A Executive Vice President of AIG. Financial Products resigned and his resignation letter is printed as on op-ed in today's New York Times.
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.
Wall Street insider Barry Ritholtz at the Big Picture loves the letter as he, like the letter, argues against any bonus-cuts or high bonus taxation.
The resignation letter by Jake DeSantis claims that he is leaving AIG-Financial Products because his bonus was cut and because he finds that unfair as he had nothing to do with the CDS mess that took AIG-FP down. The last part may well be true but it does not matter and we will come back to that in a moment.
First the payment issue:
One has to be a blatant hypocrite to claim one worked for $1 dollar per year 'out of a sense of duty' when one expected and was assured to get a million or so in bonus payments:
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.
So even if the bonus would be taxed at 90% the man would still have made quite a bit above $70,000 per year. Donating that or not is irrelevant. I find $70,000 per year a decent pay especially for someone who in the 11 years before made far, far more money than any normal person will ever make in her lifetime. To lament about that is arrogant and, unlike Barry, I find it obscene. If AIG, without taxpayer money, would have gone bankrupt Mr. DeSantis pay would have been zero.
Now back to the issue of culpability:
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.
That does not matter at all. All parts of A.I.G. have taken part in creating the mess while the persons involved hugely benefiting from it – from the various parts of AIG-FP throughout the insurance business up to the now likely bankrupt AIG. Aircraft Leasing Unit.
Consider what Chris Whalen, the Institutional Risk Analyst finds:
Speaking of poor fundamentals, when AIG released information about the amounts and recipients of roughly $100 billion of its government loans from September to December 2008, almost utterly unreported was the fact that the staid, boring, heavily regulated insurance businesses managed to run up losses on securities lending requiring $44 billion of government support.
By way of contrast, the credit derivatives widely blamed for bringing down the world's financial system were consuming $27 billion of support; municipal investment agreements (essentially, deposits) made by municipalities with AIG Financial Products took another $12 billion, and maturing debt took $13 billion. We wonder, just which unit of AIG lent the securities? What did AIG purchase with the proceeds of the securities loan? Could it be that the big story at AIG is the unsoundness of the insurer, not the credit default swaps? Why the misdirected coverage?
And Barry Ritholz himself pointed to a part of yesterday's Bernanke testimony which hinted at many other problems within AIG. than just the CDS side:
State and local government entities that had lent more than $10 billion to AIG would have suffered losses. Workers whose 401(k) plans had purchased $40 billion of insurance from AIG against the risk that their stable value funds would decline in value would have seen that insurance disappear. In addition, AIG’s insurance subsidiaries had substantial derivatives exposures to AIG-FP that could have weakened them in the event of the parent company’s failure.
All parts of AIG stink and it will take years to find out which parts are not rotten – if any. Mr. Jake DeSantis seems to claim that the commodity and equity division he worked in did not make any losses and was in no way involved in any shady AIG business. That well may be, but unless the whole AIG mess is not cleared up, I will not believe a word of it.
Mr. De Santis, how many commodity and equity deals did your AIG-FP division make with the insurance part of the AIG business?
$70,000+ per years seems fine to me for someone who is already loaded with much more money from prior bonuses in his job than any normal person can think of. If DeSantis does not want to do the job for that – fine. 325,000 financial service jobs have been cut since mid 2007. I am sure more than a few of those unemployed people are well capable to do Mr. De Santis job and will be happy to get a decent pay of $70,000+ after tax per year.
The much lower pay for autoworkers at Chrysler and GM as well as for retirees thereof were recently cut as part of a government loan arrangement. I do not remember Barry Ritholtz howling about that breach of contract or NYT op-eds arguing against that arrangement.
The people in finance seem to have lost any sense of decency and and feel for normal life standards. It is time to pull them down to earth.