Wednesday, March 25, 2009

Wham

(Hat tip: Mom)

That's all I could think about while reading the op-ed and resignation later to AIG by Jake DeSantis, who slams CEO Ed Liddy for calling "distasteful" the contracts which were promised to employees of AIG - Financial Products repeatedly over the last several months. He also implicitly slams the government for causing this and for their (idiotic) 90% bonus tax.
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.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.
One thing that's always bothered me is the ridiculous claims that "these people are the ones responsible for tearing down the economy". Even if someone wanted to blame the entire mess on credit default swaps (which is simply moronic, as someone who audited CDSs*), every financial company, bank, etc. consists of dozens, hundreds, or even thousands of employees - only a small percentage of which actually carry out CDSs. Within those employees, they are carrying out what seemed to be industry standard work by creating and trading CDS contracts, and rightfully so. This idea of "punishing" people is not genuine at all - it's a thinly veiled attempt at class warfare. Every single person who reads that piece and has already decided that AIG shouldn't get their bonuses will smugly say "what's he complaining about? His last bonus was 3/4 of a million dollars!", ignoring that we're talking about breaking contracts, possibly the single most important section of laws in this (or any) free country. We're also talking about honor, commitment, and fairness.

Every single thing so far with the AIG bonuses has been a smokescreen. This is not about "holding those responsible" for the economic downturn. It's about punitively punishing those who stayed behind to clean up some of the mess. It's about striking at those who make more money than we do**. If you would ask 100 people on the street what they know about AIG, they might say "they sell insurance", and they'd probably talk about how they got outrageous bonuses with government money. Nobody has any clue about AIG - they just know it was "rich people" getting more money, and seemingly from taxpayers (which is also almost all rich people now, but that's a different story). Yes - $165 million in bonuses were handed out, or less than 1/10th of one percent [0.1%, or .001 total] of the $170,000 Million (or $170 Billion) the US government gave AIG. That's a tiny percentage of the money heading to fulfill contractual obligations, while billions (!) will be wasted on things that have nothing to do with obligations or growth or anything of the sort.

When President Obama announced the recent $787 Billion "stimulus" plan, which was criticized as being not stimulating at all but a debt-monger, he acknowledged that it "wasn't perfect" - admitting that hundreds of billions were not going to be used in useful ways in terms of what the bill was about. Perhaps more blatant was the many Billions of dollars in pork projects he waved through, despite campaigning on a promise to never allow pork projects. Billions (!) of dollars, or many times more than the contracts being fulfilled by AIG.

The AIG bonus outrage is class warfare. Let's be honest at least about that much.

* CDSs were effectively insurance on mortgages that were bought by their bank/hedge fund/company and that then turned bad. It would be like people taking out hurricane insurance in Florida, and then having the nerve to actually cash out on the insurance when a hurricane hit. What should they do? Not claim the money which is rightfully theirs?

** It's also about blaming a company which failed primarily because other companies (rightfully) asked for collateral calls that normally would be a cinch to make, then nobody would lend them the money to make the call despite knowing at the time that they'd be able to pay it back (again, rightfully, and they shouldn't have placed themselves so precariously - but that never was an issue until that day).

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