I think this excellent article by Binyamin Appelbaum and Brady Dennis buries the lede. Appelbaum and Dennis argue that there is no need now and there was no need when the bonus contracts were written to retain the AIGFP
scum crooks employees, because AIGs most risky contracts have been unwound.
I consider the most interesting part to be way down when one of the worst arguments ever made is quoted
The two executives, who spoke on the condition of anonymity, said they were particularly concerned that the loss of experienced employees would reduce the company’s ability to secure the best prices in negotiations with other financial firms.
“We’re unwinding all of our businesses. We’re going out of business, and all of our counterparties know that,” one executive said.
OK so we have a bunch of people with expertise in helping people avoid taxes and get around regulations and an unfortunate history of taking insane risks, now working for a firm with no future and making deals worth tens of billions with exactly the firms which might employ them in the future.
Talk about incentives.
AIG has hemorraged cash faster than expected. The line I read on the web is that the cash was posted as collateral and could come back to AIG if instruments don’t actually default. But noooo the money was spent unwinding contracts and will never come back. The unwiding deals were made by sterling characters who could never be suspected at trying to get money from the US government (and whose actually profitable activities were all centered on tax avoidance).
The deals which included sending billions to Goldman Sachs were financed by the US Treasury by former Goldman Sachs CEO Hank Paulson becaues of his decision to save AIG made after a meeting whith Goldman Sachs CEO Lloyd Blankfein.
I’d look into the “company’s
ability [willingness] to secure the best prices in negotiations with other financial firms.”
update: Single letter typo which meant I crossed out not only the rest of my post but all of Angrybear corrected. I did not, I repeat not cross out Stormy’s post immediately below mine, because I was pissed that I got beaten in the race to the “publish post” key (by 12 minutes). I think that extremely similar posts going down to the wire that way is a rare event.
update II: A more plausible grant of anonymity by Dennis in a today’s follow up article
“Nobody is going to give it back and then stay,” said one of the firm’s employees. “If they give back the money, then they will walk. And they will walk into the arms of AIG’s counterparties.” Now other employees of the firm would probably not have it discussed too much in public right now that they might work for AIG counterparties in the near future. That would lead to all sorts of unpleasant questions about how they managed to drive such hard bargains 80% on behalf of the US Treasury (actually more like 100%, the Treasury has 80% of the votes but owns 100% of the downside risk).
Via Atrios of course.
Oh and don’t think it’s an accident that AIG-FP seems to be trying to destroy capitalism. Here is a photo of current AIP-FP director Gerry Pasciucco (who is not getting a bonus and spent a long time talking to Dennis just before anonymous did) from “Fairfield County Look“
More including Appelbaum and Denis’s lede after the jump.
Now I don’t see why Appelbaum and Dennis granted anonymity to the AIG executives. They sure aren’t whistle blowers. I thought WaPo policy was to explain why anonymity is granted. I would have added “, because they are making the stupidest argument not authored by Daniel Luskin,” after “anonymity”.
The work of defusing the most dangerous bets placed by American International Group was largely concluded by December, according to documents and interviews, long before the company gave bonuses to employees it said it needed to retain to avoid a financial meltdown.
I agree that this is important too. It shows that the huge bonuses were part of looting AIG at the time that AIG management knew it was going to be publicly owned soon. Bankruptcy courts can reverse actions clearly taken to dilute creditors’ claims. I’d say that if people insist on pretending AIG is not bankrupt, they can hardly argue that congress shouldn’t do the same thing via a tax.