TightyRighty.net

Congress has shown its true face(s) on this AIG matter.

First, AIG was “too important to fail” so Congress threw $150 billion + at it to keep it afloat.

Then, Congress royally screwed the folks who kept AIG afloat during this period.

Witness Jake Desantis, executive vice president of the American International Group’s financial products unit.  You probably saw or heard about his resignation letter to AIG CEO Edward Liddy, reprinted on the Op-Ed page of the NY Times.

Here is a guy who is a very high ranking executive in a profitable unit of AIG.  As the company gets in very serious trouble, it comes to him and asks him to do the following things in exchange for a retention bonus:

• Take a salary cut to $1.  I don’t know what he was making before, but I would guess he had a $350K+ base salary so this is a pretty substantial salary reduction.
• Don’t quit – stay with the company so it remains viable and can be restructured, components sold, etc.
• Work your ass off in a very dysfunctional environment where the company is under the microscope, is on  the verge of failing, and is trying to recover from some very complicated and very bad transactions previously entered in a different division than Mr. Desantis’.

Mr. Desantis does all these things and what does he get?  Screwed by AIG (Gee, can you please repay the bonus since I have to go talk to Congress in a few hours and it’s going to look bad? –  Edward Liddy).  Screwed by Congress (Yes, I added the provision to the stimulus package which would allow payment of these bonuses, but that was before I knew how unpopular these bonusses would be and how bad I would look. – Sen. Chris Dodd).  Screwed by the state (I want to know how much each of these AIG people make so I can publicly shame them for making so much money at the taxpayers expense. – Andrew Coumo).

This is an outrage!  This guy did everything he was asked and in return he gets pilloried in the public square.  Congress, in its infinite wisdom and pure spite, passes a law to tax this bonus at 90%.  Keep in mind that some portion of the “bonus” is actually the salary he had foregone in order to help the company!  And it would be taxed at 90%.

This proves how out of touch Congress is with the real world.  When Excel Communications was known to be on the block, I was one of a number of executives deemed important to the company’s viability so I was paid retention pay until a buyer was found and a deal completed.  This is the way business gets done. 

I would venture that had AIG not established a similar retention program, it would have been Katy bar the exit door and the company “too important to fail” would have folded like a cheap tent without any leadership.  Then we would have nothing to show for all the taxpayer dollars invested in the company and if it truly was “too important to fail” then our financial mess would be much worse.

p.s. In an interesting aside, the NY Times has over 900 comments on this op-ed.  The editors have highlighted 32 as the Editor’s Choice (“most interesting and thoughtful comments that represent a range of views”).  Of the 32, I’ll bet 28 are vehemently against these bonuses because this is so much more than the average American makes, once AIG ate at the government trough contracts don’t matter, etc.  This is about the “range of views” I would expect from the old gray lady.  What a hag she has become.