AIG Rewards Failure: How Could the Brightest Be So Blind?

Since we the taxpayers own approximately 80% of AIG, shouldn’t we have some say in their affairs? As 80% owners, should we approve payouts of $450 million in bonuses for employees in the unit that lost $40.5 billion last year? What happened to the idea of rewarding performance? This is reward for FAILURE! These employees were responsible for the virtual capitulation of AIG. Just think how logical this is. These people destroyed not only a company and all the lives of people dedicated to the company’s success but are now rewarded too.

The so called bright and clever were responsible for credit default swaps. The idea behind a credit default swap is when an investor (bank or Institution) takes on risky debt (Collateral Debt Obligations, Collateral Loan Obligations or any other toxic asset), in order to lower their risk they insure that risky debt by going to companies such as AIG to cover any potential losses. The risks they took on were exaggerated. I believe the amount of swaps floating currently is in the $62 trillion dollar range. There is a breakdown of counter party risk. How could the brightest be so blind? Have they never heard of the book by Nassim Taleb, ”The Black Swan”?

In short these people are being compensated at the taxpayers' expense.

This is nothing more than a ripoff or con job. AIG is paying out the executive bonuses to meet a Sunday deadline, but AIG has agreed to government requests to restrain future payments. The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. AIG stated earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

It is easy to be even more outraged. AIG is still not on solid ground and might need more money. Goldman Sachs (GS) is another question mark. Without being too negative, Citi (C) came out and stated they were profitable. What happened to their mountain of toxic paper? Where is that money supposed to come from? One guess… How is one to have any confidence when their money is wasted?

Is it any wonder that China came out last week and expressed concern over the stability of US Treasuries?

Comments

[buyitcheap:]

They're not the brightest. More often, they're the most arrogant, obnoxious, offensive, deceitful individuals you could ever meet. Eisner in his book said it best when he asked of a I bank rep, "how are you going to screw me?" and he actually wanted to know! When the rep told him, he made the trade.

In this case, they all worked for one place, selling to other arrogant liars at other I banks. And When you have that much hubris in one place, this is the result. I hope some of them have learned their lessons and will leave the sector.

Mar 16 08:39 AM

[frosty:]

imagine what they would have lost if they weren't so bright!

Mar 16 08:59 AM

[dare16:]

If the aig employees have the slightest sense of dignity, they should voluntarily forgo the bonus, instead they want sue their company which they caused to fail if they cannot get the bonus.

Mar 16 09:25 AM

[Irishscot2:]

Reality - they all went to the Ivies and are interconnected with political appointees and elected officials. Now people like Barney will come out and bemoan how they can "do this to the American taxpayer" when they are part and parcel of the problem. Google all government appointees, elected official, Fortune 100 boards, federal officials, all the same "select" schools come up, Ivies, the Georges (GW and Georgetown), U of Chicago, U of Texas and Stanford. You need go no further. And they constantly reward and pay off each other.

Mar 16 09:47 AM

[Thadeus Tho...:]

This AIG thing is an outrageous scam on the American taxpaying public. People are screaming about LOANING money to GM and other automakers to keep them alive, and here the government gives money away to AIG with no strings and inflated bonuses are given away to "keep the talent". Most of congress and their lobbiest cronies must have money in AIG pension or investment accounts to allow this kind of thing to happen. Life today is not much different than medieval times. We are living in a fiefdom and the "Big Guys" keep taking advantage of the serfs in various ways. The only thing that has changed is the way things are transparently manipulated, at least, until now.

If I were a young person I might start thinking, "Why work, why save, why try and position myself in some form of honest employment when the few , but influential, manipulate things in an economy to their advantage." America, land of opportunists.

". . . man has dominated man to his injury". Ecl. 8:9

Mar 16 10:23 AM

[Bill Herbert:]

>>I hope some of them have learned their lessons and will leave the sector.<<

There is a GREAT place for some of these offenders to actually learn their lesson - it's called a Federal Correctional Institution.

They committed gross negligence and violated their fiduciary duties when they wrote illegal insurance contracts in pursuit of bonuses based on phantom profits. And as far as I'm concerned, it should be classified as a crime when an employee accepts a bonus under those conditions, knowing that eventually the company may lose a huge amount of money, or even go bankrupt because of his or her action.

In short, this is the biggest ripoff, or heist, in history - the US Govt is being swindled by the Ivy League Mafia that has been allowed to subvert the law and the regulatory process to defraud the government and the citizenry, and steal hundreds of billions of dollars.

Mar 16 10:38 AM

[Jackson Cash:]

Yep we own 80% of AIG, but 0% of the black hand behind it.

Mafia 101 - when it smell like shit, and there's a lump under the rug no one wants to talk about - follow the money.

Mar 16 11:28 AM

[Harry Tuttle:]

The are bright indeed. They use all of their abilities to get paid no matter what.

We, on the other hand, are the ones paying.

Who is smart and who is stupid?

Mar 16 12:48 PM

[Moon Kil Woong:]

I wonder if clawback laws can be written for this type of stuff. You could make a list a mile long of financial executives that got giant bonuses with policies that ran their companies into the ground.

Sure you get your bonus. Then you get to pay back your bonus for the last 10 years.

Mar 16 01:34 PM

[bobbobwhite:]

When many of the gov't's people who make the decisions for bailouts(are allowed to) come from the very companies they bail out, what can we expect? There seems to be no limit to the dishonor(incredibly, they don't even see it as dishonor)these people can perpetrate on innocent others today for personal gain.

It is so true that every human has a sell out price, every one, and it seems they are all looking to sell out for as much $ as possible so they can live the lifestyles of the rich and famous for the rest of their sold out lives. They are true adherents of, "who cares what other people think of me these days? I don't have to care, I'm filthy rich now." Probably said by Bernie Madoff many times.

Mar 16 03:43 PM

[O-B-WON:]

I think we're about to have a Black Swan event in this country.....

The tax paying citizens of this country have just about had their fill...

Mar 16 04:34 PM

[Andy Abraham:]

Well said... who says it will be a Black Swan... enough is enough... what really happened to our country?
I had an email sent to me ...asking me to send a tea bag to Washington...my response was that would even be a waste of a tea bag....We need true leaders...


On Mar 16 04:34 PM O-B-WON wrote:

> I think we're about to have a Black Swan event in this country.....
>
>
> The tax paying citizens of this country have just about had their
> fill...

Mar 19 03:29 PM