AIG Executive Resigns Over Bonus Issue
I’m sure a lot of AIG executives have done that, but this one wrote an op-ed about it in the New York Times:
DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:
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.
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.
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. 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. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
Blogger reaction ranges from outraged on behalf of Mr. DeSantis and other AIG executives on the right to sympathy for DeSantis and understanding of why he is angry, mixed with skepticism about the larger issue of retention bonuses, on the left.
Scott Johnson at Power Line calls DeSantis’s resignation a “cause for shame for the politicians and pundits hounding AIG in connection with its payment of retention bonuses. It eloquently articulates the disgust appropriate to the occasion.”
Megan McArdle mocks the criticisms of AIG which, in her view, have been definitively debunked by DeSantis’ op-ed:
Of course the AIG bonuses should go back! They were paid to people in the very group that lost money! They were paid to people who have already left the firm, putting the lie to the idea of retention bonuses! Also, they couldn’t get jobs anywhere else anyway, so retention bonuses are unnecessary! And it’s all just unmitigated greed! They’re lucky to have jobs at all! They should be volunteering to work for free, wearing sackcloth and ashes, and grovelling on the ground in front of every taxpayer they can find, begging for forgiveness!
Ed Morrissey declares that Jake DeSantis and his colleagues still at AIG are the only ones who understand AIG’s business well enough “to get value back out of it,” and he adds that it’s a “load of crap” to say that public outrage over the retention bonuses is “understandable.”
The US has invested over $150 billion in AIG, expecting to get at least some of that value returned. If not, we could simply have made direct payments on behalf of AIG to its creditors and allowed the company to go bankrupt. In order to get value back out of the company, we need to have people on board who understand the complicated financial provisions of AIG’s problems and can apply the investment towards resolving them. In other words, we needed Jake DeSantis on that wall, and we just did everything we could to knock him off of it, along with the rest of his colleagues.
People have been calling the AIG bonus outrage “understandable.” That’s a load of crap. It springs from a fundamental lack of understanding in Congress about the business world and an almost criminal lack of curiosity about the nature of retention bonuses in general, and these retention bonuses and their recipients in particular. The screeching and hollering was only “understandable” as complete and total ignorance and stupidity. And that’s not even accounting for the fact that Treasury, Congress, and the Obama administration knew all about these bonuses long before being “outraged” by them.
Andrew Leonard at Salon understands the frustration of people who feel they are being demonized for the immoral acts of others, but… on the other hand… cry me a river:
DeSantis declares himself “disappointed and frustrated” at AIG CEO Ed Liddy’s failure “to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments.”
If the scenario that DeSantis describes is accurate — the real villains, the credit swap traders who bankrupted AIG, are mostly long gone from the company and those who were promised bonuses are hard at work trying to shut down the company, but are getting unfairly blamed — I think anyone can understand some level of irritation. But DeSantis’ revelations about his own lifestyle are not going to assuage much of the anger out there.
DeSantis received a bonus payment on March 16 of $742,006.40. But he’s going to donate all the after-tax proceeds to charity, and he can do that because “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.”
If you are in a position to donate more than half a million to charity and your family finances are still secure enough during one of the worst recessions in American history that you can blithely quit your job, then you are sitting squarely within the most privileged sector of U.S. society. You are still living a life that is out of reach to the vast majority of Americans.
And I just don’t think most people will care how betrayed you feel. Cue the violins.
Noam Scheiber has mixed feelings:
His resignation letter to AIG CEO Ed Liddy is certainly a fascinating document. On one level I’m open to the guy’s claim that there were honest, hard-working people at AIG FP who had nothing to do with the credit default swaps that nearly leveled the company (basically insurance for assets backed by subprime real estate loans).* On the other hand, however honest and hard-working some of these people were, and however far removed they were from the lousy decisions made at AIG FP, it’s just not politically tenable for employees of the unit behind its parent company’s problems to receive hundreds of millions of dollars in bonus money while the parent receives a government bailout now worth around $200 billion.
I guess I ultimately blame Liddy. If the AIG FP people had thought about how this would look to the outside world, it’s hard to believe they wouldn’t have grasped the problem immediately. But, then, it’s not their job to think about how it might look from the outside. That’s Liddy’s job. And yet, as the writer points out, he either didn’t think about it or did and just didn’t deal with the obvious upshot. …
Liddy needed to preempt the problem by renegotiating the bonuses in a way that would have been less offensive to the people paying them (I suggested a model here). Instead, every action he took seemed to reassure the AIG FP employees that there was nothing to worry about. It sounds like the letter-writer is basically blaming the right person.
*I say this without knowing how productive these people’s efforts were in economic terms, which is a separate question entirely.
Lambert at Corrente thinks simple questions have simple answers:
You’ll have to go over and read the rest to find out what the longer answer is.