Indeed,
this is a capital idea. In light of AIG Financial Products to
continue paying exorbitant bonuses, reining them in is hardly sufficient. Immediate dismissal is actually called for.
If only it were so. If only it were so easy as that.
Edward M. Liddy, chairman and CEO of American International Group sent a letter to US Treasury Secretary Timothy Geithner explaining "why" AIG found itself in the untenable position of having to pay "retention" bonuses to the scam artists who ran the (cough) financial products mob of AIG.
The Financial Post, a birdcage liner contained in the National Post, headlines Liddy's letter with,
AIG must keep its word on bonuses.
Um... it's unclear as to whether the FinPo's headline is a sentiment supporting Liddy or whether it is simply repeating the tone of Liddy's remarkable line of bullshit. There is no comment from the editor either way.
So, the first question must be - Why?! AIG didn't keep its word to any of its clients and investors. It knowingly sold toxic products it couldn't clearly explain to customers all over the world. Those products were not what AIG claimed them to be. Why is the CEO of AIG suddenly so concerned about "keeping his word"?
In the first quarter of 2008, prior management took significant retention steps at AIG Financial Products. These arrangements were designed at a time when AIG Financial Products was expected to have a significant, ongoing role at AIG and guaranteed a minimum level of pay for both 2008 and 2009. (Due to losses at AIG Financial Products, a senior manager will receive about 43% of his 2007 expected level for 2008.) Some of these payments are coming due on March 15, and, quite frankly, AIG’s hands are tied. Outside counsel has advised that these are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying.
Oh... Hector, don't step in that. It'll stick to your shoe!
The CEO of AIG doesn't seem to get that others who have received or are begging to receive corporate welfare at the hands of the American (and other nations') taxpayers are expected to renegotiate labour agreements with their employees. In the case of at least one automaker, those receiving a pension are to be whacked and whacked hard - without the benefit of being able to vote for or against the renegotiated settlement. And Mr. Liddy can't find it in his guts to demand the same thing from the people who led AIG right down the sinkhole?
Something wrong there. I think I may be getting close to it.
Given the trillion-dollar portfolio at AIG Financial Products, retaining key traders and risk managers is critical to our goal of repayment. This is all discussed in more detail in the attached “white paper.
Interesting threat! Wow! If you don't let me overpay my employees, we won't pay you back.
Honouring contractual commitments is at the heart of what we do in the insurance business. I cannot have our clients lose faith in our desire and ability to do just that.
So, if you are a CEO the formula works this way:
1. We sell you a piece of junk with the label "money market" on it and tell you it is as secure as the Rock of Gibraltar.
2. It failed and we had a pretty good idea this game would run out. We didn't know exactly when but we were pretty sure that when it did, anyone holding our paper was going straight down the tubes.
3. Because we are unbelievably huge and owe more money to our counterparties than any regular calculator has the ability to display, we insist that the US taxpayer bail us out when the game ends and we are exposed for having played a risky, unwinnable and possibly illegal game with our investors money.
4. We have to continue overpaying our executives and key portfolio managers
because our investors will lose confidence in our company if we don't.
Mr. Liddy... what kind of drugs are you using?!!! What confidence,
precisely, are you talking about?
On the other hand, we cannot attract and retain the best and brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of the American taxpayers — if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.
Excuse me? AIG
never had the best and brightest. It clearly had a horde of incompetents, crooks, swindlers and liars running things. And just in case that bunch of lily-assed MBAs haven't quite got the picture yet, they need to be made aware of one important item - they
are being paid by the US Treasury. The option available was to learn to say, "Would like fries with that?"
Apparently the Attorney General of New York
sees things differently than Liddy.
New York Attorney General Andrew Cuomo said he will subpoena American International Group Inc., the insurer that got a $173 billion taxpayer bailout, for information on employees who he said were sent bonuses March 13. Cuomo said in a conference call that the New York-based insurer claims it had to make the retention payments because of employment contracts.
“If the taxpayer didn’t bail out AIG, those contracts wouldn’t be worth the paper they’re printed on,” Cuomo said. “Just because there’s a contract doesn’t mean there’s no way around the contract.”
The attorney general demanded the names of the employees, their positions, job descriptions and information on their performance, as well as their employment contracts and who negotiated them, according to a letter Cuomo sent AIG earlier today. Cuomo said in the letter that he would subpoena the company if he didn’t receive the information by 4 p.m. today.
Hmmm... looks like time in the courtroom is inevitable. And that's what Liddy didn't want... remember?
Why?
Because of the stories that will get told. Those bonuses buy silence. Without them, the flock of MBAs will start to twitter. And since they know where all the bodies are buried I suspect we're in for one helluva horror story.
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