A.I.G.’s Best & Brightest=A.I.G.’s Dumb and Dumbest

A lot of people are fuming today about news that the 400 A.I.G. employees in the company’s London office—the folks who sold trillions of dollars worth of “swaps” that brought the company to ruin and could end up destroying the world economy—are in line to get $450 million in bonus payments.

The legal justification for this idiocy can’t be ignored. These employees have a contractual right to the money, and the contracts were signed before the government was forced to take an 80 percent ownership of A.I.G. . So legally, they probably have to get their money.

What is really infuriating here, however, are comments from the man who is now A.I.G.’s CEO. He stated that we have to keep paying bonuses to the London crowd in the future because to unwind the derivative deals they so egregiously and destructively generated and peddled, these “best and brightest” are needed to do the job.

In what universe does this man reside? His “best and brightest” to the world outside little pockets of a fast shrinking financial realm are now recognized as the dumb and dumbest—as people whose great talent was to produce short-term profits with horrendous longer term outcomes.

A.I.G. is an insurance company. The derivatives churned out by its London affiliate were a kind of alternative insurance for what turned out to be garbage investments. In other words, these “best and brightest” were in fact the worst insurance underwriters in history.

Continue to give them bonuses when the contractual need to do so expires? Why? Does anyone besides top A.I.G. and Treasury officials believe these derivative mavens will leave the company for better jobs if they don’t get mega-bonuses? Who would possible be interested in hiring people who failed so atrociously?

We may have to endure the mess these people and others like them have created. But please, please, please, never use the words “best and brightest” again to characterize this ilk. Too many truly better people have been driven into awful financial straits by their gaming for this woefully outdated terminology ever again to be applied so mistakenly and foolishly.

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4 Comments

  1. As a taxpayer, I want to freeze AIG's assets, disburse the company and liquidate the holdings back into the US. They've failed. When a business fails you don't allow it to continue to steal from you. You reverse the cash flow back to its rightful owners: US. It isn't “too big to fail” because it has already failed. The “too big” is a moot point.

  2. I'm sure there are lots of jobs out there for these “best and the brightest”.

    From the NY TImes:

    http://www.nytimes.com/2009/03/16/business/16ai

    “Mr. Liddy wrote that A.I.G. hoped to reduce its retention bonuses for 2009 by 30 percent. He said the top 25 executives at the financial products division had also agreed to reduce their salary for the rest of 2009 to $1.”

    Earlier the same article said that some executives received up to $6.5 million in bonuses.

    I'm sure that 99% of Americans would gladly work for a $1 salary if they got $6.5 million in bonuses. Particularly if they didn't have to perform very well (or at all) or understand the business. Even a high school drop out janitor has those qualifications.

    If AIG has gone bankrupt and failed, which is what would have happened if the government had not stepped in, those people would not have received bonuses. They should be happy that they continue to have jobs. But no…. To them it's business as usual, though they probably don't feel that way… I'm sure there are some changes, and stress, but certainly no fundamental changes.

  3. I think the problem with the AIG CEO's comments are a little different the one you've identified. AIG's present survival is completely dependent on the goodwill of the taxpayers and their elected representatives. While he may be right that AIG's future survival depends on its ability to attract highly qualified people, it's irrational to sacrifice AIG's survival today to AIG's survival tomorrow.

    And, as suggested above, today isn't like five years ago or even a year ago. It's a buyers' market for talent in the financial services business right now and he should be taking advantage of it by purchasing labor at the best price.

  4. MS has it exactly backward. The people who created the problems shouldn't have gotten their bonuses. Since Congress and the administration didn't address this ahead of the bailout, AIG currently is correct to say that they are legally bound to honor the contracts.

    But AIG should retain the right to award bonuses in the future (I think it's appropriate to tie them to performance, though, not blank checks for nonperformance or malfeasance.) We really do need the best and brightest to be motivated to take the reins.

    The problem is that our politicians either didn't anticipate this or they did but didn't care because it serves them just as well to have the companies award the bonuses and then attract populist wrath. Either way it demonstrates why we shouldn't allow our political class to take over the management of corporations- because they're either ignorant or self serving.

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