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March 24, 2009

AIG bonus debacle

Dear President Obama,

Do not underestimate the outrage toward American International Group and the overall negative effect this is having on the economy, the market and all of your efforts.

Do not tax the bonuses. Delete the amount that is not returned from the next installment. Verbally chastise those who do not return the bonuses and put this to rest.

Finally, there must be mandatory requirements each and every time that federal (or state for that matter) dollars are used to bail out, aka loan, any entity our tax dollars, and this must include no bonuses of any kind or raises for the duration of the loan period.

This is only common sense, and it baffles me that this was not a condition to begin with as I, and millions of others, have asked repeatedly for these types of guidelines.

If our leaders — elected or appointed — do not understand this, then God help us all.

Audrey Casassa
Mission

President Obama’s goal of having a more “transparent government” died a quick death. Washington Democrats have given so many conflicting statements lately that they’re either liars or idiots.

Treasury Secretary Timothy Geithner and Senate banking committee chairman Christopher Dodd have known all along about the AIG bonuses to be paid with our tax dollars. Geithner lied to a Senate committee March 3 when first asked about this but has now admitted otherwise. In my book, that makes Geithner a liar and a cheat. (Remember his failure to pay income taxes?) For years Dodd has been on the very committee that was supposed to be providing oversight of our banking and financial institutions. This mess all came about under his watch.

Stop pointing fingers at the last administration, because it just doesn’t cut it anymore. Everyone in Washington owns blame, and we’re part of the problem. Quit your bellyaching, lying and whining and start earning your big bucks. Or are you representatives in Washington only there to enrich yourselves and feed your own egos?

Buy Geithner a bus ticket home, and kick Dodd off the banking committee now.

Joyce Howard
Lee’s Summit

Comments

NoMoreMrNiceGuy

Actually the moral of the story is learn to be solvent and debt free versus debt heavy then blame and expect some lawyer ina suit to bail you out of the mess you put yourself into. I wish I were in the position to sell a house that I paid $200k for and profit $400k. I would retire versus sporting an obnoxious home, car and pretending I am so damn pimped out.

NoMoreMrNiceGuy

I understand that Casady but my point being is that many people ARE over indulged in credit, that is a fact. I just get tired of the ridiculous comment that EVERYONE Is on the brink of poverty when that is simply not the case. 90% of us go one living as we did, paying our bills and having to get ready to be punked once again for a small fraction of others. Certainly there are some that maybe do not deserve what happened, job loss by no fault of their own, however, GO FIND ANOTHER JOB! There are plenty of jobs. This b*ll**** notion that there are NO JOBS is just that. ANYONE that can afford to go to any casino, any concert any sporting event is not in poverty. The point being that the person that was DUMB enough to go and buy a house that is excessive with equity deserves what they get. Many people simply get hung up on buzzwords. I know people that are in exatcly the same place they were 15 years ago, yet they blame everyone else for their situation. I fail to see how printing more money and writing hot checks is genius or how it will instill fiscal discipline to people and enterprise that lacked that before hand. Some people are just poor with ficsal responsibility this includes government. Why do so many believe government is historically good with oney when we know they are not? Are they retarded or just in denial?

Casady

NMMNG:

While there are certainly enough examples of people buying beyond their means, you claim in one post that the number of foreclosures is being blown out of proportion yet in another post, you are claiming that everyone appears to be overextending themselves. I can attest to that personally.

While I do not know the situation of your poker buddies (how did you do, by the way?), did it ever occur to you that they may have bought their $600K house by selling their previous home for $500K that they only paid $200k for in 2000? Just because someone who earns less than $100K a year buys a $600K house does not necessarily mean they are overleveraged. For all you know, their mortgage may only have a $200K mortgage.

I guess the moral of the story is don't betoo quick to judge.

NoMoreMrNiceGuy

Casady is correct. No bailouts for anyone.
I was in a discussion at a poker table with some guys from other parts of the country, complaining about the economy. $600k for a house? Calling it a good deal? That is hardly reasonable. I asked them what they did for a living, none of them made over 6 figures, so there you go. Too much house, not enogh income. I thne asked then how much people spent on other things besides their mortgages, i.e. casinos, sporting events, designer clothing, $100 sneakres, etc. They got mad and said I just did not understand finance. Maybe I don't but I do understand that $600k for a house ANYWHERE is still $600k. With only 1 of 10 households making over $100k per year, I find it hard to fathom people making less than that signing off on even a $300k house. It just seems frivilous.

Casady

Very touching letter PM but how is Mr. DeSantis' situation any different from the outstanding Enron or Worldcom employee who was dupped out of his or her rightful compensation? And while I agree that Washington shares the responsibility for the current situation and is going way overboard in it's efforts to try and rectify the matter, please explain how investment bankers who repackaged this garbage down the line are somehow innocent pawns at the feet of big government. You're a pretty smart guy and you know darn well how this junk was peddled down the line. No one is innocent.

NoMoreMrNiceGuy

COngress is not put in place to regluate anything, they are put in place to represent of which they do. So long as you are part of their agenda and contributors.
Someone initially made false claims about not allowing lobbyists, apparently lawyers are not considered lobbyists or special interests. Everyone under the sun EXCEPT middle class, common Americans are being represented. Free passes are being handed out like candy on Halloween so long as you are part of the clique. Government is not accountable whether it be Obama or BUsh, they are ALL on the take to some extent or another. I have zero trust in lawyer or politicians, every one of them I have ever dealt with is a crook.

pmcw

Kee, Actually I was the one who posted the letter - you can also find it on the web.

The simple truth here is our congress, the guys and gals we hire to properly regulate our system, are trying to divert blame to someone else. Our problems are in Washington and until congress openly own up to it, our problems will persist - may not the same problems, but problems none the less.

Kee

BTW thanks Jake for sharing your letter with us all.

Kee

Yep lets all cheer, the government now dictates how much we may, or may not earn. Thanks to our friends on the left. Shades of the Russian revolution, kill all the rich people!

pmcw

March 25, 2009
Op-Ed Contributor
Dear A.I.G., I Quit!

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. 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.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. 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.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”

Sincerely,

Jake DeSantis

 
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