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View Full Version : Economics Matt Taibbi: I Quit AIG Guy's a BS Artist


Cave Johnson
03-30-2009, 11:52 AM
http://www.smirkingchimp.com/thread/20988

AIG Exec Whines About Public Anger, and Now We're Supposed to Pity Him? Yeah, Right

"I take this action after 11 years of dedicated, honorable service to AIG. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down." via Op-Ed Contributor -- "Dear AIG, I Quit!" -- NYTimes.com

Like a lot of people, I read Wednesday's New York Times editorial by former AIG Financial Products employee Jake DeSantis, whose resignation letter basically asks us all to reconsider our anger toward the poor overworked employees of his unit.

DeSantis has a few major points. They include: 1) I had nothing to do with my boss Joe Cassano's toxic credit default swaps portfolio, and only a handful of people in our unit did; 2) I didn't even know anything about them; 3) I could have left AIG for a better job several times last year; 4) but I didn't, staying out of a sense of duty to my poor, beleaguered firm, only to find out in the end that; 5) I would be betrayed by AIG senior management, who promised we would be rewarded for staying, but then went back on their word when they folded in highly cowardly fashion in the face of an angry and stupid populist mob.

I have a few responses to those points. They are 1) Bullshit; 2) bullshit; 3) bullshit, plus of course; 4) bullshit. Lastly, there is 5) Boo-****ing-Hoo. You dog.

AIGFP only had 377 employees. Those 400-odd folks received almost $3.5 billion in compensation in the last seven years, a very large part of that money coming from the sale of credit default protection. Doing the math, that averages out to over $9 million of compensation per person.

Ask yourself this question: If your company made that much money, and the boss of the unit made almost $280 million in just a few years, exactly how likely is it that you wouldn't know where that money was coming from?

Are we supposed to believe that Jake DeSantis knew nothing about Joe Cassano's CDS deals? If your boss and the top guys in your firm were all making a killing selling anything at all -- whether it was rubber kayaks, generic Levitra or credit default swaps -- you really wouldn't bother to find out what that thing they were selling was? You'd really just mind your own business, sit at your cubicle and put your faith in the guys up top to fill you in if there was something you needed to know?

This would be a believable claim for an employee of some other wing of AIG, a company with well over 100,000 employees. But DeSantis works for tiny, 377-person AIGFP, a unit that had only two offices -- one in London and one in Greenwich, Conn.

And we're talking about financial professionals, the most shameless group of tirelessly envious gossips ever to walk the face of the earth. The likelihood that Cassano would pull in $280 million for himself, and his equally greedy, hopelessly jealous employees wouldn't know not only exactly how he made that money but every last ugly detail about his life -- from what skank he's sleeping with to what side of his trousers he hangs on -- is almost zero.

I know plenty of people who work in this world, and I've met very few who didn't hate with every cell in their bodies anyone in their own companies who made more money than they did or got bigger bonuses at Christmastime. Gossiping about each others' bonuses, and bitching about each others' compensation, is the national pastime for these people.

So forgive me if I don't buy this story that poor Jake and his buddies didn't know about Cassano's CDS business.

<b>Also, there's this: let's just say, Jake, that you're telling the truth, that you don't know anything about this toxic portfolio. If that's the case, then why the **** does anyone need to retain you at an exorbitant salary to help unwind that very portfolio? If these transactions aren't and never were your expertise, then where the hell is your value here?</b>

When I spoke to Christine Pretto, the AIG spokeswoman, and asked about those bonuses, she said that AIG needed to retain people like you in order to take advantage of your "knowledge of these transactions." So if you don't have knowledge of these transactions, what are you being paid for? Your winning attitude?

Then there's the matter of Jake's other job offers. About that: It was apparent as early as last February that Cassano had basically destroyed not only the unit but perhaps AIG itself. The company announced over $11 billion in losses around that time.

If I'm Jake DeSantis, and I'm really innocent, I'm looking for a job that very instant. And I'm taking the first good job anyone offers me. Because by then I'd have realized that I was working for the latest version of Enron. That the man I've been working for the last six or seven years has turned out to be one of the most irresponsible Wall Street villains of all time, a man who single-handedly destroyed the 18th-largest company in the world. If I'm Jake DeSantis, I'm quitting out of moral disgust, because I don't want to be associated with this kind of behavior.

The only reason I'd stay is if I didn't have a choice. Which I feel sure is what happened here. If Jake DeSantis didn't take advantage of an opportunity to get a better job elsewhere with a company that didn't hide billions in losses and make $500 billion bets with money they didn't have, that's his ****ing problem.

The notion that I the taxpayer have to pay this asshole a million-dollar bonus because he turned down a better job at a less-guilty company is repugnant to begin with; the notion that he stayed at AIGFP because he expected me to pay him this bonus makes me hate him even more.

But it's all moot, because I feel quite sure it's a lie. As one trader for another firm told me not long ago when I asked what he thought about the need to pay these "retention bonuses" to these "valued employees" at AIGFP:

"Yeah, right. Who would hire these guys? They'd stay for a dollar if you offered it to them, much less a million."

I mean, half of Wall Street is unemployed right now. There are plenty of unemployed traders out there whose resumes don't include such entries as "Worked for years at small unit of AIG that helped destroy the universe; throughout that time was completely ignorant of burgeoning global disaster unfolding 5 feet from my desk."

The idea that other companies would be so eager to pass over the seas of truly innocent available people in order to scoop up some still-employed veteran of AIGFP -- and that they would be so enthusiastic in their pursuit of said AIGFP employees that AIG would need to pay those AIGFP folks million-plus retention bonuses to get them to stay -- is so ludicrous it almost defies comment.

Show me, anywhere, the Wall Street firm that's willing right now to spend more than a million dollars poaching still-employed midlevel executives like DeSantis, when they can just put an ad in the paper and have 500 recently unemployed CEOs begging for work at almost any salary in five minutes.

So the idea that the rest of Wall Street is breaking down AIGFP's doors to lavish its idiot personnel with million-dollar offers is just utterly preposterous. The fact that DeSantis expects us to believe this is insulting in itself.

Also, remember, DeSantis until this year was probably the recipient of performance bonuses. This year, obviously, there was no performance, so AIG doled out these "retention" bonuses instead. And the value of these retention bonuses is seriously in question if AIG never really needed to pay extra to retain this personnel, which I personally believe they didn't.

I personally believe these "retention" bonuses were a ruse cooked up by management to suck a few more dollars out of the company before it sank to the ocean bottom. So if DeSantis is "owed" these bonuses, it's only in the sense that someone up above agreed to cheat the shareholders by paying these bonuses when they weren't really necessary; they weren't "earned" in any real sense.

But all of this is really secondary to the tone of DeSantis' letter. He acts like he's a victim because he didn't get to keep his after-tax bonus of $742,006.40 in the middle of a global depression. And he really loses his ****ing mind when he writes:

"None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house."

First of all, Jake, you asshole, no plumber in the world gets paid a $740,000 bonus, over and above his salary, just to keep plumbing. Second, try living on a plumber's salary before you even think about comparing yourself to one; you're inviting a pitchfork in the gut by even thinking along those lines. Third, Jake, if you were a plumber, and the electrician burned the house down -- well, guess what? If you and that electrician worked for the same company, you actually wouldn't get paid for that job.

Out in the real world, when your company burns a house down, you're not getting paid by that client. It's only on Wall Street, where the every-man-for-himself ethos is built into an insanely selfish and greed-addled compensation system, that people like you expect to get paid in a bubble -- only there do people expect their performance bonuses no matter how much money the shareholders lose overall, no matter how many people get laid off after the hostile takeover, no matter how ill-considered the mortgages lent out by your division were.

You expect that money because you think it's owed to you. But what money? The money is gone. Your boss, if not you, set it all afire. You want the money, but where exactly do you think it's coming from?

Do you just not understand that that money now would have to come out of someone else's pocket? That it would have to come from middle-class taxpayers, real plumbers, people who didn't make millions over the years in equity and commodity trading?

Here's the real problem with people like Jake DeSantis. Throughout this whole period, they never were able to connect the dots -- to grasp the fact that when they skimmed a million here or a million there off the great rivers of capital that flowed through their offices, that that money came from somewhere, from someone. To them, it wasn't someone else's money, it was just money, and why shouldn't they have it?

It's remarkable that when DeSantis, in his letter, touts the reason he deserves his high compensation, all he can talk about is how much money he made: "The profitability of the businesses with which I was associated clearly supported my compensation."

For a guy like this, his worth as a human being is wrapped up in buying a bag of beans for $10 and selling it for $11. He states this like it's a law of nature: he was a good equities-and-commodities trader, therefore he should make a lot of money.

Only a person with a habitually overinflated sense of self-worth could think he deserves a $700,000 retention bonus, even if it has to be paid by taxpayers, when in reality no one "deserves" that much money. It may be that some people do get paid that much, but most people who make that much money have enough sense to realize their cushy lifestyles are an accident of fate, of birth, of class, not something that is "supported" by some unwritten natural law of compensation.

Hey Jake, it's not like you were curing cancer. You were a ****ing commodities trader. Thanks to a completely insane, horribly skewed set of societal values that puts a premium on greed and severely undervalues selflessness, communal spirit and intellectualism -- values that make millionaires out of people like you and leave teachers and nurses, the people who raise your kids and clean your parents' bedpans, comparatively penniless -- you made a lot of money.

Good for you. Consider yourself lucky. But your company went belly-up and broke, almost certainly thanks in part to you, and now you don't get your bonus.

So be a man and deal with it. The rest of us do, when we get bad breaks, and we've had a lot more of them than you. And stop whining. Jesus Christ.

patteeu
03-30-2009, 01:13 PM
Humorous, but hardly the bodyslam that was advertised.

What it really amounts to is that (1) Matt Taibbi doesn't believe Jake DeSantis' story but has nothing but speculation on which to base his disbelief and (2) Matt Taibbi doesn't think anyone deserves $700,000+ compensation no matter what his contract says.

Garcia Bronco
03-30-2009, 01:25 PM
Humorous, but hardly the bodyslam that was advertised.

What it really amounts to is that (1) Matt Taibbi doesn't believe Jake DeSantis' story but has nothing but speculation on which to base his disbelief and (2) Matt Taibbi doesn't think anyone deserves $700,000+ compensation no matter what his contract says.

I came away with that exact impression as well. Taibbi clearly doesn't understand that the entire compnay is being broken down. It's not just on portfollio.

petegz28
03-30-2009, 01:27 PM
Humorous, but hardly the bodyslam that was advertised.

What it really amounts to is that (1) Matt Taibbi doesn't believe Jake DeSantis' story but has nothing but speculation on which to base his disbelief and (2) Matt Taibbi doesn't think anyone deserves $700,000+ compensation no matter what his contract says.

For the sake of context...let's not confuse the difference between deserved and "legally obligated"....k?

Cave Johnson
03-30-2009, 01:35 PM
DeSantis' diatribe came out on the 24th, so I doubt 3 days is sufficient to do a full investigative piece on him. So yes, any critique is going to be speculative by necessity.

You're ducking the crux of the piece. Either he's complicit in at least being aware of the ridiculous CDS bets his division was making or he wasn't, in which case why does he deserve a retention bonus for unwinding them.

patteeu
03-30-2009, 01:35 PM
For the sake of context...let's not confuse the difference between deserved and "legally obligated"....k?

OK. Let's not confuse what you or Taibbi think qualifies as "deserved" with any kind of objective concept either.

petegz28
03-30-2009, 01:37 PM
OK. Let's not confuse what you or Taibbi think qualifies as "deserved" with any kind of objective concept either.

Once again, do you know what was in the contracts? Or are you still just going by what you think was in the contract? Somehow I think it is the latter.

patteeu
03-30-2009, 01:43 PM
DeSantis' diatribe came out on the 24th, so I doubt 3 days is sufficient to do a full investigative piece on him. So yes, any critique is going to be speculative by necessity.

Fair enough. I give it credit for being a humorous diatribe though.

You're ducking the crux of the piece. Either he's complicit in at least being aware of the ridiculous CDS bets his division was making or he wasn't, in which case why does he deserve a retention bonus for unwinding them.

I just don't think that's necessarily true. I think it's possible that this man has a superior understanding of the issues involved in the messed up transactions over that of an investment banker off the street without necessarily having complicity in the decisions that led the company to this disaster. He didn't necessarily have to have enough detailed knowledge of the transactions in advance to have been able to shout from the mountaintop that his company was about to destroy the financial universe in order to have valuable expertise for unwinding these transactions and helping to dismantle the company.

Maybe he did have more knowledge than he lets on, but I don't think that has to be the case. For whatever reason, he was asked to stay on to help with the dismemberment. He ought to be compensated for his work and even if $700k sounds like a lot, it's probably more reasonable than $1 if you want him to do a good job instead of spending all his energy looking for work elsewhere.

patteeu
03-30-2009, 01:45 PM
Once again, do you know what was in the contracts? Or are you still just going by what you think was in the contract? Somehow I think it is the latter.

The issue is whether $700k is "undeserved" despite the presence of a contract. The contract is presumed.

Baby Lee
03-30-2009, 01:46 PM
You're ducking the crux of the piece. Either he's complicit in at least being aware of the ridiculous CDS bets his division was making or he wasn't, in which case why does he deserve a retention bonus for unwinding them.
You think a product liability attorney in a big firm is SotA on what's going on in their IP division, or corporate, or tax?

petegz28
03-30-2009, 02:21 PM
The issue is whether $700k is "undeserved" despite the presence of a contract. The contract is presumed.

Perhaps it is underserved on both counts? Who is to say the guy actually fulfilled his contractual obligations? If he did, then there was no need to go whining publicly. He could simply sue if he was denied his allegedly deserved funds.

patteeu
03-30-2009, 02:24 PM
Perhaps it is underserved on both counts? Who is to say the guy actually fulfilled his contractual obligations? If he did, then there was no need to go whining publicly. He could simply sue if he was denied his allegedly deserved funds.

Perhaps. Perhaps AIG was building WMD in their basement for al Qaeda too, but we were discussing the Taibbi commentary in the OP.

Garcia Bronco
03-30-2009, 03:02 PM
DeSantis' diatribe came out on the 24th, so I doubt 3 days is sufficient to do a full investigative piece on him. So yes, any critique is going to be speculative by necessity.

You're ducking the crux of the piece. Either he's complicit in at least being aware of the ridiculous CDS bets his division was making or he wasn't, in which case why does he deserve a retention bonus for unwinding them.

It wasn't his division according to DeSantis. Why would he lie?

Garcia Bronco
03-30-2009, 03:03 PM
The issue is whether $700k is "undeserved" despite the presence of a contract. The contract is presumed.

Deserve has nothing to do with it. It about what's in the contract. And the contract said what it said.

KC native
03-30-2009, 03:33 PM
It wasn't his division according to DeSantis. Why would he lie?

He was in the financial products division too. He just wasn't on the CDS team. If DeSantis is as high a level as he claimed then he knows what's going on in other parts of the department.

Cave Johnson
03-30-2009, 03:40 PM
It wasn't his division according to DeSantis. Why would he lie?

He's back on the job market. I would think it would be in his best interest to minimize his role in this financial disaster.

"In a span of only seven years, Cassano [the head of AIGFP] sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market....

Initially, at least, the revenues were enormous: AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion."

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/4

I find it extremely hard to believe that he had no knowledge of the financial product which helped quintuple revenue in his 400 person division.

Cave Johnson
03-30-2009, 03:43 PM
Deserve has nothing to do with it. It about what's in the contract. And the contract said what it said.

Contracts can be renegotiated or set aside for, say, unconscionability. The "a contract's a contract" argument is a cop-out.

Cave Johnson
03-30-2009, 03:58 PM
You think a product liability attorney in a big firm is SotA on what's going on in their IP division, or corporate, or tax?

I've never worked at a big firm, so I can't say whether they have the same corporate culture Taibbi cited. Given the existence of sites like GreedyAssociate, I'd bet it's similar.

Garcia Bronco
03-30-2009, 04:39 PM
He was in the financial products division too. He just wasn't on the CDS team. If DeSantis is as high a level as he claimed then he knows what's going on in other parts of the department.

Maybe. Maybe not.

Garcia Bronco
03-30-2009, 04:40 PM
Contracts can be renegotiated or set aside for, say, unconscionability. The "a contract's a contract" argument is a cop-out.

It doesn't matter the contract was already in place, and the Government tried to subvert that contract that it, the government itself, wrote.

Garcia Bronco
03-30-2009, 04:43 PM
He's back on the job market. I would think it would be in his best interest to minimize his role in this financial disaster.

"In a span of only seven years, Cassano [the head of AIGFP] sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market....

Initially, at least, the revenues were enormous: AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion."

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/4

I find it extremely hard to believe that he had no knowledge of the financial product which helped quintuple revenue in his 400 person division.

That assumes a bunch. I sit in a postion like his, I don't know that next department's income or budget.

Cave Johnson
03-30-2009, 05:16 PM
It doesn't matter the contract was already in place, and the Government tried to subvert that contract that it, the government itself, wrote.

Nice try, but the contracts containing the retention bonuses predated the government bailout.

http://abcnews.go.com/Business/Economy/story?id=7097759

Baby Lee
03-30-2009, 05:28 PM
Contracts can be renegotiated or set aside for, say, unconscionability. The "a contract's a contract" argument is a cop-out.

C'mon man, don't throw out big words on the assumption that they'll sway the unwitting. There's not even a whiff of this being an unconsionable contract. Both parties to the contract were in strong positions and fully intended that the contract be completed by services rendered and consideration therefor.
You want to discuss this under theories of assignment of contracts, novation and obligations of after contract third parties, do that. Don't BS people.

Cave Johnson
03-30-2009, 05:48 PM
C'mon man, don't throw out big words on the assumption that they'll sway the unwitting. There's not even a whiff of this being an unconsionable contract. Both parties to the contract were in strong positions and fully intended that the contract be completed by services rendered and consideration therefor.
You want to discuss this under theories of assignment of contracts, novation and obligations of after contract third parties, do that. Don't BS people.

I don't want to get into a discussion about the legalities of a contract that neither of us has read. However, experts (http://blogs.wsj.com/deals/2009/03/19/aigs-165-million-bonuses-is-it-legal-to-take-them-back/) who have actually read the contracts (http://www.cnn.com/2009/POLITICS/03/19/aig.contracts/) feel that they're not bulletproof.

Baby Lee
03-30-2009, 05:58 PM
I don't want to get into a discussion about the legalities of a contract that neither of us has read. However, experts (http://blogs.wsj.com/deals/2009/03/19/aigs-165-million-bonuses-is-it-legal-to-take-them-back/) who have actually read the contracts (http://www.cnn.com/2009/POLITICS/03/19/aig.contracts/) feel that they're not bulletproof.

Thank you for citing references that agree with my point.

There’s something called unconscionability–if a contract is so unbelievably unfair that it shocks the conscience of the court, then the contract can be dissolved. I doubt that’s the case here, despite the outrage. That’s the harder place to attack them.

MoF, their take leans strongly to 'let them decide whether or not to brave the embarassment of pursuing what they are probably entitled to under the contracts and see if that don't deter them or at least soften them up for a settlement.'

IMO, and I may be overestimating your recall of Contracts, but your previous post is the equivalent of a doctor saying "it may look like Lance Armstrong broke his collarbone, but we can't overlook the possibility of myasthenia gravis."

Unconscionable contracts are those where one party it 'over a barrel' like contracts requiring workers to buy all their goods at the company store, or a contract obligating an gravely injured person to pay $1 Million to get the ambulance to head to the hospital, signifying a lack of voluntary assent due to a lack of meaningful choice.

Cave Johnson
03-30-2009, 06:29 PM
Unconscionable contracts are those where one party it 'over a barrel' like contracts requiring workers to buy all their goods at the company store, or a contract obligating an gravely injured person to pay $1 Million to get the ambulance to head to the hospital, signifying a lack of voluntary assent due to a lack of meaningful choice.

Where did I say that I thought these particular contracts were unconsionable?

Baby Lee
03-30-2009, 06:50 PM
Where did I say that I thought these particular contracts were unconsionable?

Are you seriously suggesting you said;

Contracts can be renegotiated or set aside for, say, unconscionability. The "a contract's a contract" argument is a cop-out.

And expected all to follow along with an understanding that "of course these contracts would never be negated for this reason, because contracts of this nature never are."

Cave Johnson
03-30-2009, 07:18 PM
Are you seriously suggesting you said;

And expected all to follow along with an understanding that "of course these contracts would never be negated for this reason, because contracts of this nature never are."

If you want to be obtuse and conflate reciting general contract law principles with a specific endorsement of a certain legal theory, go right ahead. We cool.

Baby Lee
03-30-2009, 07:23 PM
If you want to be obtuse and conflate reciting general contract law principles with a specific endorsement of a certain legal theory, go right ahead. We cool.

You're the one conflating recitation of an inapplicable principle with a non-lay appellation with proof that the contracts are pregnable.

Garcia Bronco
03-31-2009, 09:40 AM
Nice try, but the contracts containing the retention bonuses predated the government bailout.

http://abcnews.go.com/Business/Economy/story?id=7097759

And the TARP bill honors those renetion bonuses in the contract.