Tuesday, March 17, 2009

AIG Employees Not Too Happy With Persistent Death Threats

Interesting summation of the AIG populist anger from an employee's point of view. AIG's Financial Products office at 50 Danbury Road, in Wilton, CT is not a happy place. Inside "death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all." And as more employees leave(as soon as the bonus hits their bank account of course) and join the witness protection program, and nobody who understands the complexity of AIG FP's trades remains, the outcome can only be a horrendous one:
"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly."
When you have insiders telling you they are bracing for armageddon, it kinda takes away from the President's and Bernanke's message that all is well and that America will be back to its merry uberleveraged ways by the end of 2009 at the latest.

But back to the compensation issue. Apparently the recent anger at AIG bonuses should not be news:
Beginning in the first quarter of 2008, AIG disclosed the plan to offer retention awards at Financial Products. The unit had already begun to hemorrhage money, a problem that would later grow exponentially. The unit's executives, fearing they might lose valuable employees in the tumultuous months to come, successfully negotiated more than $400 million for their workers, to be paid this month and again next year.

At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. The conclusion: If the bonuses weren't paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.
Who exactly did they negotiate with, and why were Tim Geithner, the Treasury and all those screaming for AIG execs to commit seppuku not notified? Could this have to do with the fact that nobody really knows what is going on in the economy in general and in AIG in particular, until the New York Times or some other media outlet brings the problem to the front page? This is an appalling state of the information flow at Too Big To Fail institutions. Are we going to read that some financial neutron bomb has gone off at Goldman or Met Life on Page 6? This form of reactive information populism is great for politicians' ratings but terminal for any pretense of stability in the financial system. In the meantime, another 11 execs have resigned in the past few minutes, leaving likely a janitor and a chimp to supervise AIG's nuclear briefcase. In fact, here is the distribution of bonuses and departures (hat tip Paul Kedrosky):
  • The top recipient received more than $6.4 million;
  • The top seven bonus recipients received more than $4 million each;
  • The top ten bonus recipients received a combined $42 million;
  • 22 individuals received bonuses of $2 million or more, and combined they received more than $72 million;
  • 73 individuals received bonuses of $1 million or more;
  • Eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million.
Zero Hedge still cannot fathom how the SEC did not regulate Joseph Cassano's activities much more closely, especially as he already had a criminal record, as ZH posted previously.


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35 comments:

Anonymous said...

hahaha so we have AIG traders telling us this shit is going to blow up and the market is up 15% in the past 7 sessions? Lovely

James said...

No one has idea the risks they are taking in the markets right now. The Fed cant really control everything, AIG should be a warning.

wawawa said...

I guess I am not going to cover my shorts yet :)

Cathryn Mataga said...

"I have a horrible, horrible, horrible feeling that this is going to end badly."

Oh brother. Too late for this one. As if a worldwide global depressions doesn't already count as 'ending badly' -- I can only imagine what's coming next.

Anonymous said...

Oh come on.

First off, what ever gave that AIG guy a clue that "this is going to end badly?" It's BEEN ending badly for MONTHS now.

Secondly, AIG employees aren't leaving because of lack of bonuses. They are leaving because AIG is FUCKED.

What a bunch of feel sorry for the criminals propaganda. I have a better idea... how about we FIRE THEM, and replace them with people that know something about risk management.

Anonymous said...

"Persistent Death Threats"


LOL

Advant Guard said...

If the bonuses were negoiated in Q1 2008, AIG had not received any bailout money and was still a publicly-owned company. Why you would think that the Secretary of Treasury would spend his time micromanaging the salary policy of the thousands financial service companies is a mystery, but man was not meant to know everything.

Financial Products division dealt with Credit Default Swaps, which were explicitly excluded from the SEC regulation. SEC regulation does require that the top five paid employees and their remuneration are disclosed in the annual statement sent to shareholders. All salaries below the top five are not required to be disclosed.

AIG broke no rules; I am not sure why people are angry at them, except that the media and politicians prefer to use them as scapegoats to avoid having to explain who the real culprits are.

Anonymous said...

The problem is that AIG wrote checks that their ass can't cash without Uncle Sugardaddy Sam. The government could try and sue to clawback thru conveyance, but then again I'm not a lawyer.

Cathryn Mataga said...

What's not clear to me is how valuable the AIG brains are outside of AIG? As of right now, nobody else knows what's going on in the Chernobyl control room over there, so I wonder -- would any of this knowledge translate into the potential make vast sums of money outside of AIG?

Anonymous said...

Is it really Chernobyl if AIG dies? How bad is the situation? Or is it just that nobody has any idea?

Anonymous said...

Talking Points Memo linked to your blog on this story, Tyler. Now you'll get some real traffic...

killben said...

"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly."

Can't be soon enough ...

After all they had impoverished the dumb suckers(tax-payers) substantially and doing their mighty bit every day!!

Anonymous said...

Tyler,

AIG = BCCI

Oops! Did we leave a loophole in London?

http://www.rigorousintuition.ca/board/viewtopic.php?p=18450#18450

JohnC

Royce Penstinger said...

Uhhhh....why isn't anyone looking into Maurice "Hank" Greenberg and CV Starr...this man who was run off sure seems to be suddenly benefitting from all this...further, if you want to know what all of AIG's staff is going, go look at HAnk's new company.

http://washingtonscandal.blogspot.com/ for some information on Mr. Greenberg.

Anonymous said...

It's salutary that outsiders now have a voice.

They aren't getting bonuses so they'll get theirs another way. Pay them each $100,000 and I expect all the death threats would stop. Otherwise, not.

Anonymous said...

Those phuckers better run and hide.

Anonymous said...

They should be able to buy top notch, state of the art bullet-proof vests with the millions they looted from us.

Maybe the rent-a-cops dispatched to protect AIG HQ will become the only people with the knowledge of how to protect this vital American resource and will have to be paid millions to stay on to do an important but yet dangerous, thankless job.

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