Tuesday, 31 March 2009

Catching up on this whole AIG thing

The fiasco over the AIG bonuses is worth looking into, since pulling a stunt like this might be the sort of thing Rudd stoops to if he gets in a jam.

Let me see if I have this right:

  1. One part of a division of AIG fucked up in a major way. They lost the company tens of billions of dollars on bad contracts.
  2. All those contracts were overseen and approved by the US government regulator, and various EU financial regulators as well. There was nothing illegal or "slippery" about them.
  3. AIG executives made large donations to various politicans. The two that got the most in donations were Senator Barack Obama (Democrat) and Chris Dodd (Democrat, and Chairman of the Banking Committee that oversees the financial industry, which includes AIG). Obama and Dodd both recieved over $100,000 from AIG executives.
  4. When AIG went down the shitter, and the government stepped in to bail them out, the AIG managers that had fucked up were all fired. Some managers that stayed behind to try to salvage the wreck volunteered to work for a salary of $1 per year, and to recieve a bonus if they did a good job in retrieving any value (thus limiting losses to the taxpayer)
  5. Chris Dodd (Democrat), as Chairman of the Banking Committee, inserted specific clauses into the Stimulus Bill to ensure that those AIG staff who were entitled to bonuses would still recieve them - even after the government pumped in a supertanker full of cash.
  6. Nancy Pelosi (Democrat) rammed that Stimulus Bill, with Chris Dodd's little clause, through the House of Reps will little review or debate. It had to be done NOW NOW NOW.
  7. Harry Reid (Democrat) then rammed the bill at full speed through the Senate. No hearings were allowed, which might have uncovered gems like the bonus clause.
  8. President Obama (Democrat) then rushed to sign the bill, which included the bonus clause.
AIG then goes to pay the bonuses, and suddenly the poo hits the fan. Dodd, Pelosi, Reid and Obama suddenly think that the AIG executives, working for a salary of $1, and with valid contractual bonus arrangements and recently passed legislation to cover the payment of those bonuses, are the Spawn of Satan. And they didn't know anything about the bonuses in advance etc etc etc. So now the executives have to pay the bonuses back, or have them taxed to almost nothing.

Will those executives on $1 at least be back-paid a salary? It would be funny if the back-paid salary equalled the amount they would have recieved as a bonus, but at least Obama etc would be covered because it would no longer be a "bonus", it would be a salary. As if there is a difference.

This kind of mob-driven populist nonsense worries me. The fact that Dodd, Pelosi, Reid and Obama could ram through a huge bill without being aware of the contents is even more of a worry.

Be very aware of people in a hurry. Their mistakes are likely to be enormous.


An Irritating Truth said...

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


This article really made me stop and think.

I was one of the people railing against AIG.

What the media failed to tell us is that the people responsible for the credit default swap transactions had "left the company and have conspicuously escaped the public's outrage;" - that many senior level employees agreed to work for an annual salary of $1, "out of a sense of duty to the company and to the public officials who have come to its aid."

I never really thought that AIG employees may actually really deserve the retention payments which AIG is now urging them to repay the federal government in the face of political pressure.

Surely Jake DeSantis is not the only employee to be financially affected by the crisis.

DeSantis lost a significant portion of his life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of the credit swap losses.

I'm still unsure where I stand on this issue but it definitely gives us pause for thought.

Like most cases it's the hard working employees that may suffer as a result of this decision, not senior management, and not those that were responsible for this catastrophe in the first place.

Realtor from Vancouver said...

1) check
2) check
3) check
4) check
5) check
6) check
7) check
8) check

Seems like we came to the same conclusion..

Take care,