Chaos at AIG

[KrazyHorse]

Darius, those articles don't say anything like what you've claimed they say.

[notyoueither]

Only desperately ill ones will keep the cash.

Can we give them the Z?

[Darius871]

In other words, you think that the public DOESN'T want to be repaid immediately.

And I think that you're absolutely wrong on that.

They could barely be convinced to give the banks money when the administration AND the banks were both in favour of doing it. Now when the banks say they don't need the money you think the will will be there to say no to repayment?

1) I didn't say they don't want it paid back immediately, just that they don't want it paid back irresponsibly (or what the nanny state tells them is irresponsibly).

2) Even supposing #1 is sorely mistaken, I don't have much faith that Congress would aggressively respond to public concerns in that regard if there is an argument on the table that for the sake of system-wide stability a thorough completion of stress-testing (which has a timeframe that is not only indefinite but "sworn to secrecy" as the CCO put it to me) and explicit regulatory clean bill of health must be a prerequisite of any voluntary returns, much less that secretive Treasury/Fed officials would be so responsive. Don't forget that polls showed majority opposition to the initial TARP bill also, but Congress nonetheless bit the bullet and found systemic risk more important than Joe Schlub's uninformed mob anger. They could make the same trade-off tomorrow and the next day and the next day.

Don't be silly. All the healthy banks are going to repay the money early, as well as some of the not-so-healthy ones (the ones that, if TARP is a good idea, we WANT to have the money). Only desperately ill ones will keep the cash.

Of course healthy banks will repay early, i.e. not only earlier than less healthy banks but also earlier than the government expected; I never actually denied that. What disturbs me is instead the question of how early, and the fact that repayment is being impeded at all.

[DinoDoc]

What's the basis of your assumption that A) the group of people who destroyed the company through 2008 and B) the bonus-receiving group of people presently handling the "wind down" of Financial Products Division are necessarily coextensive?

I'm fairly certain you don't give people a retention bonus who stayed on the job for a period of weeks. This is also ignoring the fact that the bonus contract goes out of its way to ignore performance considerations as well.

[Darius871]

Darius, those articles don't say anything like what you've claimed they say.

The first I just googled quick and it didn't have the specific comments I recalled, but it at least makes clear that initially "U.S. Bank was told, not asked, to participate." More to my point, at about the same time he clearly said "the Minneapolis-based company must first undergo a federal 'stress test,' but it will then seek to return $6.6 billion in TARP funds it had received... 'Following those outcomes, it is my intent that, given permission...that this company would like to emerge from the TARP assets as soon as possible'" (emphasis added).

As for the second article, "Davis said he wants to pay back the $6.6 billion capital investment from taxpayers, if federal officials will allow it" (emphasis added) at least implies what I've been saying, namely 1) intent to repay ASAP as the taxpayers would like, but 2) being legally barred from repaying without Uncle Sam's say-so.

The same brick wall was said of TCF's firm and publicized intent to return TARP money: "TCF Financial Corp. has moved to pay back the federal government the hundreds of millions of TARP bailout funds it received in November, calling its participation in the banking-assistance program 'a competitive disadvantage' ... 'We believe participation in TARP has created a competitive disadvantage for TCF and it is in the best interest of our shareholders to redeem these shares.' ... The payback still needs government approval" (emphasis added). TCF's effort was even more forcefully outspoken than Davis' and was also a month ago, but lo and behold, TCF is still holding the hot potato as we speak. Why do you think that is? The only possible explanations are that regulators either A) denied or B) delayed the request; in either case, the taxpayer's will in your view - "immediate" payment - has apparently fallen on deaf ears, which is precisely my point.

Anyway, I admit Davis' public comments weren't quite as forceful as my posts made them seem, but my interpretation's colored by some inside information, namely what that CCO had to say about the regulators' total control over repayment absent certain prerequisites which are themselves under the regulators' total control. Behind the scenes it's a lot more frustrating than even Davis lets on.

[Darius871]

I'm fairly certain you don't give people a retention bonus who stayed on the job for a period of weeks.

1) What do you mean "stayed," past tense? Liddy's testimony FWIW made clear that the only people who received retention bonuses are still AIG employees as we speak.

2) Since the very specific mission of FPD at this time is to "wind down" the FPD portfolio, it necessarily follows that many of the people at FPD will no longer have jobs when that task is completed. Someone facing an almost-certain axe down the road obviously needs much more "retention" incentive than someone whose long-term job security faces only the relatively small risk of normal turnover, does he not?

[DinoDoc]

1) What do you mean "stayed," past tense? Liddy's testimony FWIW made clear that the only people who received retention bonuses are still AIG employees as we speak.

AIG 'Retention' Bonus Paid To Execs Who Already Left

2) Since the very specific mission of FPD at this time is to "wind down" the FPD portfolio, it necessarily follows that many of the people at FPD will no longer have jobs when that task is completed.

This contract was negotiated in 07, a full year before the FPD brought down AIG. Where was the need for such generous terms and lack of any performance concerns then?

[Darius871]

AIG 'Retention' Bonus Paid To Execs Who Already Left

That article was prior to Liddy's testimony, so perhaps Cuomo (whose subpoena had not yet been complied with at the time) was mistaken and Liddy subsequently set the record straight. Or Liddy is a flat-out liar, which wouldn't surprise me.

This contract was negotiated in 07, a full year before the FPD brought down AIG. Where was the need for such generous terms and lack of any performance concerns then?

Evidently Liddy flat-out lied to Congress then when he also added that the performance bonus provisions and retention bonus provisions were totally separate, and nothing was paid out on the former precisely because performance was poor, meaning "lack of any performance concerns" is at least contractually false. But I don't have the four corners of both documents in front of me, so I won't dare to say you're wrong, but if you're right then I wonder what possible motive this $1/year head of what is functionally a government receivership could have to perjure himself.

[DinoDoc]

Evidently Liddy flat-out lied to Congress then when he also added that the performance bonus provisions and retention bonus provisions were totally separate, and nothing was paid out on the former precisely because performance was poor, meaning "lack of any performance concerns" is at least contractually false. But I don't have the four corners of both documents in front of me, so I won't dare to say you're wrong, but if you're right then I wonder what possible motive this $1/year head of what is functionally a government receivership could have to perjure himself.

http://dealbook.blogs.nytimes.com/20...onus-contract/

This was not a boilerplate contract. Rather, it was highly negotiated. And it was highly negotiated to pay retention fees at high levels without regard to performance. This is obviously shocking. But it makes me wonder: perhaps one area of direction here should be actually looking at who negotiated this and why?

It strikes me that the A.I.G. financial products division received an unbelievably sweet deal. Did its managers slip it under the radar? Did the managers act in good faith? And who at A.I.G. signed off on this and did they focus on the risks and rewards? Yet more avenues for possible litigation.

http://dealbook.blogs.nytimes.com/2009/03/18/dissecting-the-aig-bonus-contract/

[Darius871]

Ok, I just wasn't clear on what you meant by "lack of any performance concerns" then. Certainly there is a "performance concern" when the total bonuses one could conceivably get is reduced by millions because the performance portion of a dual bonus structure yields nothing.

For example, say I negotiate to have my contract provide for a $10 million "performance bonus" entirely contingent on my department's earnings, plus a $2 million "retention bonus" contingent only on my staying with the company for the contract term (a contingency which is inherently valuable to the company in ways other than performance, such as being more talented and educated than weeks of an empty chair would be, being more knowledgeable about and integrated with minute details of the particular portfolio than a new hire with admittedly equal talent and credentials would be, good personal relationships with clients, being available to train replacements for a seamless transition, etc. etc. etc.). My department tanks, so I naturally get only the latter bonus and not the former.

Are you telling me that my getting only $2 million out of a $12 million expectancy demonstrates "lack of any performance concerns"?

[KrazyHorse]

Why do you bother arguing with DD?

[Darius871]

I dunno, anybody above Ben/MOBIUS level at least has the potential of teaching me something I've missed.

[DinoDoc]

Why do you bother arguing with DD?

I'm an interesting person. Just ask DaShi and other people who like following me around.

Besides he's done me the favor of correcting a few misconceptions I had.

[DaShi]

You're as interesting like Ben. That's true.

[Naked Gents Rut]

You're as interesting like Ben.

Don't you edit some sort of literary magazine?