 favorites]


The bonuses are a small portion of the bailout funds. I am sympathetic to the argument that allowing the bonuses to go untaxed creates a tremendous moral hazard problem, but what I worry about is that there are probably even larger sources of moral hazards and bad incentives in the bailout programs, on the level of billions of dollars, that we don't even know about. Let's not miss the forest for the trees here.

That being said, I'm not really shedding many tears for the bonus tax, although I wouldn't shed many tears if the Senate failed to enact it either. The real problem is the disproportionate share of political power that the financial sector has. I voted for Obama in the last election; I most certainly did not vote for AIG. I did not bust my ass to get Obama elected so that AIG and the rest of the financial sector could threaten him, "Nice economy you have there. It'd be a shame if anything happens to it." While taxing bonuses is great for getting the anger out, we really should focus less on attacking the financial sector's money and more on attacking its political power. If there's even the slightest whiff of fraud involved, we should start seeing mass arrests of financial executives. A few perp walks on the evening news will stop Wall Street from swinging their dicks around. The power of prosecution is the one power the government has that Wall Street does not. If the Obama adminstration wants to resolve its standoff with Wall Street, it should start using that power.
posted by jonp72 at 9:23 AM on March 25, 2009 [1 favorite]


"No we dont.....this is capitalism not freaking socialism......"

Fine. Then let's let AIG die and don't bitch at me when they come asking for money and we don't give it to them.
posted by krinklyfig at 9:25 AM on March 25, 2009 [8 favorites]


"Contracts should not be broken unless the possibility of this happening is written in said contract (which was not)...."

Contracts are broken all the time, particularly in bankruptcy. That's where AIG would be now if not for the saving grace of the people they now thumb their noses at. We should put the company in receivership, fire all the management and restructure it.
posted by krinklyfig at 9:27 AM on March 25, 2009 [2 favorites]


"So, the question remains, can AIG cut down the money they're asking for if they asked their employees to sacrifice and cut their bonus until they're profitable again, like the rest of us who sacrifice in order to pay for them? Like the UAW auto workers in the GM/F bailout? Why do financial service employees get to keep their large paychecks and union auto workers don't even get to keep their meager middle class benefits?"

To your first question, maybe, but it may end up costing us more in the long run as some of those folks will leave and we'll have to pay for new folks who don't necessarily know what they're doing, and who may not be able to wind down these financial units to the same benefit of the tax payer. And the amount that they're being paid, relative to the size of the bailout, is minuscule, so you're arguing for something tiny and symbolic at the risk of a worse real outcome.

As for the unions, well, I was against many of the conditions that folks tried to put on their bailout money, but the UAW volunteered those concessions in order to keep the companies running. Whether it will work remains to be seen (and the sooner we can get health care, the less the UAW concessions will be necessary).
posted by klangklangston at 9:27 AM on March 25, 2009 [1 favorite]


"f your performance pay is based on the performance of the overall company, yes. But I'd like to see a cite on the argument that no one got performance pay at financial services companies that were not profitable. "

That's what a lot of financial services companies are saying in response to this mess with AIG. I don't have time to look it up, but you're more than welcome to do the research.
posted by krinklyfig at 9:29 AM on March 25, 2009


UAW went back and renegotiated their compensation to hit the targets specified

The key word there is *renegotiated*. This guy was never given the opportunity.

What this really comes down to is that people want someone to blame for the current crisis, and that these AIG execs make a good target.
posted by Slothrup at 9:31 AM on March 25, 2009


jonp72: " I'm not really shedding many tears for the bonus tax, although I wouldn't shed many tears if the Senate failed to enact it either."

Failure to enact well under way.

They know we can't keep anything in our heads longer than a week or two.
posted by Joe Beese at 9:31 AM on March 25, 2009


"Contracts are broken all the time, particularly in bankruptcy. That's where AIG would be now if not for the saving grace of the people they now thumb their noses at. We should put the company in receivership, fire all the management and restructure it."

Again, since you don't seem to be getting this: AIG going into default or bankruptcy would make everything worse for everyone, so it's not a solution, it's bullshit emotional bitterness blinding you to constructive action. It's revenge thinking, and it's stupid.
posted by klangklangston at 9:31 AM on March 25, 2009 [1 favorite]


"That's what a lot of financial services companies are saying in response to this mess with AIG. I don't have time to look it up, but you're more than welcome to do the research."

Yeah, I'll get right on supporting your claims. I assume while I do that you'll be out grabbing me a cruller.
posted by klangklangston at 9:32 AM on March 25, 2009 [1 favorite]


These kinds of situations are precisely why force majeure clauses exist. If I employ you under contract to make widgets for me, and a meteor hits the widget factory, I can escape our contract and not be additionally burdened by having to pay your salary while I'm digging my factory out from under the rubble.

My whole point was that it's irrelevant that the contract could be legally set aside. Sure, I agree, it's likely AIG can do that. But that doesn't prove to me that they ought to do it. If, to use your example, you need me to help you dig that factory out from under the rubble, it probably makes sense for you to honor my contract. And if you told me you were going to honor that contract (even though you didn't have to) if I helped you dig, then you have an ethical duty to follow through on that independent of what legal options you may have.

You KNEW this when you signed the contract. This is the risk you take when you sign an employment contract.

Also, I know when I buy a stock that there's a risk that management could be greedy self-serving idiots. Even if I couldn't prove that they behaved illegally, I would still be justified in my moral outrage.
posted by mullacc at 9:34 AM on March 25, 2009


"but it may end up costing us more in the long run as some of those folks will leave and we'll have to pay for new folks who don't necessarily know what they're doing, and who may not be able to wind down these financial units to the same benefit of the tax payer. And the amount that they're being paid, relative to the size of the bailout, is minuscule, so you're arguing for something tiny and symbolic at the risk of a worse real outcome."

No. The problem is that they want to be compensated regardless of the overall health of the company. Nobody else in a similar situation gets the sort of special treatment they're asking for. I don't buy the argument that they'll lose their talent and won't be able to survive. These guys make far more now than they did 20 or 30 years ago. There was no such lavish compensation for these services. A few guys made a lot, but now everyone expects to make millions doing this, regardless whether that may even be realistic moving forward. AIG will not be the same company when it emerges. Neither will any of the financial services companies. There is no more 30-1 leverage on phantom valuations.

I say let them go and make their way. I'll be interested in hearing their stories later on. But for now, cry me a river.
posted by krinklyfig at 9:34 AM on March 25, 2009


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.

The UAW could argue the same thing; where's the chorus of sympathy for them?
posted by Civil_Disobedient at 9:34 AM on March 25, 2009 [2 favorites]


DeSantis is not all of AIG, and punishing DeSantis for all of AIG is over-broad and unfair.

Just like I wasn't the company I worked for when it went bankrupt, and punishing me for all of the company was indeed over-broad and unfair.

But it happened anyway.
posted by DreamerFi at 9:36 AM on March 25, 2009 [2 favorites]


Ok so this guy got 1 million? You know how much Joseph Casanno (the guy who supposedly took the decissions in the London Office of AIG to swap CDS stocks) made? About $250 million.....

Yes, it's terribly unfair. What's happened is Jake DeSantis, our honourable letter writer, turns out to be a sucker. Can't even keep his lousy million bucks. The guys who fled the CDS office with hundreds of millions of dollars turn out to have been terribly clever. It's a hideous inequity.
posted by Nelson at 9:37 AM on March 25, 2009


"Again, since you don't seem to be getting this: AIG going into default or bankruptcy would make everything worse for everyone, so it's not a solution, it's bullshit emotional bitterness blinding you to constructive action. It's revenge thinking, and it's stupid."

I get it, bud.

If we did nothing, the people whining now would be getting nothing, and they'd be out of work. Since we have to spend money of our own to bail these guys out by selling treasuries to China, which we will pay back with interest, it behooves us to treat this as a financial crisis, not business as usual. They need to break off their trading division, if they're so concerned.
posted by krinklyfig at 9:38 AM on March 25, 2009


Just like I wasn't the company I worked for when it went bankrupt, and punishing me for all of the company was indeed over-broad and unfair.But it happened anyway.


Good so cause it happened to you now everybody must feel the wrath of the economy...or they should not complain at all if it happens to them.

Misery does love company.
posted by The1andonly at 9:42 AM on March 25, 2009


"See, and this is what I meant by stupid. DeSantis is not all of AIG, and punishing DeSantis for all of AIG is over-broad and unfair."

Why isn't he working for himself, then?
posted by krinklyfig at 9:45 AM on March 25, 2009


"Good so cause it happened to you now everybody must feel the wrath of the economy...or they should not complain at all if it happens to them."

If we're bailing out your company, expect things to change for you. If we're spending our taxpayer dollars and see people getting excessive pay, expect taxpayers to be pissed off. Expect to explain it or cut it. Otherwise, don't ask for our money!
posted by krinklyfig at 9:46 AM on March 25, 2009 [1 favorite]


The guys who fled the CDS office with hundreds of millions of dollars turn out to have been terribly clever.

If it's any bonus (heh) Cassano is getting a bit of attention from investigators.
posted by ryoshu at 9:50 AM on March 25, 2009


WTF. All of you people arguing that he wouldn't be getting the bonus if AIG had been allowed to go bankrupt -- he wouldn't have been working for a $1 salary for the last 6 months either.
posted by Perplexity at 9:51 AM on March 25, 2009 [3 favorites]


Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored....If this is actually true, they must be the only people in the country who are turning down job offers. But if it's so easy for him to get a new job, what does he care about AIG?

Brings to mind Rep. Barney Frank's comments regarding the Bailout Bonus Brouhaha: Fannie Mae Edition
"Another bonus battle flared up today as a key lawmaker and government-controlled mortgage giant, Fannie Mae, crossed swords over the controversial money awards.

Fannie Mae's chief executive sent employees an e-mail message defending the company's bonus program while Representative Barney Frank, Democrat of Massachusetts, countered with a demand that such bonuses be completely scrapped.

...Herbert Allison -- who took over at Fannie Mae last fall and works without a salary -- proclaimed his view in an e-mail to employees. Fannie's spokesman, Brian Faith, did not return calls for comment.

'I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis,' he wrote employees.

Noting that Fannie is charged with preventing housing foreclosures, he said the bonuses were needed to 'ensure we maintain the skills and experience we need to help keep the mortgage market operating.'

Pshaw -- in a word -- said Frank, who chairs the House Financial Services Committee. He wrote Fannie's regulator, the Federal Housing Finance Agency, urging it to rescind the retention bonus programs, bar future bonuses, and recover any bonuses already paid.

'I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea,' he wrote in a letter released today.

Plus -- given the troubled economy and job market -- 'it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave,' he said."
posted by ericb at 9:54 AM on March 25, 2009 [2 favorites]


"he wouldn't have been working for a $1 salary for the last 6 months either."

He wasn't. That's the whole point.
posted by krinklyfig at 9:55 AM on March 25, 2009


"He wasn't. That's the whole point."

What do you mean? Looked back at your last several comments and can't figure out what you're trying to say.
posted by Perplexity at 9:58 AM on March 25, 2009


He wasn't getting paid $1. He was expecting far more. The $1 was an empty gesture.

As far as other comments you don't understand, unless you're more specific I'm not sure what to say.
posted by krinklyfig at 10:00 AM on March 25, 2009 [1 favorite]


My point was exactly that though, the vast majority of people are not in this guy's position.

But so what? If he is a guy who, if paid what he negotiated, can help extract value for the creditors (taxpayers), why shouldn't he be treated better than "the vast majority of people"? This isn't a civil rights issue, it's about the tedious work of salvaging a broken company. The scale of the problem is such that we need to focus on creating the best economic outcomes, not soothing the emotions of the populace.

Yes, that is a story of a guy who makes massive amounts of money losing out on getting another massive sum of money that he earned.

That is not the story. This is the story of a guy losing out on money he earned for reasons that truly benefit no one. It won't help the taxpayers. It won't help the average family who is indirectly hurt by the financial crisis.

The only benefit is the temporary pleasure it brings to people who are angry. And, more insidiously, it benefits the politicians who make a name for themselves fomenting rage at this kind of low-hanging fruit while missing the bigger picture.

I don't know why people think this guy is after sympathy. When you go work on Wall Street, that generally means you don't concern yourself much with garnering sympathy. What he really wants is to be "right." The point of this letter is to provide evidence of the harm done by angry people whose rage is being misused.
posted by mullacc at 10:00 AM on March 25, 2009 [1 favorite]


I didn't read every comment, so forgive me if I'm repeating but I'll say this:

If AIG actually went down without the bailout money do you think that in a million years they would still be paying out these "bonuses"? Of course not. So what's the difference here? The government bailed out AIG to save the economy and thus the average Joe in the street but essentially, without this government money, it would be bust, so why the hell should these contracts be honoured at this point?

Normally I hate media-led witch-hunts, but at this time, in a crippled economy a company that needs government intervention to prevent it from going tits up does not need to pay out these things. People are getting let go right left and centre and now we're sorry for the AIG "bonus" guys? Please. Cry me a fucking river.
posted by ob at 10:01 AM on March 25, 2009


Part of growing up, part of being an adult, is realizing not only you can't always get what you want, but someone else is likely to get what you want, and more. This is such a case.

If AIG went under, it would take a major portion of the financial system with it. In order to prevent total market chaos the government bailed/bought it out. The advantage is we, the average folk, get to continue to have some semblance of a normal financial life (credit cards, bank accounts, etc.) The disadvantage is other, not so average folk, are going to continue to be paid huge sums of money. You know what that's called? Life. It's called life.

We need to fix the economy, now if not yesterday. Having a functional economy is more important than the politics surrounding the AIG bonus.

Oh, and last thought, we taxpayers may own AIG, but we individuals do not. We have no more input into the pay of AIG executives than we have rights to fly F-22's to the bar. Again, this is life.
posted by elwoodwiles at 10:01 AM on March 25, 2009


I'm pretty agnostic about the question of whether the bonuses get taxed to high hell or not, but I can definitely understand why people are so angry. And I think a big part of the anger isn't even the bonuses themselves, but the perception that (1) this entire clusterfuck was caused by excessive greed, characterized by a bunch of Wall Street traders basically excusing any risk they were introducing by saying "well what do you expect, it's all about the money, it's totally ethical for me to do anything legal to maximize the profits we're making, that's what capitalism is," and (2) now that everything's gone to shit, the same cast of characters is widely perceived as holding the country's economy hostage by explicitly refusing to help fix it unless they get paid obscene amounts of money (and arguing that they're the only ones who CAN fix it).

Whether or not the above characterization is fair or accurate, I'll have to say that Mr. DeSanis' letter really is epic FAIL for the sole reason that it just reinforces all those perceptions. Falling back on the claim he's not responsible (despite being a VP), and holding out the fact that his unit has made money during the downturn as the only metric by which it should judged, as if ethics and responsibility have no place being discussed in the sentence as profit? Yup. Explicitly pointing out that the only reason he didn't walk away from the mess his company created--which would have presumably made the situation worse for everyone else in the country--only because he was promised a very high bonus? Yup. Writing a letter to the NYT to point out that he is going to quit now, taxpayers and everyone else living in this economy be damned? Yup. Comes across as a real principled and nice guy, truly.

I think people are looking at what we're being asked to do as taxpayers--basically tighten our belts, hold our noses, and save these companies not because the whole mess is our fault but out of a sense of duty to the country. And we're maybe looking at what the GM unions were asked to do, which again was to tighten their belts and take pay or benefit cuts not because they personally were responsible for GM being run into the ground, but out of a sense of duty to a larger good. And you compare that to what we hear coming out of the finance sector, and it's extremely galling to see financial execs being asked to do some belt-tightening for the greater good and getting the response that it's too much to even ask. That if they weren't personally responsible, if they didn't actually create the CDOs that cratered the economy, if their fingerprints aren't all over the thing--well, then, it's not like anyone should expect them to do anything other than look out for themselves.

So all the talk about well, it was a contract, and well pragmatically you can't run off the very talent we need to fix this, and it's not ethical to change the rules after everyone's agreed to payment aren't *wrong*, exactly, just missing the point. Those are all principles I generally agree with. It's just none of it really takes away the anger from seeing some people (those closest to epicenter) shirk their share of the belt-tightening and sacrifice-making when the rest of us are doing so in an effort to save the economy. It's watching that, and hearing a justification "well I have options and I can walk away." Great. I'm sure you do. I don't hate them for having the option, I hate them for being such assholes that they think it's okay to bail at this point and not participate in trying to save a sinking ship. I'm not sure I think it's a good principle for Congress to go after them with a targeted tax, because I don't like that sort of precedent, but no one can sit here and tell me that I'm not allowed to think they're complete and total assholes who would rather watch everything burn than get their hands dirty helping.
posted by iminurmefi at 10:01 AM on March 25, 2009 [34 favorites]


Civil_Disobedient: "The UAW could argue the same thing; where's the chorus of sympathy for them?"

I would like the Times to publish a letter from the Auto Worker guy about how he worked years and was promised a pension and healthcare when he retired; then he quits because he just isn't going to put of with this sham of a company and disrespect for contracts...Oh wait! that doesn't happen...middle-class people don't get a platform to flaunt empty principles in the NY Times!
posted by Joe Beese at 10:02 AM on March 25, 2009 [7 favorites]


If we're bailing out your company, expect things to change for you.

Yes and let them know at the time of the bailout, negotiate it as part of your bailout terms...

basically changing up the terms on the flight should not be expected. You are very ferocious about this but the point is that YES they are being bailed out and if bonuses are going to be taken out that should be part of your bailout terms IT WAS NOT.

Of course now you are going to say if the company would have gone bankrupt then yada yada yada....but it did not.......

oh yeah by the way now you are going to say oh is not fair this this and that....and no it is actually FAIR to observe your contracts..
posted by The1andonly at 10:03 AM on March 25, 2009


I'm sorry but I cannot feel for a guy that has more money set aside than my entire family. A couple very wealthy people start to feel a little bit of discomfort and everyone must run to their aid. No empathy for these bums. They are part of a company that screwed things up. They are on government (AKA Tax player) fueled life support. They are receiving something other than their salary, called a bonus. AND we the people who are dealing with massive lay offs, reduced pay, eating ramen, etc should not feel outrage when these dimwits try and receive their bonuses? Screw them. They took a greedy million dollar risk when they decided to stay with AIG. If any of these retards had any foresight at all they would have jumped ship long ago. BUT lo and behold..... the past repeated itself. Their inability to see bad shit on the horizon because of their stupidity cost them their "Bonuses". Smart person would have seen... Tax Payers money... middle class and lower in hard times.... AIG using their tax money to give me something called a bonus..... "Hmmm I'm sure they won't be mad about this!" If you get paid a certain amount for doing a job it is called a salary.... if you get anything more than your salary it is called a bonus because the company is doing great and making profits. Last time I checked AIG needed bailed out. There are no profits for these bonuses. Call me spiteful, jealous, wanting revenge, whatever.... I'm glad these Exec jerks are not getting their bonuses!
posted by Mastercheddaar at 10:04 AM on March 25, 2009 [1 favorite]


"I don't know why people think this guy is after sympathy. When you go work on Wall Street, that generally means you don't concern yourself much with garnering sympathy. What he really wants is to be 'right.' The point of this letter is to provide evidence of the harm done by angry people whose rage is being misused."

So, he needs excessive pay for this work? I don't buy it. There are plenty of talented people who go to work on much bigger problems for far less money, like Geithner for instance. He's no saint, but he's not getting paid multi-million dollar bonuses and whining about his pay. If this is the current Wall St. culture, where this sort of work is valued far beyond what it's worth, that needs to change, too. A generation or two ago, compensation was far less for his job.
posted by krinklyfig at 10:05 AM on March 25, 2009 [1 favorite]


He wasn't getting paid $1. He was expecting far more. The $1 was an empty gesture.

Well yeah, exactly, that's what I mean.

Some people seem to be arguing that the guy would be worse off if AIG had gone bankrupt, because he wouldn't have received any bonus anyway. It may well be the case that if AIG had gone bankrupt in October, he wouldn't have been received his bonus. But he wouldn't have kept working for nothing, either.

This relates to another point that most people/press don't seem to understand -- "bonuses" in the finance industry are often not really bonuses. They're just part of total compensation.
posted by Perplexity at 10:07 AM on March 25, 2009 [1 favorite]


Plus -- given the troubled economy and job market -- 'it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave,' he said."

Given all the people who have left Fannie and Freddie to go work for various mortgage opportunity funds and Agency REITs, I think there are a lot of people out there who can easily imagine what Frank can't.
posted by mullacc at 10:08 AM on March 25, 2009 [1 favorite]


"Of course now you are going to say if the company would have gone bankrupt then yada yada yada....but it did not......."

The point remains. These guys want to have their cake and eat it, too. Who else is getting that sort of sweet deal right now? Hey, we're not even into the legal issues. You want people to calm down and understand why these guys need to get paid excessive amounts while we're footing the bill, so many of us our losing our jobs due to this specific company's fuck ups, and we're supposed to be grateful they're paying so-called financial experts ludicrous amounts of money, and if people get angry they start whining. Good luck with that, but I wouldn't count on it.
posted by krinklyfig at 10:09 AM on March 25, 2009 [2 favorites]


So, he needs excessive pay for this work? I don't buy it.

You don't buy it? You just read his resignation letter, buddy.
posted by mullacc at 10:10 AM on March 25, 2009


After hearing Frank Portnoy on Fresh Air over lunch, describing his experiences as a derivatives trader for Morgan Stanley in the 90s--in particular, hearing him describe how he and his colleagues, after selling their clients on complex derivative investments they personally knew were overpriced and many times riskier than advertised, would high-five and boast to each other about having "ripped their faces off" before heading off to the strip clubs--I don't give a rat's ass about respecting a meaningless contract issued by a company that's spent the last two decades or so making a mint off of selling meaningless contracts.

Just take a step back and look at the bigger picture for a second and its plain why there's so much righteous outrage and anger over this issue: AIG bankrupted itself and practically destroyed the US economy by issuing mountains of swap contracts it never held even a fraction of the collateral it needed to be able to honor, but then suddenly when it comes to compensation for the employees who created those unrealistic obligations, AIG is all about honoring contracts? Give me a break.

If we're supposed to believe AIG can't afford to meet its swap obligations (which are also contracts, after all), then how are we supposed to swallow that, at the same time, it can afford to meet its compensation contracts? This is what stinks about this. They're basically choosing to ignore their obligations under one set of contracts (those that don't enrich the executives themselves), while declaring that another set of contracts (those that put money in their pockets) have to be honored without exception. Or at least, they're putting compensating themselves before meeting their contractual obligations to clients. That's what passes for business ethics on Wall Street.
posted by saulgoodman at 10:10 AM on March 25, 2009 [33 favorites]


"This relates to another point that most people/press don't seem to understand -- 'bonuses' in the finance industry are often not really bonuses. They're just part of total compensation."

Yes, but what also doesn't get mentioned very much is that the salaries ... er, excuse me "bonuses" in the financial sector are far, far more than they were 20-30 years ago. This new method and amount of compensation is very modern and is based on the hot economy which burned throughout that time but which is now burnt out. These guys want to keep going like that. I don't think it's going to work very long.
posted by krinklyfig at 10:12 AM on March 25, 2009



posted by iminurmefi


Well said! Excellent post.
posted by Mastercheddaar at 10:13 AM on March 25, 2009


To the mentally and morally damaged idiots who think this creep is being "crucified", I'd love to get "crucified" to the post-tax value of $742,006.40.

This scumbag is a criminal, donating the proceeds of his theft only because he is under public scrutiny.

Fuck him and fuck his apologists, while the rest of us pay for his "crucifixion" and for "crucifying" all the other crooks who are stealing from us under cover of "law".
posted by Blazecock Pileon at 10:14 AM on March 25, 2009


Perplexity: " It may well be the case that if AIG had gone bankrupt in October, he wouldn't have been received his bonus. But he wouldn't have kept working for nothing, either."

So he was financially penalized by the worthlessness of A.I.G.'s representations, eh?

Guess that puts him in the same liferaft as the rest of us.
posted by Joe Beese at 10:15 AM on March 25, 2009


They're basically choosing to ignore their obligations under one set of contracts [CDS]...

WTF are you talking about? The reason AIG took the government's money is so it could stand behind its CDS contract. That's what all the outrage about bailout money going to Goldman and other big banks is about.
posted by mullacc at 10:16 AM on March 25, 2009


"Or at least, they're putting compensating themselves before meeting their contractual obligations to clients. That's what passes for business ethics on Wall Street."

Bingo. Thank you.
posted by krinklyfig at 10:17 AM on March 25, 2009


But he wouldn't have kept working for nothing, either.

The idea that this guy is working for $1 is stupid. Even if he were taxed at 90% on a $1 million bonus, he would still be making $100,000. That's not bad for 6 months of work. Sure, it's not great by high finance standards, but at this point I have no problem saying fuck high finance.
posted by ryoshu at 10:19 AM on March 25, 2009


Failure to enact well under way.

Yeah, if the bonus tax goes down the tubes, I hope the Administration at least has some sense to extract some concessions from the financial industry beforehand, like demanding access to corporate balance sheets and greater financial transparency.
posted by jonp72 at 10:24 AM on March 25, 2009


odinsdream, I agree that hidden risk is indeed a major culprit in this, but I remain firm that the marketplace sets the value of items and work. Over time, it corrects as hidden information becomes unhidden.

The value of a financial executive may very well change based on the new information, but it doesn't change the value of the work at the time it was being paid at a higher rate. This is to be expected. But to pass judgment retroactively on the value of the work done doesn't make a lot of sense.

You don't hear people screaming that newspaper classified ad salesmen were overpaid since their entire business model was upended by the internet. Their value dropped and so did their salaries, and now internet ad cartels make huge profits and their execs have enviable high paid job equivalents to newspaper and yellow pages sales execs in the past.

It seems reasonable to assume that goods and services are worth what the market will bear as long as you understand these values change over time, based on current circumstances. I don't think you can assume that there is an innate, fixed value to any good or services that doesn't depend on the current circumstances.
posted by Argyle at 10:26 AM on March 25, 2009 [1 favorite]


But to pass judgment retroactively on the value of the work done doesn't make a lot of sense.

Then all of Bernie Madoff's clients are still rich?
posted by ryoshu at 10:36 AM on March 25, 2009 [2 favorites]


jonp72: "I hope the Administration at least has some sense to extract some concessions from the financial industry beforehand..."

Don't get your hopes up. The appointment of Geitner made it very clear whose bitch Obama is.

Note that the press conference question that snapped his legendary cool was:

It seems like the action is coming out of New York and the Attorney General's Office. It took you days to come public with Secretary Geithner and say, look, we're outraged.

Outrage that lasted all of several days before a danger emerged that the bonuses might actually be threatened.
posted by Joe Beese at 10:36 AM on March 25, 2009


This is the story of a guy losing out on money he earned for reasons that truly benefit no one. It won't help the taxpayers. It won't help the average family who is indirectly hurt by the financial crisis.

Actually, considering that he is donating the "entire post-tax retention payment to those suffering from the global economic downturn," it will help some of the families indirectly hurt by the financial crisis. The whole $1 + bonus thing turned out to be a stupid idea, and if losing people like him due to the decision to ask for the bonuses back really does end up costing the company large amounts of money, then I agree that the whole thing is a significant net negative to everyone. At any rate you're correct that forcing people to leave a company by asking them to work but not paying them doesn't inherently benefit anyone, so all things being equal no one should be purposely pushing for that to happen without any other benefits.

The scale of the problem is such that we need to focus on creating the best economic outcomes, not soothing the emotions of the populace.

Maybe, I don't know. When GW Bush was in power he made a similar argument about the unpopularity of the Iraq war; he was going to do the right thing regardless of what the public thought. Bush didn't do himself or his party any favors by ignoring the public, and a significant amount of people who actually agreed with Bush probably think that burning all of the bridges in process did more harm than good. Would telling the public that they shouldn't get upset about this situation and the ill will inevitably generated by such a move be worth keeping guys like this working to salvage AIG? I'm not sure, but either choice has consequences outside whether or not one guy gets paid. He wasn't really talking about those consequences in his letter though, it was mainly focused on how he got such a raw deal.
posted by burnmp3s at 10:42 AM on March 25, 2009


"The value of a financial executive may very well change based on the new information, but it doesn't change the value of the work at the time it was being paid at a higher rate. This is to be expected. But to pass judgment retroactively on the value of the work done doesn't make a lot of sense. "

It's not the value of the work done, it's the idea that everyone has to take a hit except these guys. If they don't get their excessive pay, they bail out. In my mind, that tells me they're not worth what they purport to be. They're in it only for themselves, and we're expected to suffer such fools gladly while the rest of us go broke?
posted by krinklyfig at 10:44 AM on March 25, 2009


Nobody's contract was broken. He got his bonus. He chose not to keep it.
posted by dirigibleman at 10:45 AM on March 25, 2009 [2 favorites]


Aryle: Here's a little pro-tip to all you beautiful or unique snowflakes:

There is no such thing as 'fairness' in terms of what people get paid. People get paid what the market will bear for their services. That's simply the reality of the world we live in. To expect otherwise is to reside in fantasyland.


Guess what talk of value is exactly appropriate. The market will bare something fine that's how things work, I get it. The problem with the state getting involved in setting wages is that it is, generally worse than the market, the market is pretty good in general of paying people what their worth. But it's not axiomatically superlative at it. Markets are great tools, but it is a fact that they, in specific cases, have institutional inefficiencies that state power can correct. Patents are one example, non-excludable goods are another, pigovian taxes and subsidies are another. So the government does play with economic incentives in ways that create efficiency. Suppose there is a job where the market will pay a huge wage. Suppose this job doesn't generate value. If the state through differing rates of taxation provides a disincentive to do this job relative to doing other more valuable work then efficiency goes up. It's my opinion that these investment bankers are not that special, they make a lot of money by over leveraging themselves to the point where they require a lot of money from other people to cover their losses. That is how they make so much money. So the market was wrong. These institutions have legally through the market, done worse than nothing. These people have altered the way these institutions work in way that ultimately destroyed value. And they were paid handsomely to do it. They were paid handsomely because they made really really really big bets which allowed them to generate large amounts of value. If they weren't allowed to make bets much bigger than they had any chance of paying off if they lost they wouldn't be able to secure that kind of compensation in the first place.

Galt's Gulch is a fantasyland too. Is what I'm saying.
posted by I Foody at 10:46 AM on March 25, 2009 [1 favorite]


fwiw, i thought this FT editorial made a good point re: Maths and markets
We need more – and better – maths to underpin individual banks and the enhanced regulatory regime that will oversee them. Some of the expertise required is already out there waiting to be put to use...

Contrary to Lord Turner’s assertion, the banks’ sums were not sophisticated enough. They over-simplified, and assumed away the limitations and caveats of their models. They did this to convey an illusion of accuracy and precision, and so convince the market that they had everything under control.
like the stories that were spun were fictional but, appropriately nuanced, the techniques and tools, derivatives and leverage, needn't be misapplied and perhaps might someday contribute to 'real information' actually being created...
posted by kliuless at 10:55 AM on March 25, 2009 [1 favorite]


"Just like I wasn't the company I worked for when it went bankrupt, and punishing me for all of the company was indeed over-broad and unfair.

But it happened anyway.
"

That's stupid. Someone got mugged so no one should complain about mugging?

"It's not the value of the work done, it's the idea that everyone has to take a hit except these guys. If they don't get their excessive pay, they bail out. In my mind, that tells me they're not worth what they purport to be. They're in it only for themselves, and we're expected to suffer such fools gladly while the rest of us go broke?"

They've already taken a hit, especially concerning how much of their compensation was tied up in stock options. Because YOU have decided that their pay was excessive based on YOUR emotions, you don't think they've taken enough of a hit and seem to think that they should work for as little as humanly possible, not realizing that hey, if they don't like it, they'll quit, and then we're fucked.

Stop being stupid.
posted by klangklangston at 10:56 AM on March 25, 2009 [1 favorite]


"Without this "fiction" we'd be living in caves."

I'm sorry, I've worked on Wall Street for years and I agree with Malor 100%. There is some economic utility to the work done by traders - no one disagrees with that - but it's small compared to their actual compensation.

The reason they can get away with it is that traders sit in a position where they can funnel money to their firms, and consequentially, to themselves, regardless of the economic value of their work. In many cases, the work that traders and other financial workers have done has had a medium-term negative economic value to everyone concerned - yet they still collect the huge salaries.

The fact is that in 2007, the financial industries were about 40% of the US economy - the largest segment. Do you really believe that simply moving money from place to place is really worth so much more than any other economic activity that humans do?

(I have to say, you have some chutzpah in using efficient markets as an economic benefit from the work of traders - since it's obvious from the collapse that the market prices were chimeras and illusions caused by massive irrationality on many people's part, including the traders...)
posted by lupus_yonderboy at 10:59 AM on March 25, 2009 [9 favorites]


That's stupid. Someone got mugged so no one should complain about mugging?

Oh, no, I complained loudly when it happened. But I didn't expect my complaining to help much, and it didn't.
posted by DreamerFi at 11:05 AM on March 25, 2009


"Because YOU have decided that their pay was excessive based on YOUR emotions, you don't think they've taken enough of a hit and seem to think that they should work for as little as humanly possible, not realizing that hey, if they don't like it, they'll quit, and then we're fucked."

First of all, nobody made any decisions based on what I want, or you for that matter, not specifically.

The guy quit on his own accord. I don't know what you expect. Can you mold public sentiment to make people be happy about this situation? Is that what he wants in order to do his job? He wants to get paid, and he wants people to be happy about it on top of that? Should I have written him a wistful little letter about how much I admire his l33t financial skillz? Maybe that would have helped to solidify his fragile constitution, and not take us all down with him on his self-pity trip. Because if the whole country's financial health depends on guys like this getting more than they deserve and having the public applaud them and their salaries, or they can't find it in themselves to go to work, then we're all totally fucked.

We don't need guys like this. We need to get rid of them, the sooner the better.
posted by krinklyfig at 11:05 AM on March 25, 2009 [1 favorite]


The bonuses for people not in the damage-causing business centers should have been paid from profits, not from the bail-out funds.

I think it goes without saying that no one involved in damage-causing business centers should have been given bonuses.

The statement made (and favourited) that it's not a bonus if you can count on it is right on.

This whole kerfuffle shows how broken the corporate compensation model is.
posted by batmonkey at 11:09 AM on March 25, 2009


So much to say, so little time:

contractually promised

Yes, well having worked in industry long enough to know their ways, "contracts" for bonuses mean very little until you reach a certain level, and then they mean "additional salary". And this guy clearly had reached that level and expected his bonus. In addition, contracts usually can be voided in financial exigencies, which this clearly is.

Just because he was working at AIG doesn't mean he was in any position to do anything about CDS's, or even knew or understood anything about them.

This is the biggest load of bullshit propagated in the discussion. That an EVP of the FP division didn't know about the business practices that were fueling unprecedented growth in his division is impossible. Not unlikely, impossible. Our boy Jake is playing a little loose with the facts here.

In other words, the government bailed out the financial industry to cover your ass, not the bankers'.

My ass is not being covered here. What is my take home message? Oh, that the big boys, if hurt, will take their ball and go home and won't I be sorry.

The money disappeared by virtue of accounting, not fraud.

That's a creative way to phrase it. How about this? The accounting was inflated because of fraud; that inflation led to undeserving executives getting huge "bonuses" based on that inflated value and traders in the know to dump their holdings before the "accounting" got corrected; oops, we have to revise the accounting because it turns out this crap isn't worth the paper it's printed on; merely an accounting adjustment, folks, nothing to see here, put down the pitchforks and torches, move along...
posted by Mental Wimp at 11:09 AM on March 25, 2009 [5 favorites]


basically changing up the terms on the flight should not be expected.

Right! Because if there's one thing insurance companies such as AIG are known for, it's honoring contracts!
posted by vibrotronica at 11:12 AM on March 25, 2009


Right! Because if there's one thing insurance companies such as AIG are known for, it's honoring contracts!


umm yeah?
posted by The1andonly at 11:15 AM on March 25, 2009


My sole pang of sympathy: I do feel a touch bad for the people who, expecting compensation (albeit CONSIDERABLE compensation) passed on job offers from other, more stable employers.

I know how it feels to be assured that one's position is solid, that you can make financial plans... only to get left out in the cold without warning, even when you had yourself done a spectacular job.

Granted, I'm a public school teacher, so the pay difference between my wages and lost financial prospects versus an AIG-FP exec's is pretty drastic, and it makes it hard to feel bad for these guys. But in principle, I can see how that's a serious shaft.

...past that, having once worked as a low-level office monkey for Goldman Sachs and having spent a lot of time lately trying to educate myself on this whole mess, I am still overwhelmed with hate and anger for the overpaid, arrogant assholes who created this whole mess.
posted by scaryblackdeath at 11:18 AM on March 25, 2009


umm yeah?

Umm no. The US tax payer is now honoring AIG's contracts.
posted by ryoshu at 11:20 AM on March 25, 2009 [1 favorite]


What this guy doesn't seem to understand is that he's lucky not to be hanging from a lamppost. Lucky he lives in a modern society that frowns on such things.

Populism has been (tellingly) getting a lot of negative press. But sometimes a little populism is a useful corrective to a system that has gone too far the other direction.
posted by moonbiter at 11:22 AM on March 25, 2009 [1 favorite]


umm yeah?

Your experience getting insurance companies to pay up on their obligations seems to be quite different than mine. I have a stack of benefit statements from Blue Cross/Blue Shield that argue otherwise.
posted by vibrotronica at 11:23 AM on March 25, 2009


Don't get your hopes up. The appointment of Geitner made it very clear whose bitch Obama is.

This is not a question of Obama being Geithner's bitch. Even if Obama were to the left of Dennis Kucinich on economics, there are still major structural constraints that limit what he can do. The Treasury Department works in conjunction with the Federal Reserve, which is a non-elected body controlled by bankers. This can lead to major problems during an economic crisis, because the financial interests of bankers and the financial interests of "the economy" writ large don't necessarily coincide. For example, see how the dithering of the Federal Reserve during the Hoover Administration led to the worsening of the Great Depression. For another example, take a look at this paper by James K. Galbraith about how the Federal Reserve's partisan bias, stimulating the economy when Republicans are in power and showing restraint when Democrats are the helm.

AIG and the big financial firms have the power to cause a major economic meltdown if they don't get their way. Think about how the economic elite in Chile did everything to make the economy collapse after the election of Salvador Allende, the better to pave the way for Pinochet. According to Bob Woodward's The Agenda, Clinton said in the early days of his first term, "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a few fucking bond traders." Similarly, Obama has even compared AIG to a suicide bomber: "It’s almost like they’ve got — they've got a bomb strapped to them and they've got their hand on the trigger. You don't want them to blow up. But you've got to kind of talk them, ease that finger off the trigger."

With the pit bulls of Wall Street poised to tear the economy apart, I don't blame Obama for saying "Nice doggie, nice doggie..." Unless you have a plausible alternative plan for outflanking the power of Wall Street, calling Obama somebody's "bitch" isn't going to help matters.
posted by jonp72 at 11:24 AM on March 25, 2009 [5 favorites]


But sometimes a little populism is a useful corrective to a system that has gone too far the other direction.

No, populism is stupid. What the world needs is more lynching? There is a lot of stupid in this thread.
posted by chunking express at 11:25 AM on March 25, 2009


I see your point...AIG does very little work with individuals and more with companies and what not so I am not sure what the "honoring contracts" came from. Good point....though.
posted by The1andonly at 11:26 AM on March 25, 2009


I think this fits nicely in this thread. Anti-capitalists today claimed responsibility for vandalising the home of disgraced former Royal Bank of Scotland boss Sir Fred Goodwin.
posted by DreamerFi at 11:27 AM on March 25, 2009


This is the biggest load of bullshit propagated in the discussion. That an EVP of the FP division didn't know about the business practices that were fueling unprecedented growth in his division is impossible. Not unlikely, impossible.

You don't know what you're talking about. If the head of the equity and commodities trading desk tried to squash the activity of the mortgage derivatives desk, he'd get fucking screamed at and would STFU lest he gets himself into a political fight with a desk that makes more money than his.
posted by mullacc at 11:27 AM on March 25, 2009


klangklangston: Third, while Malor's down his yellow brick road again, the fundamental argument for these salaries is sound: If you make me $5 million, I have no problem paying you $1 million. In maximizing the benefit that we, as owners, get from selling off pieces of the company, this guy's salary is worthwhile, and engaging in demagoguery is counter-productive and futile.

The problem is that if the industry you're in sucks that value out of the world without paying anything back, you're a net loss. Your existence is bad for everyone else.

My particular comments here were pointed at the fact that AIG could afford to pay these traders $700k to sit at a desk and push paper, extracting that money through simple trading. For every dollar they win, someone loses. And while speculators do provide value, they need to be an ancillary component of an economy, not the centerpiece.

Also, as far as "being on my yellow brick road again": it's worth pointing out that, right here on Metafilter, I've been talking about this upcoming crash since 2004.

You might want to consider that, since I was one of very few voices here talking about a possible Depression four and a half years ago (though, honestly, I thought we'd missed it, and were headed for hyperinflation instead, which I STILL think) and now you hear 'Depression' all over the mainstream media, maybe, just maybe, I've got a clue. In my posts from years back, I was speaking in generalities, and was consistently badly off on timing. I was always much too soon. The Fed always had another play in its playbook to keep the game going.

Regardless, I was loudest and most correct about the fact that we were headed for catastrophe. Well, here it is. It has arrived. Each year, I thought, "this year for sure!" -- but it took until 2007 to really start to fall apart.

So you might want to give me a little bit of credence when I tell you, in all seriousness, that our reactions and bailouts are just more of the same, and they only make the fundamental problems worse, not better. You do not, sir, have the right to be so dismissive.

Many professed experts have come through here, some of which had no shortage of scorn for my viewpoint ... and we can see just how a good a handle they had on things.
posted by Malor at 11:29 AM on March 25, 2009 [5 favorites]


My sole pang of sympathy: I do feel a touch bad for the people who, expecting compensation (albeit CONSIDERABLE compensation) passed on job offers from other, more stable employers.

Sure, we all stand to benefit if we can correct the current problems in the insurance and credit markets, BUT GUYs LIKE THIS STANDS TO BENEFIT THE MOST. He's in that business, and there won't be jobs for him if the meltdown continues. Sure, he got job offers, but for how much? I suspect a lot less than AIG "promised" him. Why? Because the business sucks right now.
posted by Mental Wimp at 11:30 AM on March 25, 2009


You don't know what you're talking about. If the head of the equity and commodities trading desk tried to squash the activity of the mortgage derivatives desk, he'd get fucking screamed at and would STFU lest he gets himself into a political fight with a desk that makes more money than his.

Yes, it would have been a fight to mess with an APPARENTLY profitable group, but he was a fucking EVP and he didn't try, as far as I can tell. I had to fight a large and powerful group of individuals in the medical products company I worked for when they were ignoring a product problem because it was making so much money. I survived and the product was recalled. And I was a lowly biostatistics manager.

Besides, he claims "I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. " An EVP is responsible for the ethical conduct of his business unit. Period.
posted by Mental Wimp at 11:39 AM on March 25, 2009


WTF are you talking about? The reason AIG took the government's money is so it could stand behind its CDS contract.

AIG execs have argued it didn't use public funds to meet its compensation obligations. But money is fungible. It could have used up to 100% of whatever capital it had on hand to meet its swap contract obligations before reaching out for public assistance.

Listen to Frank Portnoy's interview, anyone who still doubts the more general economic problems are a result of willfully fraudulent behavior in the financial sector. The derivatives lobby and its supporters in the financial world--including former Enron executives, btw--have known exactly how fraudulent what they've been doing is for years.
posted by saulgoodman at 11:41 AM on March 25, 2009 [1 favorite]


Let's face it, not every single executive nor employee was a party to this nonsense.

So? The liver is not responsible for the brain deciding to drink booze, yet the liver gets to suffer.

When one opts to be part of a large corporation, you live and die by others decisions within that corporation. If you care about your future you'll find somewhere else to be if you think the brains are doing something wrong. Its not like you are a liver and have no where else to go.
posted by rough ashlar at 11:45 AM on March 25, 2009 [1 favorite]


"People get paid what the market will bear for their services."

If it were "the market" here, then the person writing the letter would be completely out of a job as his company went bankrupt.

The fact of the matter is that the financial companies were looted and left as mere shells with a negative value, while traders and management cashed in. This was not "market wages", this was theft.

Again, I'd also add that the reason these people pay themselves astonishing bonuses has nothing, nothing, nothing whatsoever to do with "the market" - it's because they can - in other words, they can basically write themselves blank checks.

It's been shown time and again that there is a negative correlation between CEO salaries of comparable companies and company performance.
posted by lupus_yonderboy at 11:47 AM on March 25, 2009 [4 favorites]


Even if Obama were to the left of Dennis Kucinich on economics, there are still major structural constraints that limit what he can do.

Let the apologetics begin. His hands are tied!

The Treasury Department works in conjunction with the Federal Reserve, which is a non-elected body controlled by bankers. This can lead to major problems during an economic crisis, because the financial interests of bankers and the financial interests of "the economy" writ large don't necessarily coincide.

So the answer is to...wait for it...design a trillion dollar hedge-fund to buy up "toxic" assets with non-recourse loans

For example, see how the dithering of the Federal Reserve during the Hoover Administration led to the worsening of the Great Depression. For another example, take a look at this paper by James K. Galbraith about how the Federal Reserve's partisan bias, stimulating the economy when Republicans are in power and showing restraint when Democrats are the helm.

For another example see the current administration's eagerness to bend over backwards to keep the investor class happy.

AIG and the big financial firms have the power to cause a major economic meltdown if they don't get their way. Think about how the economic elite in Chile did everything to make the economy collapse after the election of Salvador Allende, the better to pave the way for Pinochet. According to Bob Woodward's The Agenda, Clinton said in the early days of his first term, "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a few fucking bond traders." Similarly, Obama has even compared AIG to a suicide bomber: "It’s almost like they’ve got — they've got a bomb strapped to them and they've got their hand on the trigger. You don't want them to blow up. But you've got to kind of talk them, ease that finger off the trigger."

Admitting that the Federal Government is being blackmailed by a corporation does not strike me as defining great leadership.

With the pit bulls of Wall Street poised to tear the economy apart, I don't blame Obama for saying "Nice doggie, nice doggie..." Unless you have a plausible alternative plan for outflanking the power of Wall Street, calling Obama somebody's "bitch" isn't going to help matters.

But feeding the monsters will help? What kind of cowardly "realism" is this?
posted by ornate insect at 11:53 AM on March 25, 2009 [3 favorites]




"If AIG went under, it would take a major portion of the financial system with it."

This is fear-mongering. The government could and has every legal and moral right to seize it and unwind its contracts - or not, as the mood takes them (because many of the counterparties to these transaction knew perfectly well they were gaming the system).

The government's already on the hook for these transactions. Realizing this and paying people off (or not) isn't going to make the financial system crash.

I'm curious - what, exactly, do you think the trajectory of AIG will be in future? A lot of people (here and elsewhere) seem to have the idea that if we forget about all these liabilities, they will simply go away. This is simply not the case: AIG will have to pay off on all these lost bets sooner or later - that means us, the taxpayer. But in the mean time a horde of parasites will continue to collect seven-figure salaries from us, the taxpayer.

If any of you has some reasonable scenario where a) AIG is not liquidated but b) everything works out OK, please let us know.
posted by lupus_yonderboy at 11:55 AM on March 25, 2009 [1 favorite]


Look the difference here is that after the backruptcy, the govt owned entity cut a deal with this guy. The government-owned entity wanted this guy to work for $1 salary and a promise of a bonus in March 2009. Now that same entity - not the pre-bankruptcy AIG, but the government owned one - doesn't want to pay him the bonus. So the government, and most of you, wanted him to have done that work for free.

Breaking that deal means that contracts with the government cannot be trusted. Good luck with the downstream effects of that.

Yes, there are people who are worth a million dollars a year. Is Bono worth that? Because he probably gets 10 times that at least. Are actors and directors whose films bomb worth that?

All he has to do is buy and sell things such that the total difference exceeds $1 million and he's worth that.

That is precisely the same thing walmart and every other store does. Walmart doesn't actually make anything. They buy shit and sell it to you for more than they paid.

On the tax issue: yes, most people pay over 30% in taxes. But of the total income taxes received, most of that, over 90% of it, comes from the top 50% of taxpayers. This is because not every american makes the same amount of money. The very very rich are responsible for a disproportionate amount of the total taxes received.
posted by Pastabagel at 12:02 PM on March 25, 2009 [1 favorite]


"Breaking that deal means that contracts with the government cannot be trusted. Good luck with the downstream effects of that. "

No, it means the people who are footing the bill aren't happy with the terms of the contract. He doesn't need to get paid zero. He does need to get paid less. Nothing wrong with the underwriters expressing their opinions, unless you think majority shareholders should just shut up and go along with whatever the execs of their company want to do.

"Yes, there are people who are worth a million dollars a year. Is Bono worth that? Because he probably gets 10 times that at least. Are actors and directors whose films bomb worth that?"

Are taxpayers making sure they don't go broke? No? Then it's hardly relevant.
posted by krinklyfig at 12:04 PM on March 25, 2009 [2 favorites]


jonp72: "AIG and the big financial firms have the power to cause a major economic meltdown if they don't get their way. Think about how the economic elite in Chile did everything to make the economy collapse after the election of Salvador Allende, the better to pave the way for Pinochet. According to Bob Woodward's The Agenda, Clinton said in the early days of his first term, "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a few fucking bond traders." Similarly, Obama has even compared AIG to a suicide bomber: "It’s almost like they’ve got — they've got a bomb strapped to them and they've got their hand on the trigger. You don't want them to blow up. But you've got to kind of talk them, ease that finger off the trigger.""

If those "few fucking bond traders" are truly more powerful than the Executive branch of the government - as opposed to just being a stumbling block to his precious re-election - then Obama would best serve his country by publicly acknowledging that our experiment in democracy has failed.

Lying to us as he helps them loot hundreds of billions of dollars of our money might also be seen as "not helping".
posted by Joe Beese at 12:05 PM on March 25, 2009 [2 favorites]


"Because if the whole country's financial health depends on guys like this getting more than they deserve and having the public applaud them and their salaries, or they can't find it in themselves to go to work, then we're all totally fucked."

More than they deserve—again, you have no idea what you're talking about.

"Also, as far as "being on my yellow brick road again": it's worth pointing out that, right here on Metafilter, I've been talking about this upcoming crash since 2004. "

Let's all clap for the stopped clock.

"My particular comments here were pointed at the fact that AIG could afford to pay these traders $700k to sit at a desk and push paper, extracting that money through simple trading.

Somehow, I don't think it's your morals that are preventing you from doing the "simple trading."

For every dollar they win, someone loses.

Bullshit. Pure, unadulterated bullshit.

And while speculators do provide value, they need to be an ancillary component of an economy, not the centerpiece.

First off, they're not purely speculators, unless you want to call all insurance "speculation." Second off, your whole definition of "value" is blinkered and based on some bizarro-world version of mercantilism.

"Regardless, I was loudest and most correct about the fact that we were headed for catastrophe. Well, here it is. It has arrived. Each year, I thought, "this year for sure!" -- but it took until 2007 to really start to fall apart."

Like I said, a stopped clock. Christ, you're like psychics who predict earthquakes. Keep predicting long enough and wham, earthquake, like I toldja!

"So you might want to give me a little bit of credence when I tell you, in all seriousness, that our reactions and bailouts are just more of the same, and they only make the fundamental problems worse, not better. You do not, sir, have the right to be so dismissive.

Not when it's obvious to anyone who has the least bit of actual economic sense that the reason you keep predicting failure is totally absurd. That you were loud and consistent does not make you right, sir, it makes you a crank.
posted by klangklangston at 12:06 PM on March 25, 2009


Meanwhile
posted by ob at 12:08 PM on March 25, 2009


Then it's hardly relevant.

Well, in all fairness, remember that financial wizards are the conservative equivalent of rockstars anyway.
posted by aramaic at 12:09 PM on March 25, 2009


That you were loud and consistent does not make you right, sir, it makes you a crank.

Pot, meet kettle.
posted by aramaic at 12:10 PM on March 25, 2009 [2 favorites]


Given that AIG-FP got back 30 cents out of every dollar of CDS contracts as compensation, Mr. DeSantis may not have sold CDSs himself, but he sure as hell did directly benefit from them.

In 2007 I was working many 12-14 hour days myself doing the job of two people (it takes forever to hire someone in my company) and I really don't recall any million-dollar bonuses making their way to my bank account for that. Or hundred-thousand-dollar bonuses. I didn't even get a ten thousand dollar bonus for that year, even though my division and my company as a whole were quite profitable. In fact I've never made $100k in a year.

I don't feel a whole lot of sympathy for Mr. DeSantis. I was once laid off within two weeks of moving to a new apartment where the rent was nearly triple my old rent, in the US where I had no right to claim any state benefits (although that did not discharge me from the responsibility of paying for such benefits). And that was after getting laid off six months previously by a former employer who went bankrupt and couldn't claim the US Treasury as a sugar daddy. I don't recall the New York Times being so interested in my predicament then that they gave me a big op-ed like that. In fact I don't recall any newspapers having any interest in the matter. There was nothing for me to do but grin and bear it, making do with whatever I had put aside, which I did.

The point is, circumstances change and life sucks. Mr. DeSantis should stop being such a fucking pussy and realize that a lot of people -- it may be as many as 99.9% of the human race -- have it a whole lot rougher than he does.
posted by clevershark at 12:13 PM on March 25, 2009 [2 favorites]


Oh, and if anyone thinks that AIG will ever repay the US Government the $175 billion or so in bailout money, I have this bridge that they might be interested in buying.
posted by clevershark at 12:14 PM on March 25, 2009


But feeding the monsters will help? What kind of cowardly "realism" is this?

Do you have a better idea? The best thing I can think of is mass arrests of Wall Street executives (and even that isn't necessarily a "brilliant" idea), because the power of prosecution is one of the few powers that the government has, but Wall Street lacks. And, of course, arresting Wall Street is a whole lot easier said than done. That doesn't mean I wouldn't like to see it happen, but it would be very difficult to pull off.

If nationalization is your alternative (and I'm not opposed to temporary nationalization), how are you going to get nationalization passed through a Senate with a filibustering obstructionist Republican caucus that would rather drive the economy off a cliff than have Obama succeed? The Treasury Department doesn't have the statutory authority to nationalize non-bank firms. They have asked for that authority, but Congress may decide against granting them that authority. I would be delighted to see this crisis resolved through nationalization, but the moderate Republican Senators who serve as veto points for Obama's agenda (e.g., Susan Collins, Olympia Snowe, George Voinovich) won't fully support nationalization until you've hammered them over the head that there is no alternative. If Geithner's plan succeeds, that's great, but if it doesn't succeed, it can strengthen the political case for nationalization of the most toxic financial firms.
posted by jonp72 at 12:17 PM on March 25, 2009


mullacc: You don't know what you're talking about. If the head of the equity and commodities trading desk tried to squash the activity of the mortgage derivatives desk, he'd get fucking screamed at and would STFU lest he gets himself into a political fight with a desk that makes more money than his.

this is the problem in a nutshell, more money = better than. If you're in charge and Joe Accountant tells you a VP is cooking the books, putting the company's future and by extension the entire US economy at risk, and you're going to tell him to STFU because his department makes less money well, you're corrupt and need to go down. Hard. and it may yet happen.

and

People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed, and prices plummeted—the speculative bubble burst. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Mackay claims the Dutch devolved into distressed accusations and recriminations against others in the trade.

The panicked tulip speculators sought help from the government of the Netherlands, which responded by declaring that anyone who had bought contracts to purchase bulbs in the future could void their contract by payment of a 10-percent fee. Attempts were made to resolve the situation to the satisfaction of all parties, but these were unsuccessful. The mania finally ended, Mackay says, with individuals stuck with the bulbs they held at the end of the crash—no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable by law.

posted by Challahtronix at 12:17 PM on March 25, 2009 [1 favorite]


"More than they deserve—again, you have no idea what you're talking about."

They're getting paid far more than they used to. The pay scale for the financial sector is completely out of control and needs to come back down to earth. It will happen anyway, regardless of the over-entitled people who whine about their hardships in the face of massive failure on the part of their own company, while we're shoveling money at them so we don't all drown.
posted by krinklyfig at 12:20 PM on March 25, 2009 [1 favorite]


That pig's never gonna sing, klangklangston.

All this furor over 0.1% of the money down the AIG hole [so far]. Sad. And it's not even hate pointed the right way. A bunch of people working on a doomed ship somehow managed to get themselves big chunks of compensation. The sensible reaction should be "good for them!" We may or may not respect what they do or think perhaps they're complicit in this disaster, but this is a plain and simple matter of employee compensation.

Their employer may have been moronic to pay it but blaming them for taking it is just stupid. How many of us, if we already worked at a company we thought was doomed, would turn down a big ass payment? I once worked for a company that I had little confidence would survive long-term, but be sure I still negotiated the best deal for myself that I could when review time rolled around. The company is looking out for its own interests and its employees look out for theirs. Asking the employees to look out for the interests of the company and the taxpayers above themselves is just stupid and a standard most of us wouldn't apply to ourselves.

The people we should have a hate-on for are the bozos who approved these deals. Yanking back agreed-upon bonuses almost does those folks a favor by letting them escape accountability for their actions. The smart move is to grit our collective teeth, pay the bonuses, and figure out why our oversight is so craptacular that we're paying bonuses unnecessarily. Or at least why some people are so tone-deaf that they kept using the word BONUS.

What a waste of citizen will and government time. Where's the similar outrage over the order-of-magnitude larger amount of money squandered because of bad regulatory decisions? Over the 99.9% of what we've spent on AIG?

Somewhere there's some people who are very happy to see the attention focused on this comparative pittance.
posted by phearlez at 12:22 PM on March 25, 2009 [2 favorites]


In the social production of the their life, men enter into definite relations that are indispensable and independent of their will, relations of production which correspond to a definite stage of development of their material productive forces. The sum total of these relations of production constitutes the economic structure of society, the real basis, on which rises a legal and political superstructure, and to which correspond definite forms of social consciousness. -- Marx.
posted by chunking express at 12:22 PM on March 25, 2009


you have no idea what you're talking about... Let's all clap for the stopped clock... Pure, unadulterated bullshit.... based on some bizarro-world version of mercantilism... obvious to anyone who has the least bit of actual economic sense... it makes you a crank.

klangklangston: I flagged your obviously abusive post. But a few questions while I wait for it to be deleted.

1. As a banker, Malor's credentials to discuss this are impeccable. What are yours?

2. You seem to be claiming that only a crank would have predicted trouble in 2004. Yet the troubles we see now are the direct result of obvious and systematic problems that long predated that year (such as a hugely overinflated housing market). Many people, not just Malor and myself, predicted trouble.

How do you reconcile these statements?

3. Malor has been supporting his statements with reasoning and references. I might have missed something, but your refutations seem to be much as above, blanket claims without any corroborating evidence. Why should we listen to you over him?
posted by lupus_yonderboy at 12:25 PM on March 25, 2009


The people we should have a hate-on for are the bozos who approved these deals.

Oh believe me I do! I also agree with the point that this is a smokescreen and that there are many more important issues here. I do however feel that, given the government bailout, these contracts need not be honoured.
posted by ob at 12:26 PM on March 25, 2009


"How many of us, if we already worked at a company we thought was doomed, would turn down a big ass payment?"

I would turn it down if the taxpayers were footing the bill to keep it alive, and then I would work my ass off to make things right in the company (this is even easier if you have a lot of money in the bank). And, regardless of what happened, I would know I did the right thing and could live with myself, which is really what counts.
posted by krinklyfig at 12:27 PM on March 25, 2009


"Or at least why some people are so tone-deaf that they kept using the word BONUS."

They were the ones who arranged their pay this way to avoid taxes and other nasty inconveniences we poor folks have to pay. If it's not a bonus, don't call it one.

Maybe we should scrap all this talk and go back to the tax plan under Eisenhower, where the top bracket is taxed at 91%. Then, everyone who gets paid excessively has to chip in. Hey, the '50s were a great time, right?
posted by krinklyfig at 12:30 PM on March 25, 2009


If those "few fucking bond traders" are truly more powerful than the Executive branch of the government - as opposed to just being a stumbling block to his precious re-election - then Obama would best serve his country by publicly acknowledging that our experiment in democracy has failed.

There's no "if" about it. Unless the imbalance of power between Wall Street and the government is rectified, those "bond traders" really are more powerful than our government. The argument I'm making is not all that dissimilar to Fred Block's seminal article, The Ruling Class Does Not Rule, about how an economic ruling class can control policy even though its own members are not specifically in power themselves. Are you saying Obama shouldn't try to do the best he can, while simultaneously making sure that he gets re-elected? Obama has put in the most progressive budget proposal since LBJ, but it's going to do no good if some Republican wingnut tears it all down four years later.
posted by jonp72 at 12:33 PM on March 25, 2009 [2 favorites]


Who doesn't get taxed on their bonuses? American tax law can't be so ass backwards that bonuses don't count as income.
posted by chunking express at 12:34 PM on March 25, 2009




For too long the ruling class have enjoyed an extended New Years Eve Party
whilst we can only watch, faces pressed up against the glass
The Housemartins say:
Don't try gate crashing a party full of bankers. Burn the house down.
posted by kirkaracha at 12:35 PM on March 25, 2009


The mania finally ended, Mackay says, with individuals stuck with the bulbs they held at the end of the crash—no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable by law.

And in fact, as (again) Portnoy explained on Fresh Air, until its status was clarified under the Reagan administration, the unregulated derivatives trade was in many ways considered to be a form of quasi-gambling under the law, and so the industry represented a pretty murky area in contract law. There were literally derivatives contracts, according to Portnoy, that were based on the number of wins a particular basketball team made in a season. If that's not just out and out gambling, what is?
posted by saulgoodman at 12:35 PM on March 25, 2009


Top Hedge Fund Managers Do Well in a Down Year

Some aren't doing so well.
posted by Perplexity at 12:39 PM on March 25, 2009


1. As a banker, Malor's credentials to discuss this are impeccable.

I think you've confused Malor for Mutant.
posted by malocchio at 12:41 PM on March 25, 2009 [5 favorites]


I think you've confused Malor for Mutant.

URG, yes, I think so too.

So lose one of my points.
posted by lupus_yonderboy at 12:46 PM on March 25, 2009


The best thing I can think of is mass arrests of Wall Street executives (and even that isn't necessarily a "brilliant" idea), because the power of prosecution is one of the few powers that the government has, but Wall Street lacks.

Grand Juries used to have the power to investigate *ANY* crime brought to their attention, and it used to be that citizens could bring charges directly to a Grand Jury.

It would seem at one time the people had the power to do exactly what you have asked for, and did not need government 'actors' to 'bring charges'.

Anyone care to guess how many Ham sandwiches might exist on Wall Street.
posted by rough ashlar at 12:47 PM on March 25, 2009 [1 favorite]


"How many of us, if we already worked at a company we thought was doomed, would turn down a big ass payment?"

I would turn it down if the taxpayers were footing the bill to keep it alive, and then I would work my ass off to make things right in the company (this is even easier if you have a lot of money in the bank). And, regardless of what happened, I would know I did the right thing and could live with myself, which is really what counts.


Why is taking the money an employer is willing to pay you not the right thing to do? If you are going to choose to work somewhere it's insanity not to accept that there are choices they're going to make that you have no input in. If you find their overall way of doing business repugnant then you should not work there. If they are doing illegal things then you should do the right thing and report them. But to second-guess the compensation structure and stay within it is just dopey.

There's also the reasonable question as to whether these people could have gone elsewhere and made an equivalent amount. If they could, then refusing to pay market rate means you end up with sub-par employees. It's easy to be glib about that, but considering the amount of our money that was poured into that operation I'd just as soon there at least be average-level employees there. If we're not going to commit to running it at an average or above level then why didn't we just let it crash and burn?

And if that's what you think should have happened, fine. But if so then getting wound up over 1/10th of 1% of the total funds poured in there is just dumb. You're writing a complaint letter about the turn signal quality in your post-fire Pinto.
posted by phearlez at 12:54 PM on March 25, 2009




Why is taking the money an employer is willing to pay you not the right thing to do?

It's always a shock to a lot of Americans when they're talking to me and they realize that "the right thing to do" in my world is not necessarily equivalent to "the thing that makes you the most money".

The answer to your riddle is that the employer might have made the money through criminal or unethical activities.
posted by lupus_yonderboy at 12:59 PM on March 25, 2009


hmm, that seemed needlessly snarky to phearlez... sorry! I shouldn't cast blame at you... but the point is that if you're offered a bonus and you realize it's come through theft, that's a very good reason to refuse it (and leave).
posted by lupus_yonderboy at 1:02 PM on March 25, 2009


Oh, I get it. He's paid salary plus tips.

Crappy service, dude. I'll be speaking to your manager.

Someone upthread mentioned that we didn't actually contract with him for those bonuses, but I thought that was in the spending/TARP bill specifically?
posted by lysdexic at 1:03 PM on March 25, 2009 [1 favorite]


*cough*

If you find their overall way of doing business repugnant then you should not work there. If they are doing illegal things then you should do the right thing and report them.
posted by phearlez at 1:06 PM on March 25, 2009


jonp72: "Are you saying Obama shouldn't try to do the best he can, while simultaneously making sure that he gets re-elected?"

I think we simply differ on what "best he can" amounts to in this context.

To quote Atlas Shrugged - largely because it will irritate people...

I'm a practical man, Mr. Thompson. I don't think it's practical to establish a person whose sole means of livelihood is the breaking of my bones. I don't think it's practical to support a protection racket.

To my mind, the best Obama could do would be to use the full power of the Executive - which, as he inherited it from Bush, is almost unfathomably vast - to break these men's balls and put them in federal prison. And if the resulting exposure of how deep our economic rot goes costs him re-election, boo fucking hoo. At least we'll be dealing with reality at long last.

But this whole argument is academic. As I never tire of quoting:

Obama is the perfect embodiment of the system as it now exists. He will challenge it on no issue of importance. To the contrary, he will advance the goals of the ruling class and ensure that the powerful are fully protected. He will lie to you about all of this, as he already has on numerous occasions
posted by Joe Beese at 1:08 PM on March 25, 2009


I blame capitalism.

You can call it "state capitalism," but really it's all capitalism's doing that makes these problems possible - not the state (i.e. democracy). Capitalism sucks. We need a different system, one that doesn't make the same mistakes (severe inequality, insanely unjustified compensation or under-compensation, crisis driven thinking/reactions, rewarding malevolence, anti-progressive tax schemes) that this one did. You need a system that honors production of real goods, that is equitable for all, and that does not allow for legalized thievery. We were headed in the right direction after WW2, we've been dragged backwards to the 1920s by a certain crowd that has far more influence than it ought to - my 2 cents.
posted by peppito at 1:14 PM on March 25, 2009 [1 favorite]


I understand both the people who are furious over the bonuses and the people who are disgusted with the populist rage. I actually think both moods are not just reconciliable but also necessary for our country right now, because they highlight different problems.

America faces two problems simultaneously: we are in a short-term economic crunch, but we got there because there were certain structural weaknesses that we've encouraged, not curbed. The populist outrage, it seems to me, is basically short-term thinking: people are mad because recently these companies lost money but the employees still got paid large salaries. The anti-populism side (for lack of a better descriptor) is pointing out: yes, this company lost money, but in the long term, we need the company to continue to exist, and that means it will need to continue employing trained professionals.

What I'm missing in this discussion is a sense of the common ground: we have to plan for both the short term and the long term because both are going to happen eventually.

Our economy reminds me of a cancer patient who has just gotten stabbed repeatedly: we desperately need to act using triage principles. Yes, we want to get rid of our various cancers as soon as possible, and oh, sure, its tempting to go in there now while we can see them - I mean why cut another hole later when there's already a hole there now? - but it wouldn't do anyone any good to let us bleed to death in the name of beating our cancer. The first thing we have to do is to stabilize.

In the short term - in my opinion at least - it would do us good to listen to the people with the long-term view. These bonuses are pittances, and we cannot afford to jettison the entire staff of these too-big-to-fail companies no matter how much they suck, because that would destabilize them even more and cost us all so much more, both directly via taxpayer funds and indirectly via economic harm. But in the long term we need to listen to the populist rage, because those people do suck and the system will never get better with them at the helm, because they seem to lack common sense and basic ethics.

To many, this AIG bonus stuff seems silly and manufactured, which on its own, it is; but as a symbol, it represents a lot more. Mostly, I think this is just a convenient shorthand to refer to a specific problem, and that problem is one we can ill-afford to forget about. Because it is, on its own, so minor, it would be silly to use this as an excuse to stifle our plans for short term stability and cashflow. But because this stands as an example of a systematic problem, we have to act with the knowledge that while patching up a broken machine is sometimes necessary, perpetually throwing good parts into a terminally broken machine is just a waste of money.

Look: it took years for this crisis to come to a head, and its going to take years to fix itself. And maybe Obama hasn't been perfect, but he hasn't even been in office three months yet. He's learning, things actually are slowing getting better, and the more he learns, the faster things will get better. So let's back off for awhile and see if his plans work.

But let's not back off so much that these in-bred Wall Street cronies get to walk away with all our money and nary a dent in their hides.
posted by Kiablokirk at 1:32 PM on March 25, 2009 [3 favorites]


To my mind, the best Obama could do would be to use the full power of the Executive - which, as he inherited it from Bush, is almost unfathomably vast - to break these men's balls and put them in federal prison. And if the resulting exposure of how deep our economic rot goes costs him re-election, boo fucking hoo.

We're on the same page as far as breaking Wall Street's balls are concerned, but seriously, "Boo fucking hoo?" You sound like those Floridians who voted for Nader over Gore, because "It couldn't get that much worse, could it?" Oh, it did... It could get a lot worse.
posted by jonp72 at 1:36 PM on March 25, 2009


1. As a banker, Malor's credentials to discuss this are impeccable

I'm not a banker, lupus_yonderboy! I'm just an amateur. I have no special qualifications other than a great deal of reading and paying attention to the actual numbers. A great deal of what I say is regugitated from those who understand better than I do.

He may be right. I may be an internet crank. I don't think so, but does any crank ever think so?

That said, I desperately hope he's right, and that I AM off my gourd. My fundamental assertion is that what's wrong with us is monetary disorder -- too much debt/money/money-like things, too little actual wealth. If I am correct, the eventual outcome of the bailouts will be dire. Being an Internet nutcase would be tremendously better.

Mutant is a banker. He's one of those who has been most scornful of my position, and one of those who has been most consistently wrong.
posted by Malor at 1:36 PM on March 25, 2009


Mutant is a banker. He's one of those who has been most scornful of my position, and one of those who has been most consistently wrong.

Most consistently wrong? About what, exactly?
posted by Perplexity at 1:48 PM on March 25, 2009


Actually, AIG in its current form is eventually toast, no matter what. Uncle Sam is just trying to wind things down slowly and carefully enough that the worst-case-scenario described in this other related thread doesn't happen. AIG's immediate collapse would represent a much farther reaching problem than just impacting those who play insider baseball.

Not to take that as a given is silly. Bonuses for retaining people are not the point. I don't even hear that argument from AIG--from their side, it's all about meeting their existing contractual obligations.

Joe Beese: This is BS. Have you even paid a damn bit of attention to what Obama's been doing, other than what the WSJ op-ed echo chamber that passes for an American media spends all its time chattering on about? Like his reversal of Bush's EPA fuel efficiency policies? His change of policy on stem cell research? His reinstatement of planned parenthood funding? His change in the way his budgeting requests were made to fully account, for the first time since they began, for the actual costs of the wars in Iraq and Afghanistan instead of using Bush accounting tricks? His policy commitment to withdrawing all troops--not just "combat troops," but every last one of them--from Iraq by the end of 2011? His complete reprioritization of the federal budget to create a universal healthcare plan and to increase education spending?

Damn, it's like you people want to fail.
posted by saulgoodman at 1:54 PM on March 25, 2009


Like "cotillion." And "brazillion." And "nathanfillion."

I don't have anything against the Brazillions, but shouldn't you be including other Platinumericans?
posted by oaf at 2:05 PM on March 25, 2009


From the letter: "I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P."
Y'know, I'm proud of a lot of things I've done in my life. "Proud" is not the word I'd use if my job was all about a big paycheck. Like, what, he's a firefighter or something?
I don't know much about the situation with AIG, et.al. But I don't think our asses are being saved. Seems to me, since it's our money, we're saving ourselves. These guys are just along for the ride. Is the greed so ingrained they can't see that?
posted by Smedleyman at 2:07 PM on March 25, 2009 [1 favorite]


Is the greed so ingrained they can't see that?

That's rhetorical, right?
posted by ryoshu at 2:08 PM on March 25, 2009


saulgoodman: "Have you even paid a damn bit of attention to what Obama's been doing... His change of policy on stem cell research? His reinstatement of planned parenthood funding? ... His policy commitment to withdrawing all troops--not just "combat troops," but every last one of them--from Iraq by the end of 2011? ... it's like you people want to fail."

How ever many brownie points you'd like me to award the President for not being an anti-science, enforced-pregnancy Jeebus freak, consider them awarded.

As for his policy "commitments"...
posted by Joe Beese at 2:09 PM on March 25, 2009


AIG's immediate collapse would represent a much farther reaching problem than just impacting those who play insider baseball.

Prove it. Seriously. You know, with numbers and quantitative analysis.

News to the world: governments lie. They lie about WMD and they lie about the immanent catastrophe of not bailing out companies like AIG.
posted by ornate insect at 2:17 PM on March 25, 2009 [1 favorite]


ornate insect: did you see the TED Spread when Lehman collapsed? It's not too much of a stretch to say it'd be several times bigger (if not an order of mangnitude) because AIG is more interconnected. Not only do they run a crapton of crazy-complicated CDSes, they also are well-connected to middle-america, in that their "real" business is directly involved with pension funds, &c. You don't need further quantitative analysis to see that playing that game is unimaginably risky.

Just because some 200-odd executives get to run away with millions is unjust and annoying, doesn't justify replaying a significantly worse September 2008.
posted by amuseDetachment at 2:29 PM on March 25, 2009


AIG's immediate collapse would represent a much farther reaching problem than just impacting those who play insider baseball.

Prove it. Seriously. You know, with numbers and quantitative analysis.


Saulgoodman already linked to it upthread, but Ironmouth has already discussed the bad outcomes that could result if AIG defaulted on a massive scale in this post here. The basic gist is that AIG is the guarantor for the bonds held by numerous bondholders, including municipal governments, universities, school districts, transit authorities, airlines, railroads etc. etc. If AIG goes down the crapper, all these institutions will go down with them.

The fact that Ironmouth's analysis is not quantitative does not make it any less valid.
posted by jonp72 at 2:36 PM on March 25, 2009


amuseDetachment--I'm not in it for revenge, and I'm not denying letting AIG fail would cause ripples, but there is a total lack of detailed quantitative analysis to determine what its failure would mean--specifically whether its failure would be as risky, all things being equal, as continuing to pump vast sums of capital into it. If someone can convince me that AIG's failure would be catastrophic using actual analysis, I would be prone to agree. But so far most of the prognosticated doom from such a choice is being taken at face value.
posted by ornate insect at 2:37 PM on March 25, 2009


The fact that Ironmouth's analysis is not quantitative does not make it any less valid.

Yes it does.
posted by ornate insect at 2:37 PM on March 25, 2009


Everything else aside, though, this letter really is written by a douchebag who can't see the writing on the wall. I'm not even talking about his opinions vis a vis AIG: I'm talking about his inability to see the role the media is playing in this mess, and feeding into its worst instincts by using the NYT to put a human face on this mess.

Its fine if the media wants to cover dumb drunk celebrities as personality driven stories.
Like most people of inherited wealth, Paris Hilton is a vestigial organ irrelevant to the functioning of the American body. She is like nipples on a man, or the nub of a tailbone we have tucked under our skin. Talk about her sense of entitlement all day, and I'll just shrug - but that is NOT the way we need to discuss this. This is too important of an issue to be reduced down to "This person is obnoxious! Get rid of them!" And by writing a self-entitled article and putting it in the biggest paper in America, this guy has basically climbed onto a rooftop and said "Hey! We're so obnoxious that even when we're trying to be contrite we end up pissing you off!"

Right now, arrogance or greed or any other personality trait is secondary to competence, but the media is not talking about who is competent and who isn't; they are talking about who is a jerk, because they aim to give people what they want and right now people want to yell at someone. (Hell, I want to yell at someone.) And I understand that he was just trying to help people calm down, and to point out that not all AIG people are monsters, and that some of that money went to charity, etc. etc. But we need to start talking about the unsexy stories, the bottom of it all systematic issues, and so by running out there and re-igniting the debate about who is a bastard and who isn't, and putting us back into the realm of personality conflicts, he's actively keeping us from getting anywhere. It wouldn't matter what in the hell the guy wrote, because it was a counterproductive project to start with.
posted by Kiablokirk at 2:39 PM on March 25, 2009 [3 favorites]


There is no such thing as 'fairness' in terms of what people get paid. People get paid what the market will bear for their services. That's simply the reality of the world we live in. To expect otherwise is to reside in fantasyland.

When the market's being lied to (as is the case here—they were pretending to create wealth while actually doing fuck-all on that front), the market is fantasyland. I'm in the real world, and a well-informed market here wouldn't pay these people anywhere near this much.

We're just teaching anyone who can grasp the lesson that cheaters do, in fact, prosper.
posted by oaf at 2:42 PM on March 25, 2009 [1 favorite]




how are you going to get nationalization passed through a Senate with a filibustering obstructionist Republican caucus that would rather drive the economy off a cliff than have Obama succeed?

Remind the Republican minority in the Senate that if they filibuster while Rome burns, it will make them (and their fellow members of the Grand Obstructionist Party) a lot easier to pick off when they next come up for re-election.

I really don't know why Harry Reid hasn't gone in there, introduced the plan, and sat back and watched as the Republicans actively worked to destroy the country, live on C-SPAN2.
posted by oaf at 2:51 PM on March 25, 2009


What would we think, for example, if we discovered that the Bush Administration had been secretly lending hundreds of billions of taxpayer dollars to their friends to participate in a highly speculative investment scheme? Some of the friends turned out to be former colleagues and mentors at private equity and sovereign wealth funds, and most of the money came from subsidized interest rates on non-recourse loans from the FDIC, so that if the investments went bad, the private investors could walk away with only minor losses while leaving the Treasury stuck with the bad investments? But if the investments became profitable, the private investors would have leveraged massive US dollars and become obscenely rich.

I'd still like to think if we discovered this had been going on, Congress and the public would demand the resignations of every responsible official. There would have been calls for criminal investigations of the extent of corruption and collusion in the scheme to loot US taxpayers.

How naive I once was. The Obama Administration's position is that if you set up this speculative looting scheme to occur in broad daylight, and claim it will unclog bank lending, it's okay.

posted by Joe Beese at 3:20 PM on March 25, 2009




there is a total lack of detailed quantitative analysis to determine what its failure would mean

What kind of quantitative analysis could there possibly be, on either side? We can only look at past events, and attempt to draw comparisons. People on either side of the bailout proclaim that we should or shouldn't do it, but there's no proof on either side for which is the "right" position. Markets (and the convergence of markets with government and society) are not closed systems, and we can't build mathematical proofs for them.
posted by me & my monkey at 3:51 PM on March 25, 2009


I'll be at work for a couple of hours tonight on my econometric analysis paper on AIG and its effect on the entire global economy, and should be able to submit it to ornate insect by tomorrow morning. It will only be a preliminary working paper, however. Hope that's OK.
posted by raysmj at 4:01 PM on March 25, 2009


I'll be at work for a couple of hours tonight on my econometric analysis paper on AIG and its effect on the entire global economy, and should be able to submit it to ornate insect by tomorrow morning. It will only be a preliminary working paper, however. Hope that's OK.

I look forward to reading it. ; )
posted by ornate insect at 4:14 PM on March 25, 2009




Let's try that again:

Is the greed so ingrained that they can't see that?
posted by vibrotronica at 4:18 PM on March 25, 2009 [1 favorite]


On the tax issue: yes, most people pay over 30% in taxes. But of the total income taxes received, most of that, over 90% of it, comes from the top 50% of taxpayers. This is because not every american makes the same amount of money. The very very rich are responsible for a disproportionate amount of the total taxes received.

Again, due respect, but how is the tax burden of the ultra-wealthy in any way 'disproportionate?'. What better way to apportion income tax than by percentage of income? The very very rich are responsible for an absolutely proportionate amount of the tax base, as are the very very poor, and everybody in between.
posted by JohnFredra at 5:16 PM on March 25, 2009 [1 favorite]


huh, roubini and i think alike :P
I see the Geithner plan as being relevant only to banks that are solvent. For those that are found - after stress tests - to be insolvent I see as the proper solution - -as I have widely written - to nationalize them and thus clean them up to prepare them for re-privatization.

The stress test should do a triage between banks that are illiquid and undercapitalized but solvent given the provision of capital and liquidity and those that, under a reasonable stress scenario are effectively insolvent. Those that are insolvent should be nationalized.
time to get my walls indented with plaster vulvas i guess! (to go along with the penis roof)

as for tax reform, i'm partial to the aleph's idea: "Far better that we should get true tax reform, where the clever rich who have hidden their assets from taxation so long, like Mr. Buffett, should pay their fair share. Washington, you want real tax reform? Tax us all on the increase in net worth, and listen to the wealthy scream. They have gamed the system for too long."
posted by kliuless at 5:33 PM on March 25, 2009


If I give someone money, I figure they're working for me. What seems to get in the way is this sense of entitlement. I really don't know where it comes from. Certainly there are systemic issues, the mechanics, to address. But some people genuinely seem to think they did it alone, that they're worth all this dough. Funny, I was in the ER, every other word out of my mouth was 'thank you.' Here are people who've made it their life's work to compassionately help people when they're sick or injured. And yet, there are people there bitching about not getting this or that, not listening. Amazing.
But it's the same thing. Some people want more attention, money, comfort, whatever. Mostly based on fear. Of the unknown I suspect, because they've never been hungry or really in need. And it gets codified. Writ into law. An economic system.
Whatever else we're talking about (and I admit my ignorance to 90% of it) we're still talking about conceptual frameworks invented by people. So it's subject to human prejudice and failings from the foundation.
posted by Smedleyman at 5:59 PM on March 25, 2009


The whole bonus brouhaha is nothing more than a convenient distraction for press and politicians who are scared to death that they have no remedies for our very real financial mess.

Of course we have remedies:

1) War on Communism
2) War on Terrah
3) War on Drugs
4) Let's go whoring

Choose two.
posted by jsavimbi at 8:34 PM on March 25, 2009


There are lots of comments here, and I haven't read them all, but I was disappointed to do a search for the word 'wanker' and come up blank.

The disingenuousness of this guy is breathtaking. There's three short paragraphs between distancing himself from nameless CDS offenders, and him claiming some credit for the paper profits made when times were good. I hope he's being dishonest here, and not just stupid.
posted by pompomtom at 10:21 PM on March 25, 2009 [1 favorite]


This guy is not quitting because he didn't get his bonus. He's getting it. He's, in fact, quitting as early as possible while still being eligible to receive that bonus. He was only there for the money, and as soon as it became less-than-astronomical he got the hell out of dodge. I don't care about the quantity of money, nor about the contracts; the level of disloyalty this guy has just displayed is disgusting.

A better analogy would be: a fireman who's working to dig out people from the rubble of 9/11 quits and walks away because his boss wasn't real prompt with the paycheck.

His donation offer is nothing more than weregild.
posted by breath at 11:26 PM on March 25, 2009


Dear Mr. DeSantis,

You say you have worked at AIG for eleven years. Please total up the amount of compensation you've received while working there, and divide that number by thirteen. I suspect you'll find you will have been richly rewarded for your hard work even if you spend two more years working there without receiving another paycheck.

That's what this comes down to. You didn't earn the vast sums you made in the years before this collapse. Those numbers on your paycheck were spurious, an exaggeration... a fantasy. This has nothing to do with your personal performance, which I obviously can't speak to. For all I know, you should have earned more than that for your singular and unparalleled genius. However, the money you specifically received from AIG might as well have been in neat stacks of three-dollar bills.

Well, except for one thing: it was still real money, money you still have in amounts far exceeding what is necessary to live an aggressively comfortable life. You'll forgive us, then, if we don't make your further success our first priority. There are people out there who are truly struggling, and they have neither the luxury of quitting on principle, nor the media platform to have their objections heard.

You spent years collecting from a broken system, and if your expertise is as you describe it then you should have known better. That you would then expect to keep collecting once that system collapsed is appalling to the rest of us. You and your peers are being persecuted because, as far as I know, not one of you offered to scale back your bonuses once you realized they were going to be fronted by the taxpayer. None of you offered to donate the bonuses to charity before it became politically expedient to do so. You all appear to have acted, as so many in your industry, in your own direct interest with no mind for the big picture.

That's the kind of reckless behavior that got us into this crisis, which is why it's been so easy for people to vilify you when the blame should have more rightly gone to your predecessors; you're not showing any signs that you'd have done anything differently if you were in their shoes.

I make no apologies for the histrionics of many of the public, and some of our elected officials. The threats to your safety, to your lives, are indefensible. And yes, perhaps debate over this tiny percentage of the overall bailout is not the most effective use of our resources.

On the other hand, perhaps it is. Perhaps a little populist outrage will remind you and your compatriots that the real world doesn't run on derivatives and securities. Maybe we just need to plant a seed in your minds that you should give a damn about the flaws in the system before it all falls apart next time, rather than trying to secure your own future while leaving the rest of us to pick up the pieces.

I hope you read and reread this entire letter. I'd assume you'll have the free time to do so these days.

Sincerely,
Some Guy on the Internet
posted by Riki tiki at 7:35 AM on March 26, 2009 [8 favorites]


All this outrage. My goodness! I hear outrage everywhere. Even Republicans are expressing outrage!

Know what? It's called faux populism. It's an old trick. You-know-who used it, big time.

Go ahead people. Be pissed off. REALLY PISSED OFF! It feels good? YOUR ANGER WILL MAKE YOU STRONG!

Lucas called it the darkside. Attractive, isn't it? How does it feel to play right into the hands of the enemy?

I know, I know. You don't feel like that's what you're doing. You feel justified! Of course. That's what makes it so effective.

Many of you fanning these flames are arguing out of pure ignorance. Hey, what's a body to do, right? You're pissed! It's reasonable to be pissed, too true, too true. So quit chasing after poor old Unc, and get truthed. These aren't the droids you're looking for.
posted by Goofyy at 9:07 AM on March 26, 2009


So quit chasing after poor old Unc, and get truthed.

Yeah. Wake up, sheeple!!!!!1!
posted by Nelson at 9:20 AM on March 26, 2009


It's an old trick. You-know-who used it, big time.

Way to Godwin it, Goofyy!
posted by Mental Wimp at 9:36 AM on March 26, 2009


"Lucas called it the darkside. Attractive, isn't it? How does it feel to play right into the hands of the enemy? "

Really? That's where we're going now, looking to George Lucas for wisdom?
posted by krinklyfig at 10:09 AM on March 26, 2009


Really? That's where we're going now, looking to George Lucas for wisdom?

Meesa say AIG douchebags should keepsa all the monies theysa get! /Jar Jar
posted by ryoshu at 10:25 AM on March 26, 2009


The way I see it the financiers of today have much in common with the alchemists of the 15th and 16th century. They are both experts in fields that have only a passing resemblance to the reality that they attempt to describe. Derivatives and credit default swaps are ingenious attempts to turn lead into gold. It's possible that if they just add more phlogiston to their risk models we might all just get rich next time.
posted by jefeweiss at 11:01 AM on March 26, 2009 [2 favorites]


Matt Taibbi reacts to the letter. He's moved.
posted by Kirth Gerson at 1:10 PM on March 26, 2009 [3 favorites]


Related: Another recent open letter concerning bonuses.
posted by saulgoodman at 1:27 PM on March 26, 2009


Actually, I guess that one's not so much an "open letter" as a letter to the administration, but it's all good.
posted by saulgoodman at 1:38 PM on March 26, 2009


Wait a minute. Dude got his fucking bonus, didn't he? Reading this thread you get the impression the guy was paid $1 for a year's work and had his precious bonus stolen. Not so. He cashed out, and felt compelled to huff about his moral high ground as he ran.

He writes:
After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
The take-away seems to be
  • he worked a year for a $1 salary out of a sense of duty (and repeated promises to get a $750,000 bonus post-tax retention payment in march 2009).
  • Now it's march 2009: it's become clear he won't see any future bonuses, but
  • HE GOT THE FUCKING BONUS MONEY! Right?!!
  • He quits now because he was asked to repay the money (and who knows, if he stays maybe he'll have to sign away the money). Also, he doesn't want to work for $1 anymore -- sense of duty fulfilled.
  • He says he intends to donate his bonus to charity.
He's pissed off because:
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
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.
But he got paid. As promised! He was then asked to pay it back (because he and his 399 AIG-FP accomplices helped bleed the biggest fucking economy in the world dry). The fucking audacity of the elected officials searching for ways to set things right. Naturally he refused. He'll use his money as he sees fit! And to create the impression he has a soul, he says he intends to donate the money to those suffering from the economic "downturn."

And he wants you to know it too. Writes about his "sense of duty," and helping victims of the "downturn."

What a cocksucker.
I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Sincerely,
Jake DeSantis
if this is the smallest of fishes in this enormous crimesprea... I hope you Americans stay furious, get even more furious, and rework your entire financial system 'til none of these bastards are left standing.
posted by Glee at 1:52 PM on March 26, 2009


Another open letter.
posted by ryoshu at 2:31 PM on March 26, 2009


I guess this was the most satisfying part of Matt Taibbi's rant:
Hey Jake, it's not like you were curing cancer. You were a fucking commodities trader. Thanks to a completely insane, horribly skewed set of societal values that puts a premium on greed and severely undervalues selflessness, communal spirit, and intellectualism -- values that make millionaires out of people like you and leave teachers and nurses, the people who raise your kids and clean your parents' bedpans, comparatively penniless -- you made a lot of money.

posted by Mental Wimp at 2:50 PM on March 26, 2009 [3 favorites]


I love it when he gets all sentimental like that.
posted by Kirth Gerson at 3:17 PM on March 26, 2009


The Greater Greed -- "Wall Street didn't invent excess. It just upped the ante."
posted by ericb at 3:34 PM on March 26, 2009


I guess this was the most satisfying part of Matt Taibbi's rant:

Hey Jake, it's not like you were curing cancer. You were a fucking commodities trader. Thanks to a completely insane, horribly skewed set of societal values that puts a premium on greed and severely undervalues selflessness, communal spirit, and intellectualism -- values that make millionaires out of people like you and leave teachers and nurses, the people who raise your kids and clean your parents' bedpans, comparatively penniless -- you made a lot of money.


Wow, that was great.
posted by peppito at 5:47 PM on March 26, 2009


Glee, he's pissed b/c the administration is asking him to give it back. And even if he doesn't, congress might pass a bill that will tax the bonus at as high as 90% (on the portion raising his salary above 250k). Since he cleared 700k+, I think it's safe to say his bonus was already well above 1 Million. So instead of pocketing 700k, he's looking at roughly 250k take home during the worst company 1 year performance in history? (250 taxed at 33%, leaving 167k, plus 10% of whatever he received past 250, I'm estimating another 900 or so).

Anyway, I'm against the tax. I'm all for restructuring the contracts, but this is the wrong way to go about it.
posted by ShadowCrash at 11:14 AM on March 27, 2009


Glee, he's pissed b/c the administration is asking him to give it back.

No, he was asked to consider giving it back--not by force, but voluntarily--because the entire nation's economy is in crisis and he happens to be one of the nation's most fortunate citizens.

In the past, it would have been viewed as vulgar and scandalous for a member of the upper-class not to have such an impoverished sense of honor, public duty and noblesse oblige.

It should be viewed as an honor to be called upon personally to direct the benefits of one's privilege to furthering the public good in times of crisis.

But these days, the American upper-class is comprised of nothing but traveling salesmen and cheap confidence men, so it only makes sense one of them would be so incapable of seeing just how dishonorable and fatuous his dramatic gestures and public statements really are.
posted by saulgoodman at 1:27 PM on March 27, 2009


oops. that's: "...it would have been viewed as vulgar and scandalous for a member of the upper-class not to have such an impoverished sense of honor, public duty and noblesse oblige."
posted by saulgoodman at 1:28 PM on March 27, 2009


ShadowCrash, ok that makes it a little clearer. And I can see how one can be against this taxing-after-the-fact, even the breach of contract issue.

If I compare the situation to "Eminent domain," would that make sense? (I'm trying to understand all of this myself, not condescendingly ask-tell anyone what's what.)

DeSantis myopic lashing out at the mere suggestion to pay the money back, as the entire world quakes around him because of the game his cabal played. It really sticks in my craw, and I sit comfortably employed (for the time being) here in Sweden, way away from the epicenter. You Americans directly effected by these shenanigans, I'm astonished at the relative level-headedness. Don't you people normally start wars at the drop of a hat?! ;)
posted by Glee at 5:11 AM on March 28, 2009


We don't. They do.
posted by Kirth Gerson at 5:14 AM on March 28, 2009


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