more AIG

[mattycub]

In response to my post yesterday, Greg mondragon brought up a reasonable point. Since my response to it is as long as a normal post, I thought I'd repurpose it as a post. Double content generation points! Greg's comment:

I appreciate you taking the time to write this, but one question pops out at me: there are two assumptions here - one is that there are

Comments

[pink_halen]

There are some of us who think the Financial Products devision of AIG should have never existed. These services like credit default swaps are not very well understood. They are not a very wise move and they proved to be the down fall of the company.

Personally, I don't think anyone is worth a one million dollar salery. NO ONE. No matter how arrogant they are. That money should have been plowed back into making the company run or paid out to the stockholders. It is unfair to expect that big a salery. But these men have no shame. They say they "deserve" that money. I don't buy it.

[mattycub]

The CDS group was but one subdivision of the Financial Products division at AIG. From what I can tell, even though it's the group that caused the company all the problems, it was a fairly small group. And like I said in my post yesterday, those people are gone. That subdivision has pretty much been wound down, as most of the billions we've poured into the company have gone to pay out on those CDS contracts. What we're talking about is the rest of the FP division, which still has a $1.6T derivatives portfolio to manage. Which is now our $1.6T derivatives portfolio, and I'd like it managed well.

Wether or not someone should be making millions of dollars a year or deserves it or not is, in my view, entirely beside the point. The reality of the situation is that people in the financial industry make a lot of money. And we now own a company in that industry, a company that still has a lot of risk inside of it and if not managed well could cost us even more money. Someone has got to do that work, and for the reasons I outlined in my post

[joebehrsandiego]

Matty - I think your final paragraph here is a great summary. And - in my own professional world I can vouch for your observations. My skillset isn't in programming languages, but it is very specific and not very common.

I can't remember if you are on Curtis/dr_scott's f-list, but these two public posts on the bank crisis and AIG are well worth anyone's reading.

Banking Crisis Thoughts (lots of good detail): http://dr-scott.livejournal.com/342073.html#cutid1

More specifically about AIG: http://dr-scott.livejournal.com/342901.html

Tangent: Are you and Sean still interested in a PS visit?

[foodpoisoningsf]

My sense is that "these people" are at their roots, gamblers, and that they're bluffing when they say their skills are critical to retain. This is more Liar's Poker.

Someone here is going to get scapegoated. If it's the upper-level management of certain divisions of AIG, so be it. In fact, it's probably a necessary cathartic.

[mattycub]

Well, but it's not "these people" that are saying it. It's the guy that we hired to run the company after we took it over, who from what I can tell has no real incentive to lie. His job is to get as much of our money back out of this company as possible. If he says he did the risk analysis and decided that it was important to try to retain these people, I'm prepared to accept that analysis if there's no evidence-based refutation of it offered up. I mean, do you or I really know how easy it is to find people that can successfully manage a $1.6T derivatives portfolio? On short notice? At a company everyone hates?

Again, the big gamblers were the folks running the CDS sub-division. Those people are gone. The upper level management folks that I agree should be scapegoated? Those folks are gone too. We already got rid of them. Liddy took great pains to make the case that a lot of the people that are left in the FP division are good people who have done nothing wrong and didn't contribute to the mess the company is in.

[foodpoisoningsf]

If Liddy is unable to save these bonuses, and the 400M in bonuses coming down the pipeline at AIG, no one he knows will ever speak to him again.

He'll be playing golf, alone, for the rest of his days. Probably in Belize or Uruguay.

He should have changed his name, too. "Liddy" brings up deeply submerged memories of Watergate.

[mattycub]

Good thing we couldn't convince Bichard Bixon to run AIG for us, think of the psychic damage that would cause! :)

If Liddy is unable to save these bonuses, and the 400M in bonuses coming down the pipeline at AIG, no one he knows will ever speak to him again.

Eh. This is exactly the kind of statement I'm skeptical of. I could be naive, but I don't buy it as a reasonable motivation.

[zombietruckstop]

Since you and I discussed this in our marital bed last night, you know what I'm going to say, but so the rest of the world can have evidence after you've murdered me in my sleep

[qnetter]

You can ask someone to renegotiate -- but you can't force them to. And "acting in a manner that's best for our economy" is not only open to debate -- I'm sure there are still lots of people out there who believe that high executive pay is best for our economy -- but, at least as important, is a moral imperative, but not a legal one.

[wyrmwoud]

Amen.

[mattycub]

SLEEP WITH ONE EYE OPEN, ABLEY!

I hear what you're saying. And I agree that Liddy should have done more to get out in front of this thing. There had to have been creative options between paying every cent of these bonuses and unilaterally breaking the contracts.

And yes, he's now asking for volunteers to give the money back. Which he could have done before. But it might have been that he was worried that people would do what they're doing now - volunteering to give the money back and walking out the door at the same time. And like Roger said, you can ask people to renegotiate, but you can't force them to. Perhaps he took a temperature test of the room and decided that it wouldn't fly.

this is no time to positively reinforce over inflated rates for their servicesSounds good, but one man's over inflated rate is another man's fair price. Big movie stars that make $20M a picture pull it down because their services make the studios multiple times of that. If I'm a derivatives trader that stands to make or save the company millions or

[wyrmwoud]

Funny you should write this post about employment on today, of all of my days.

I may call you tomorrow.

[mattycub]

Call away. Everything ok?