11
   

Dear A.I.G., I Quit!

 
 
Reply Wed 25 Mar, 2009 10:24 am
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.

Quote:
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.”
 
Robert Gentel
 
  1  
Reply Wed 25 Mar, 2009 10:33 am
And on a personal note, nothing in my life has made me question and doubt my political beliefs more than seeing smart leftists turn into rabid populists in this economic crisis. I do realize that they were likely always this way, but they actually believe their extremism these days and think it's all vindicated due to this crisis.

And here is yet another of their misguided crusades. Looking at the discrepancy of compensation levels their foolish instinct is invariably to try to handicap everyone into their version of equality or fairness.

The AIG bonuses are a great example. They ignorantly (without a shred of substantiating information, mind you) join the crusade against these employees and quite frankly I'm so sick of the economic stupidity I'm seeing from the more radical leftists here that I've started to wonder if my economic politics can accurately be described under the same name as their simple-minded populism.
McGentrix
 
  1  
Reply Wed 25 Mar, 2009 11:50 am
For the most part, they have always been that way. They just have the power to support themselves now.
0 Replies
 
dyslexia
 
  2  
Reply Wed 25 Mar, 2009 12:01 pm
@Robert Gentel,
Robert Gentel said;
Quote:
And on a personal note, nothing in my life has made me question and doubt my political beliefs more than seeing smart leftists turn into rabid populists in this economic crisis.
I totally agree and I am certainly among the radical leftists on this forum.
0 Replies
 
DrewDad
 
  1  
Reply Wed 25 Mar, 2009 12:02 pm
Political grandstanding has been around forever. Republicans did it impeaching Bill Clinton over a blowjob, and over the Terry Schiavo mess. Democrats are doing it over AIG because that's what people are upset about now.

"There go my people; I must run to get in front of them" -- every "leader" in history.
0 Replies
 
Thomas
 
  3  
Reply Wed 25 Mar, 2009 12:16 pm
@Robert Gentel,
Robert Gentel wrote:
And here is yet another of their misguided crusades. Looking at the discrepancy of compensation levels their foolish instinct is invariably to try to handicap everyone into their version of equality or fairness.

I agree. Compensation levels in Silicon Valley are at least as unequal as they are on Wall Street. High Tech is just as opaque to the average investor as High Finance is. Yet Silicon Valley doesn't have anything close to the level of corruption and self-dealing that we see on Wall Street. And although tech stocks go through their share of booms and busts too, that's just some turbulence on a broad, long-running stream of tangible progress.

The debate, therefore, should be about bringing transparency and honesty to the process that brings about inequality on Wall Street. It shouldn't be about eliminating inequality.
edgarblythe
 
  1  
Reply Wed 25 Mar, 2009 12:18 pm
We have not to a man jumped on the bandwagon.
ebrown p
 
  1  
Reply Wed 25 Mar, 2009 12:23 pm
@edgarblythe,
Quote:
We have not to a man jumped on the bandwagon.


Apparently there is more than one bandwagon.
0 Replies
 
ebrown p
 
  1  
Reply Wed 25 Mar, 2009 12:47 pm
Anti-populism can be as rabid as populism. I am hardly a populist and probably to the right of Dyslexia. It is difficult for me to feel sorry for this gentleman.

First, it is tough when your company goes under... but that's life. I am an employee with an incentive plan. I know full well that if my company goes under, I will lose my incentive. And that is what would have happened had the government not stepped in. They would have not have only lost their bonuses, they would have lost their jobs.

Second, This argument that these particular highly paid employees are being treated unfairly is difficult to swallow. There are lots of American who are in real trouble who don't have a shot at government backed bonuses. I will save my sympathy for people who don't have millions of dollars.

Third, it seems obvious to me that income inequality, and the obscene profits made by a financial system that has obviously failed us are legitimate issues.

I want to take a moderate position in this issue-- agreeing that large bonuses from companies being propped up by the government are an issue... while accepting that companies in this situation need to be able to offer incentives to performing employees (and I don't mean clowns).

If the argument is that the attacks on these bonuses are overblown... fine I can accept that. But, that's politics.

However, it seems to me the underlying issues raised by this "populist anger" are valid.
Robert Gentel
 
  1  
Reply Wed 25 Mar, 2009 02:05 pm
@ebrown p,
ebrown p wrote:
It is difficult for me to feel sorry for this gentleman.


I never said anything about feeling sorry for him.

Quote:
First, it is tough when your company goes under... but that's life.


His company did not go under. The government made the decision to not let it do so. That decision was made with the knowledge of the company's obligations and now everyone acts surprised and calls for the heads of the AIG employees while blaming them for things they have nothing to do with.

I personally don't care if they get paid or not, but I care that they are being blamed for the financial woes of their company just because of their compensation, without any evidence of any wrongdoing on their part. That's just an executive pay crusade taking advantage of the crisis.

Quote:
Second, This argument that these particular highly paid employees are being treated unfairly is difficult to swallow. There are lots of American who are in real trouble who don't have a shot at government backed bonuses. I will save my sympathy for people who don't have millions of dollars.


I've said nothing about feeling "sympathy" for this person. I am not trying to elicit sympathy for him, as I have no personal feelings for him or his predicament. I am criticizing the populist position of dragging anyone with large income down and blaming them for societal woes.

Quote:
Third, it seems obvious to me that income inequality, and the obscene profits made by a financial system that has obviously failed us are legitimate issues.


So do I, and I think the populists are dead wrong on the issue. You very clumsily try to tie the two (their compensation and the economic crisis) to each other but upon what basis do you do so?

Quote:
However, it seems to me the underlying issues raised by this "populist anger" are valid.


What specific "underlying issues" did you have in mind? The one I have in mind that I think is falsely tied to this is the populist notion that it's the "fat cats" who are responsible for the economic crisis, and that executive pay is a legitimate issue to address in response to it.

That may be an appealing position to the average American, but it's a false one. These people in AIG who are being attacked and threatened are no more responsible for the financial crisis than you or I.
ebrown p
 
  1  
Reply Wed 25 Mar, 2009 02:31 pm
@Robert Gentel,
Quote:

What specific "underlying issues" did you have in mind? The one I have in mind that I think is falsely tied to this is the populist notion that it's the "fat cats" who are responsible for the economic crisis, and that executive pay is a legitimate issue to address in response to it.

That may be an appealing position to the average American, but it's a false one. These people in AIG who are being attacked and threatened are no more responsible for the financial crisis than you or I.


Do you really think that that highly paid executives in the financial industry are "no more responsible for the financial crisis" than a not so highly paid software engineer?

It is "fat cats" (and we might should clarify who we are talking about but for now you can take it as highly paid executives in the financial industry) who lobbied congress to limit regulation on the financial industry. It is "fat cats" who set up the ridiculous financial instruments whose collapse started the current crisis. And... it was "fat cats" who profited greatly from these instruments before they failed. For the record... I have never done any of these things.

Again, I take a moderate position on this. Perhaps some of the anger toward these particular AIG executives is misplaced. But I don't think that saying that we regular people are equally culpable is reasonable at all.

There is plenty of anger directed at executives in the financial industry that is quite reasonable.



0 Replies
 
ebrown p
 
  1  
Reply Wed 25 Mar, 2009 02:34 pm
Quote:

So do I, and I think the populists are dead wrong on the issue. You very clumsily try to tie the two (their compensation and the economic crisis) to each other but upon what basis do you do so?


I also want to make this point very clear.

I am saying there is a clear and direct link between the obscene profits made by the financial industry in the past decades and the irresponsible acts that led to the current economic woes.
0 Replies
 
Robert Gentel
 
  1  
Reply Wed 25 Mar, 2009 02:43 pm
@Thomas,
Thomas wrote:
The debate, therefore, should be about bringing transparency and honesty to the process that brings about inequality on Wall Street. It shouldn't be about eliminating inequality.


I agree with what you said, but have a qualm with this part. I don't think it's corruption or dishonesty that brought about this financial crisis. From the public perspective I think the only problem was that financial institutions were allowed to get so large with so little regulation of their risk.

The bubble was inflated by everyone, and popped. That is going to keep happening and we can't stop it. But if we are going to guarantee institutions we need to be able to regulate the risk we are guaranteeing so that when they pop we aren't holding the bag for undue risks.

So I think that a conservative net capital rule for banks, with regulations on how assets are valued on the books is what we were really missing, and I don't think that the crisis is really about honesty, corruption or compensation.
rabel22
 
  1  
Reply Wed 25 Mar, 2009 04:54 pm
@Robert Gentel,
The fact that I have lost 45% of my 401k is my fault and I should feel good about the finicinal people getting multimillion retention bonuses. I dont think so.
DrewDad
 
  2  
Reply Wed 25 Mar, 2009 05:37 pm
@rabel22,
At least all your money wasn't in tulips.
dlowan
 
  1  
Reply Wed 25 Mar, 2009 05:47 pm
@DrewDad,
I wonder if that was the first crazed bubble in the history of capitalism?

I read a fascinating book about it.
0 Replies
 
Robert Gentel
 
  1  
Reply Wed 25 Mar, 2009 06:32 pm
@rabel22,
rabel22 wrote:
The fact that I have lost 45% of my 401k is my fault..


It's certainly more your fault than the AIG employees, who had nothing whatsoever to do with your 401k.

Quote:
... and I should feel good about the finicinal people getting multimillion retention bonuses. I dont think so.


I didn't say anything about how you are supposed to "feel" about their bonuses. Feel free to feel as bad as you want about it, but it's still irrelevant to your 401k, and to the economic crisis.
BillRM
 
  1  
Reply Fri 27 Mar, 2009 07:20 am
@Robert Gentel,
Somehow I am not crying for the I quit guy. The way we had set up both the tax code and the rules governing corporations had allow outrageous ripped off of stockholders and the middle class in general for generations.

No other nation on the planet had allow this large an unbalance structure of pay and rewards to exist and I am not sure if I would cry if we begin to set up guillotines in front of AIG.
Robert Gentel
 
  1  
Reply Fri 27 Mar, 2009 09:55 am
@BillRM,
BillRM wrote:
Somehow I am not crying for the I quit guy.


Again, the point isn't to feel bad for him or not. I don't care what people feel about him. The way their compensation was structured was politically stupid and I have no feelings for them.

Quote:
The way we had set up both the tax code and the rules governing corporations had allow outrageous ripped off of stockholders and the middle class in general for generations.


Like revel, this has nothing at all to do with their bonuses. And this is a good example of how this bonus scandal is driven by class conflict and not by any legitimate understanding of the case.

Quote:
No other nation on the planet had allow this large an unbalance structure of pay and rewards to exist and I am not sure if I would cry if we begin to set up guillotines in front of AIG.


Again this is a generalized class conflict taking itself out on the AIG scapegoat. You know not a whit about the situation, but won't let that stop you because of the generalized anger.

I, for one, am very wary of the whimsical tide of public opinion being applied this way. It's self-serving and disingenuous to try to place all the blame for the financial crisis on corporations and fat cats. You can't make the case that this person is any more responsible for the financial crisis than you are, but just because he makes more money you are willing to call for his head.

Economic hardship really brings out the stupid in class conflict.
DrewDad
 
  1  
Reply Fri 27 Mar, 2009 10:36 am
Mob rule is no rule at all.
 

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