Sorry, THING, the problem in Darfur is not the paucity of attempted aid, it is the fact that the ruling regime will not let aid reach the refugees. It’s called genocide, and is outside the scope of this article.
Boy, they say a little knowledge can be a dangerous thing. NO knowledge is even more dangerous.
AIG MUST pay every penny back. If you read the news, you would have noticed almost weekly notices of assets they have been selling off in order to repay.
For the auto cos., if they remain solvent they too must pay it back. In the case of Chrysler, the federal government will own a substantial portion of the company in lieu of paybacks. If FIAT can turn it around, the government could make as big a profit as they did the last time they lent Chrysler money.
I’m truly disgusted with how these companies keep taking taxpayers money and spending it like it was there own!!! Any person who has taken this blood money should rot in hell. Everyone of you’s in AIG should pay the tax payers back for every penny you took plus penalties!!!
Exactly!! If they were allowed to fail, not one bonus would have been paid, but since they were bailed out they had to pay them. We need to start asking our politicans when they are going to worry about their own house and balance the budget and pay off our national debt instead of worrying about private enterprise. Let them squirm over that awhile.
While I don’t excuse AIG for its behavior in this matter, we shouldn’t overlook our illustrous federal government and the federal reserve, the people who were responsible for controlling the use of the bailout monies.
None of these idiots made any provisions for what the bailout monies were to be used for, and what they could not be used for. Whoever was responsible for the oversight of these monies should be hung. Of course the government has always sucked at overseeing anything so we shouldn’t be surprised. Had such stipulations been made prior to writing the checks, this would never have escalated to this level.
I’m a little confused. Why did we put money into AIG in the first place? We made an investment and we want the company to survive and make profit so they can pay us back with interest. Don’t we want them to be able to retain their best people so they can do that? We can argue that the investment unit might not deserve the bonus, but people in their profitable sectors deserve the bonus and we need to get them to stay to make more money. I don’t get this hostility against all their employees that received a bonus.
I like bonus money as much as anyone, but trying to buy loyalty is a slippery slope. As for the employees who had nothing to do with the Financial Products debacle, they’re still part of the larger entity and that entity fell flat on its face, making it unable to pay bonuses. I don’t support using taxpayer bailout money for standard operational bonuses. It’s not business as usual for any department of AIG. If people aren’t willing to forego a bonus in the midst of the worst financial disaster the world has ever seen, let them find something better. In this ecnonomy, few will.
ALL units of AIG worked and were profitable- still are! except the Financial Services Unit of 400 people where 3 IDIOTS ran the show.
Remember, that money went to pay the claims that came in on the Credit Default Swaps, that insured the crap loans that Wall Street packaged up. SO AIG is paying Goldman Saks and the rest of the gang, on the policies that insured the busted mortgages and Wall Street is paying out their bonus’s aren’t they?
Seems to me that there is far more to the story than what is being fed to us.
I have a letter I’ll post next from an AIG guy, it’s good to get all sides of ANY story.
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.
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.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed 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, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”
That may also be why you authorized the balance of the payments on March 13.
At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.
I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
So what am I to do? There’s no easy answer. I know that because of hard work 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. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Is there no shame with these people and no limit to the depths they will sink to?
$454 million dollars in performance bonuses for 2008, the year of the company’s collapse. All this after, a $60 billion loss in the fourth quarter and a $180 billion bail out by the taxpayers. Don’t these numbers boggle the mind? How could anyone justify any kind of bonus payments to these people? I hope AIG and the new and improved AIU crash and burn miserably. Enjoy your ill gotten gains and remeber karma is a beautiful thing.
The P&C units posted extraordinary profits in 2008 and, as is usual in our industry, performance AND retention bonuses were paid?
What is the problem with this?
I have issues with paying bonuses to the individuals who practically bankrupted the parent through the derivate swaps but I do NOT have issues with paying bonuses to P&C professionals who did their jobs well. No superbly.
Let’s not tar EVERYONE at AIG with the same brush.
You know how they justify the bonus pool…the same way B of A and JP Morgan and Wells Fargo and Goldman Sachs and Dupont and GE and Kraft and General Foods and Glaxo Smith Klein do….It’s F***IN BUISNESS!
The criminals are the Feds for giving out taxpayer money for bail out. The Feds rob the poor to give to the rich, they need to indict themselves for criminal behavior.
First of all, they are not “performance bonuses”. Performance bonuses are given if results exceed expectations.
What they actually are, even though called bonuses, are “deferred compensation”. They are called bonuses because back in the Clinton Administration cos. were severly criticised for the large salaries they were paying, and laws were passed limiting same. So, the cos. came up with deferred compensation, which is contractually guaranted, regardless of performance, and given later on, hence they are contractually guaranteed deferred compensation, not performance bonuses.
It would certainly help if the media would make this distinction so people actually understood what is going on, but, of course, that is far to much to expect.
And I thought being a member of Congess was where the money was at. GEEZ Louise we may actually have embarred Barney Frank after all. What am I saying I must be out of my mind.
You’re not confused, you’re absolutely on the right track. The bottom-line question has got to be, do we want AIG to succeed and pay a return on the investment, or do we want them to fail merely for the sake of validating the whining and *****ing of the narrow-minded, short-sighted, voyeurs of probllem solving? There are thousands of honest, intelligent and hard working people that rely on AIG either as an employer or a client or a provider of specialty coverages (the list goes on and on and on). One final thought, the one injustice, that we all share in common these days, is the almost absolute failure of the network and cable news communities to honor the core values of journalism. Don henley got it write when he wrote the song “Dirty Laundry”.
Agreed. I don’t know why everyone here wants AIG’s talent pool to disappear, they have some great business units over there and if the human capital leaves the business units fail and the profitable units at AIG, which there are several, would all then fail.
Think people, if AIG fails then yes the Taxpayers are never going to see a dime. But if AIG succeeds then the government and taxpayers are repaid and then some.
In addition, why are people so angry at AIG for taking the money? If the government dangled money in front of you, would you take it? AIG took the money and wasn’t told how it was to be spent. Don’t be pissed at AIG, be pissed at your local congressman. This is what happens when government starts playing Businessman and doesn’t have a clue what their doing.
Also, people need to read what the definition of a loan is.
And don’t ever lose sight of the FACT that this money is NOT “performance” “bonuses”. It is contractually guaranteed deferred compensation.
Legally, AIG is required to pay it even to those who almost sank the ship, although there is perhaps a strong moral question as to whether or not the guilty parties deserve even the contractually guaranteed deferred compensation.
AIG took the LOAN (with interest)in order to keep itself from going under. It has been selling assets ever since because it is contractually required to pay it back.
Are you kidding me? Don’t you get it? The “best” people they retained took AIG where it is today. Not only should those people not get bonuses, they should be unemployed and potentially charged with securities violations – or, to keep it simple, charged with theft (since stupid is not illegal…)
Hello? They are broke. they are worse than broke, they are into the pockets of EveryAmerican for BILLIONS of dollars. If you had a relative who was acting irresponsible and using your credit cards, wouldn’t you shut them off before the whole family went down the tubes?
And they are not “broke”, they have the assets necessary to cover what they owe, they just have to find buyers. IF you’ve been watching the news, they’ve been selling off business units as fast as they can to raise the money to repay the government.
I understand the intense feelings, but be careful not to let the media spoon feed you your thoughts, because as soon as the next baby falls down a well, they will leave you hanging without the facts to back-up your soundbites. The important thing here is that people are talking. There is certainly a lot to be upset about, but there are also some real strengths and success stories miixed in with this topic.
What scares me is that my brothers and sisters in the insurance industry do not seem to be able to understand the basic tenants of what is happening and are reacting to the media’s soundbites!
What leaves me optomistic is that these same “persons” are my competition and if they are this “un-thinking” then they are easy prey for me to take their accounts away from!
SOrry but that is the way I see it. Not every (in fact only a few are) AIG units are insolvent. Most are very solvent and since they are selling off assets to repay the loan….there are some great bargins to be had. If only there was some credit money available so that good buyers could take advantage.
Truth be told…if everyone would think about it. Everyone would be better if AIG kept all the assets and got back to making sound decisions and then repay when the economy improves and they can get better prices for the assets they do want to sell. Or even better…they repay via future profits.
But we are not all that sane…as has been proven time and again.
When your company posts the single largest quarterly loss in American history, you shouldn’t be eligible for a bonus…no matter which division you work for.
If you are an AIG employee and you still believe you deserve a bonus you have an entitlement mentality.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You and Sam need to read the previous commentary, where you will see it all explained.
Quite basically, the “bonuses” are not bonuses for good performance, they are contractually guaranteed deferred compensation, and, yes, there is a huge difference. Read back and enlightment will be yours.
Temblor – I’m going to give you half a point on that one and take half a point away from myself. While, the deferred compensation payments were seperate from the recent retention bonuses (paid primarily to key employees of units which were/are up for sale, so that those key employees, and more importantly their relationships, would stay with and continue producing gains for that unit). Having said that,…Deferred compensation is primarily an employee retention tool and almost always tied to the results that would be directly influenced by that individual if specific metrics are met. At the time these deferred compensation deals were negotiated, It’s not likely that the individual would have agreed to limitations on the payout that stem from factors outside of that individuals realm of influence and especially not outside of that individuals company. You certainly can’t argue against honoring a valid contract. Having said all of the above, I think we have to look at senior executives somewhat differently.
How did AIG perform in 2008? How did you perform in the 1st quarter of ’09? If the government hadn’t bailed AIG out would there have been any money available to pay these bonuses (I don’t care what type of bonus you call them)?
The folks at AIG just don’t get it. We are in the midst of a recession. A lot of people have lost their jobs and are struggling. These are unprecedented times. The government provided AIG with a bailout to supposedly to prevent the economy from slipping deeper into a recession and prevent the ripple effects that AIG’s collapse would have on banking. Keep in mind the American people now own 80% of AIG.
I keep hearing that AIG’s insurance companies didn’t take any of the TARP money. But the insurance companies are still part of AIG and AIG’s losses are your losses.
I believe in the free market. I would have preferred if AIG had been allowed to file bankruptcy. If AIG’s insurance divisions, or employees, are performing well, they would have been able to stand on their own or they would have been snatched up by a competitor. To expect to receive a bonus that is funded by taxpayer money demonstrates an entitlement mentality.
As an AIG employee, you should be grateful that you still have a job and be thankful that the American people bailed you out. Stop whining about how poorly you are perceived by the media and get to work on rebuilding the company and paying the taxpayer back. And you should expect a bonus until you pay the taxpayers back.
Hmmmm, let me get this straight. Your complaining that AIG is losing money, to us in the business, that means they are paying claims. Lots and lots of claims.
So what is it you want? No claims paid and everybody should work for free? Can you sell off profitable insurance divisions for billion$, to pay back the Government Loans, by just waving a magical wand and it will just happen because you think about it?
Stop whining and spend your time looking into how Wall Street committed insurance fraud by setting up these fraudulent worthless Mortgage backed Securities.
I don’t expect a company that has the largest single quarterly loss in American history to pay performance bonuses with taxpayer money. Doesn’t sound like too much to ask for.
Three things sparky, and then I want you to go sign-up for that economics class you’ve always dreamed of taking.
1). I don’t work for AIG or any of it’s subsidiaries.
2). AIG’s commercial insurance division can stand on it’s own, has rock solid financials and has been losing top talent to it’s competitors (see competitor, Ironshore).
3). If you want to get your taxpayer moneyback (investment) and reduce jobloss, it’s going to take the best talent that you can find. And guess what, it won’t come cheap and you’re going to have to agree to pay them performance bonuses based on the results that they achieve.
Lastly, when it comes to working on the solution,…you’re in the way. There’s a sideline somewhere, go find it. WE’ve got work to do.
If AIG’s commercial insurance division is so rock solid why are they losing top talent? Maybe because the folks that are leaving are not drinking the Kool-Aid and see the writing on the wall. I believe in the free market, comrade.
Secondly, this was a bailout, not an investment. By taking an ownership stake in AIG the Bush Administration was holding out the slim hope that the US taxpayer could recoup some of the money thrown at AIG. The ownership stake was a gimmick used to sell this bailout to the American people. I don’t expect AIG to ever pay the US taxpayers back; if they do it will be pennies on the dollar. Try and sell this all you want as an investment, but it was nothing more than a bailout to prevent the further deterioration in the credit markets.
We have bankruptcy laws for a reason. If AIG had been allowed to go into bankruptcy the insurance divisions could have been spun-off or sold. The US government should have allowed AIG to fail and work with the banks on improving liquidity. Also, if AIG had been allowed to go into bankruptcy the bankruptcy court could have renegotiated the credit-default swaps with the banks and the worked with AIG’s employees on the bonus payments. Once you take taxpayer money its a totally new ballgame.
You just don’t understand. It was AIG the holding company that got in trouble, not it’s insurance subsidiaries.
The gov’t LOANED AIG money, which they are paying back as fast as they can.
They loaned the money not out of fear of what an AIG collapse would do to the banks, but out of fear of what it would do to the insurance market.
If the holding co. went under, it could have sucked all the surplus out of the insurance subsidiaries (that’s what happened when Reliance and Home went under).
In an unprecedented move, the insurance subsidiaries (now called collectively AIU) have been legally separated from the holding company so if AIG the holding co. goes under it will not affect the insurance subsidiaries.
AIG is selling off assets as fast as it can to repay the government LOAN.
This was all caused by a small group of people in the holding co. who thought they had found a riskless gold mine.
It is not fair to penalize all those who did their jobs properly and who were CONTRACTUALLY GUARANTEED deferred compensation (improperly called a “bonus”).
It’s easy to throw rocks around if you haven’t properly studied the topic, or read all the prior comments.
Part of the fault lies with the trade and public press. Even Insurance Journal calls them performance bonuses and makes it seem there was something wrong with paying them.
No, the bankruptcy court could NOT have renegotiated the “credit default swaps with the banks”. AIG didn’t do credit default swaps with the banks, they sold INSURANCE against the credit default swaps that the banks bought going bad. When they went bad, AIG HAD to honor the insurance contracts.
AIG is actually well on it’s way to paying the loans back, and is expected to eventually pay them back 100%, with interest.
THING of all the people in DAUFAR THAT WOULD FEED.WAKE UP Also, please visit http://fastdarfur.org and http://www.youtube.com/watch?v=USLDoIiFzzg&NR=1
Sorry, THING, the problem in Darfur is not the paucity of attempted aid, it is the fact that the ruling regime will not let aid reach the refugees. It’s called genocide, and is outside the scope of this article.
Are you sick of those AIG guys embarassing you yet? They’ll keep dishing it out if you keep taking it.
Fool me once, shame on you.
Fool me twice…
Cheryl,
What’s even worse is that Congress gave them the bonuses. It was all in that big TARP (TRAP?) thing no one read but, voted for anyway.
The taxpayers will see none of this money. Just like Chrysler, they don’t have to pay the taxpayers back either.
Boy, they say a little knowledge can be a dangerous thing. NO knowledge is even more dangerous.
AIG MUST pay every penny back. If you read the news, you would have noticed almost weekly notices of assets they have been selling off in order to repay.
For the auto cos., if they remain solvent they too must pay it back. In the case of Chrysler, the federal government will own a substantial portion of the company in lieu of paybacks. If FIAT can turn it around, the government could make as big a profit as they did the last time they lent Chrysler money.
Gee what a surprise… can’t wait to hear all you sympathetic losers excuses now to defend AIG and blah, blah, blah.
This adds insult to injury!
I’m truly disgusted with how these companies keep taking taxpayers money and spending it like it was there own!!! Any person who has taken this blood money should rot in hell. Everyone of you’s in AIG should pay the tax payers back for every penny you took plus penalties!!!
Exactly!! If they were allowed to fail, not one bonus would have been paid, but since they were bailed out they had to pay them. We need to start asking our politicans when they are going to worry about their own house and balance the budget and pay off our national debt instead of worrying about private enterprise. Let them squirm over that awhile.
While I don’t excuse AIG for its behavior in this matter, we shouldn’t overlook our illustrous federal government and the federal reserve, the people who were responsible for controlling the use of the bailout monies.
None of these idiots made any provisions for what the bailout monies were to be used for, and what they could not be used for. Whoever was responsible for the oversight of these monies should be hung. Of course the government has always sucked at overseeing anything so we shouldn’t be surprised. Had such stipulations been made prior to writing the checks, this would never have escalated to this level.
I’m a little confused. Why did we put money into AIG in the first place? We made an investment and we want the company to survive and make profit so they can pay us back with interest. Don’t we want them to be able to retain their best people so they can do that? We can argue that the investment unit might not deserve the bonus, but people in their profitable sectors deserve the bonus and we need to get them to stay to make more money. I don’t get this hostility against all their employees that received a bonus.
I like bonus money as much as anyone, but trying to buy loyalty is a slippery slope. As for the employees who had nothing to do with the Financial Products debacle, they’re still part of the larger entity and that entity fell flat on its face, making it unable to pay bonuses. I don’t support using taxpayer bailout money for standard operational bonuses. It’s not business as usual for any department of AIG. If people aren’t willing to forego a bonus in the midst of the worst financial disaster the world has ever seen, let them find something better. In this ecnonomy, few will.
ALL units of AIG worked and were profitable- still are! except the Financial Services Unit of 400 people where 3 IDIOTS ran the show.
Remember, that money went to pay the claims that came in on the Credit Default Swaps, that insured the crap loans that Wall Street packaged up. SO AIG is paying Goldman Saks and the rest of the gang, on the policies that insured the busted mortgages and Wall Street is paying out their bonus’s aren’t they?
Seems to me that there is far more to the story than what is being fed to us.
I have a letter I’ll post next from an AIG guy, it’s good to get all sides of ANY story.
March 25, 2009
Op-Ed Contributor
Dear A.I.G., I Quit!
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.
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.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed 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, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”
That may also be why you authorized the balance of the payments on March 13.
At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.
I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
So what am I to do? There’s no easy answer. I know that because of hard work 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. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Sincerely,
Jake DeSantis
Is there no shame with these people and no limit to the depths they will sink to?
$454 million dollars in performance bonuses for 2008, the year of the company’s collapse. All this after, a $60 billion loss in the fourth quarter and a $180 billion bail out by the taxpayers. Don’t these numbers boggle the mind? How could anyone justify any kind of bonus payments to these people? I hope AIG and the new and improved AIU crash and burn miserably. Enjoy your ill gotten gains and remeber karma is a beautiful thing.
The P&C units posted extraordinary profits in 2008 and, as is usual in our industry, performance AND retention bonuses were paid?
What is the problem with this?
I have issues with paying bonuses to the individuals who practically bankrupted the parent through the derivate swaps but I do NOT have issues with paying bonuses to P&C professionals who did their jobs well. No superbly.
Let’s not tar EVERYONE at AIG with the same brush.
Don’t confuse the ranters by asking that they learn what the facts are here CA Ins Broker. It’s too much fun to be angry.
You know how they justify the bonus pool…the same way B of A and JP Morgan and Wells Fargo and Goldman Sachs and Dupont and GE and Kraft and General Foods and Glaxo Smith Klein do….It’s F***IN BUISNESS!
The criminals are the Feds for giving out taxpayer money for bail out. The Feds rob the poor to give to the rich, they need to indict themselves for criminal behavior.
First of all, they are not “performance bonuses”. Performance bonuses are given if results exceed expectations.
What they actually are, even though called bonuses, are “deferred compensation”. They are called bonuses because back in the Clinton Administration cos. were severly criticised for the large salaries they were paying, and laws were passed limiting same. So, the cos. came up with deferred compensation, which is contractually guaranted, regardless of performance, and given later on, hence they are contractually guaranteed deferred compensation, not performance bonuses.
It would certainly help if the media would make this distinction so people actually understood what is going on, but, of course, that is far to much to expect.
And I thought being a member of Congess was where the money was at. GEEZ Louise we may actually have embarred Barney Frank after all. What am I saying I must be out of my mind.
You’re not confused, you’re absolutely on the right track. The bottom-line question has got to be, do we want AIG to succeed and pay a return on the investment, or do we want them to fail merely for the sake of validating the whining and *****ing of the narrow-minded, short-sighted, voyeurs of probllem solving? There are thousands of honest, intelligent and hard working people that rely on AIG either as an employer or a client or a provider of specialty coverages (the list goes on and on and on). One final thought, the one injustice, that we all share in common these days, is the almost absolute failure of the network and cable news communities to honor the core values of journalism. Don henley got it write when he wrote the song “Dirty Laundry”.
Agreed. I don’t know why everyone here wants AIG’s talent pool to disappear, they have some great business units over there and if the human capital leaves the business units fail and the profitable units at AIG, which there are several, would all then fail.
Think people, if AIG fails then yes the Taxpayers are never going to see a dime. But if AIG succeeds then the government and taxpayers are repaid and then some.
In addition, why are people so angry at AIG for taking the money? If the government dangled money in front of you, would you take it? AIG took the money and wasn’t told how it was to be spent. Don’t be pissed at AIG, be pissed at your local congressman. This is what happens when government starts playing Businessman and doesn’t have a clue what their doing.
Also, people need to read what the definition of a loan is.
And don’t ever lose sight of the FACT that this money is NOT “performance” “bonuses”. It is contractually guaranteed deferred compensation.
Legally, AIG is required to pay it even to those who almost sank the ship, although there is perhaps a strong moral question as to whether or not the guilty parties deserve even the contractually guaranteed deferred compensation.
AIG took the LOAN (with interest)in order to keep itself from going under. It has been selling assets ever since because it is contractually required to pay it back.
Are you kidding me? Don’t you get it? The “best” people they retained took AIG where it is today. Not only should those people not get bonuses, they should be unemployed and potentially charged with securities violations – or, to keep it simple, charged with theft (since stupid is not illegal…)
Hello? They are broke. they are worse than broke, they are into the pockets of EveryAmerican for BILLIONS of dollars. If you had a relative who was acting irresponsible and using your credit cards, wouldn’t you shut them off before the whole family went down the tubes?
SHUT THEM DOWN.
NO, Gork, a very very few people in 1 unit did this to AIG. The rest had nothing to do with it, knew nothing about it.
And they are not “broke”, they have the assets necessary to cover what they owe, they just have to find buyers. IF you’ve been watching the news, they’ve been selling off business units as fast as they can to raise the money to repay the government.
I understand the intense feelings, but be careful not to let the media spoon feed you your thoughts, because as soon as the next baby falls down a well, they will leave you hanging without the facts to back-up your soundbites. The important thing here is that people are talking. There is certainly a lot to be upset about, but there are also some real strengths and success stories miixed in with this topic.
What scares me is that my brothers and sisters in the insurance industry do not seem to be able to understand the basic tenants of what is happening and are reacting to the media’s soundbites!
What leaves me optomistic is that these same “persons” are my competition and if they are this “un-thinking” then they are easy prey for me to take their accounts away from!
SOrry but that is the way I see it. Not every (in fact only a few are) AIG units are insolvent. Most are very solvent and since they are selling off assets to repay the loan….there are some great bargins to be had. If only there was some credit money available so that good buyers could take advantage.
Truth be told…if everyone would think about it. Everyone would be better if AIG kept all the assets and got back to making sound decisions and then repay when the economy improves and they can get better prices for the assets they do want to sell. Or even better…they repay via future profits.
But we are not all that sane…as has been proven time and again.
if you’re going to go to Youtube, do a search for the Turtle Man of Kentucky. You’d have more fun.
Didnt take long for AIG to start acting like Freddie Mac and Fannie Mae.
They now are acting like every other government program. Profit? who cares we are supported by the government now!
THIS MODEL DOES NOT WORK. GOVERNMENT/PRIVATE SECTOR.
You haven’t read anything, have you Sam?
When your company posts the single largest quarterly loss in American history, you shouldn’t be eligible for a bonus…no matter which division you work for.
If you are an AIG employee and you still believe you deserve a bonus you have an entitlement mentality.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You’re over simplifying to the negative. Let me over simplify to the positive for the sake of balance, mention truth and reality. The most recent results indicate marked improvements over prior results. Improvements are good. You want continued improvements. Now, let’s say that of the thousands of employees at AIG, you could somehow identify, several hundred employees who way outperformed all of their peers and those employees would commit to staying with AIG in exchange for a bonus, wouldn’t you want to retain those employees? Remeber, a “reward for performance” is not an entitlement. If you’re wondering where the money for these incentives would come from, they’d have to fire all of the pessimistic slackers.
You and Sam need to read the previous commentary, where you will see it all explained.
Quite basically, the “bonuses” are not bonuses for good performance, they are contractually guaranteed deferred compensation, and, yes, there is a huge difference. Read back and enlightment will be yours.
Temblor – I’m going to give you half a point on that one and take half a point away from myself. While, the deferred compensation payments were seperate from the recent retention bonuses (paid primarily to key employees of units which were/are up for sale, so that those key employees, and more importantly their relationships, would stay with and continue producing gains for that unit). Having said that,…Deferred compensation is primarily an employee retention tool and almost always tied to the results that would be directly influenced by that individual if specific metrics are met. At the time these deferred compensation deals were negotiated, It’s not likely that the individual would have agreed to limitations on the payout that stem from factors outside of that individuals realm of influence and especially not outside of that individuals company. You certainly can’t argue against honoring a valid contract. Having said all of the above, I think we have to look at senior executives somewhat differently.
Multi Dimensional,
How did AIG perform in 2008? How did you perform in the 1st quarter of ’09? If the government hadn’t bailed AIG out would there have been any money available to pay these bonuses (I don’t care what type of bonus you call them)?
The folks at AIG just don’t get it. We are in the midst of a recession. A lot of people have lost their jobs and are struggling. These are unprecedented times. The government provided AIG with a bailout to supposedly to prevent the economy from slipping deeper into a recession and prevent the ripple effects that AIG’s collapse would have on banking. Keep in mind the American people now own 80% of AIG.
I keep hearing that AIG’s insurance companies didn’t take any of the TARP money. But the insurance companies are still part of AIG and AIG’s losses are your losses.
I believe in the free market. I would have preferred if AIG had been allowed to file bankruptcy. If AIG’s insurance divisions, or employees, are performing well, they would have been able to stand on their own or they would have been snatched up by a competitor. To expect to receive a bonus that is funded by taxpayer money demonstrates an entitlement mentality.
As an AIG employee, you should be grateful that you still have a job and be thankful that the American people bailed you out. Stop whining about how poorly you are perceived by the media and get to work on rebuilding the company and paying the taxpayer back. And you should expect a bonus until you pay the taxpayers back.
Hmmmm, let me get this straight. Your complaining that AIG is losing money, to us in the business, that means they are paying claims. Lots and lots of claims.
So what is it you want? No claims paid and everybody should work for free? Can you sell off profitable insurance divisions for billion$, to pay back the Government Loans, by just waving a magical wand and it will just happen because you think about it?
Stop whining and spend your time looking into how Wall Street committed insurance fraud by setting up these fraudulent worthless Mortgage backed Securities.
James,
I don’t expect a company that has the largest single quarterly loss in American history to pay performance bonuses with taxpayer money. Doesn’t sound like too much to ask for.
Three things sparky, and then I want you to go sign-up for that economics class you’ve always dreamed of taking.
1). I don’t work for AIG or any of it’s subsidiaries.
2). AIG’s commercial insurance division can stand on it’s own, has rock solid financials and has been losing top talent to it’s competitors (see competitor, Ironshore).
3). If you want to get your taxpayer moneyback (investment) and reduce jobloss, it’s going to take the best talent that you can find. And guess what, it won’t come cheap and you’re going to have to agree to pay them performance bonuses based on the results that they achieve.
Lastly, when it comes to working on the solution,…you’re in the way. There’s a sideline somewhere, go find it. WE’ve got work to do.
Comrade Sparky,
If AIG’s commercial insurance division is so rock solid why are they losing top talent? Maybe because the folks that are leaving are not drinking the Kool-Aid and see the writing on the wall. I believe in the free market, comrade.
Secondly, this was a bailout, not an investment. By taking an ownership stake in AIG the Bush Administration was holding out the slim hope that the US taxpayer could recoup some of the money thrown at AIG. The ownership stake was a gimmick used to sell this bailout to the American people. I don’t expect AIG to ever pay the US taxpayers back; if they do it will be pennies on the dollar. Try and sell this all you want as an investment, but it was nothing more than a bailout to prevent the further deterioration in the credit markets.
We have bankruptcy laws for a reason. If AIG had been allowed to go into bankruptcy the insurance divisions could have been spun-off or sold. The US government should have allowed AIG to fail and work with the banks on improving liquidity. Also, if AIG had been allowed to go into bankruptcy the bankruptcy court could have renegotiated the credit-default swaps with the banks and the worked with AIG’s employees on the bonus payments. Once you take taxpayer money its a totally new ballgame.
And…you’re still in the way.
You just don’t understand. It was AIG the holding company that got in trouble, not it’s insurance subsidiaries.
The gov’t LOANED AIG money, which they are paying back as fast as they can.
They loaned the money not out of fear of what an AIG collapse would do to the banks, but out of fear of what it would do to the insurance market.
If the holding co. went under, it could have sucked all the surplus out of the insurance subsidiaries (that’s what happened when Reliance and Home went under).
In an unprecedented move, the insurance subsidiaries (now called collectively AIU) have been legally separated from the holding company so if AIG the holding co. goes under it will not affect the insurance subsidiaries.
AIG is selling off assets as fast as it can to repay the government LOAN.
This was all caused by a small group of people in the holding co. who thought they had found a riskless gold mine.
It is not fair to penalize all those who did their jobs properly and who were CONTRACTUALLY GUARANTEED deferred compensation (improperly called a “bonus”).
It’s easy to throw rocks around if you haven’t properly studied the topic, or read all the prior comments.
Part of the fault lies with the trade and public press. Even Insurance Journal calls them performance bonuses and makes it seem there was something wrong with paying them.
No, the bankruptcy court could NOT have renegotiated the “credit default swaps with the banks”. AIG didn’t do credit default swaps with the banks, they sold INSURANCE against the credit default swaps that the banks bought going bad. When they went bad, AIG HAD to honor the insurance contracts.
AIG is actually well on it’s way to paying the loans back, and is expected to eventually pay them back 100%, with interest.
When AIG got the first $70 Billion loan – HOW MUCH did Goldman Saks ( Treas Sect – Timmy Geitner’s former employer) get?
Don’t see what bearing that has on the points under discussion here but AIG’s first loan was Sept. 08, when Shrub was still President.