Says, err, someone claiming to be an employee at AIG’s financial products business.
Clusterstock has what purports to be yet another AIG letter and let’s just say it has a rather different tone to the resignation missive of Jake DeSantis.
Edited version below.
Dear Family, Friends and Colleagues,
As most of you know I work at AIG, specifically in the division known as Financial Products which is often cited as the “root of the problem” at AIG. It seems to me that given the media circus, political hypocrisy and witch-hunting going on in the US right now, I should try to set a few facts out and make a few points that, while they are appearing in the press, are being drowned out in the populist frenzy.
First of all, what happened at AIG? AIG has been destroyed by a systemic failure of management that started when Hank Greenberg was booted out. I have facts that prove that had Greenberg not been removed, AIG would be in fine form today, but he does need to accept the blame for the weak overall structure of the place. Now what I mean by systemic failure is this: while it is true that AIG FP lost a fantastical amount of money, something like 45 billion dollars, other units at AIG, namely AIGGIC in its securities lending activity has lost even more. It is misleading and an intentional distortion of the facts by AIG and the treasury to pin this solely on FP, much as FP does richly deserve blame. …
Even worse than this is that the failure of AIG is part of a systemic failure of the anglo-saxon financial world. If AIG alone had failed, then the lessons to be learned would be at AIG alone. However, as clearly as AIG itself is a case study in corporate governance failures that I hope will be taught to the future class of sheep/managers at Harvard Business School, the real failures in the US and UK banking systems stem from an extremist belief in the free market. How else to explain the simultaneous failures of virtually every large US and UK bank? And the blame for this lies squarely in the corrupt circles of US politico-business classes. … Basically at the heart of the US democratic system is the fundamental issue that those with money can influence those with power and that usually their interests are narrow, short term and take no account of the country at large.
Personally I hate this system, I fear for the future of America and the world and I and many of my colleagues strongly supported candidates of change like Obama because we could see something was amiss. I will tell you though, what was amiss was not that a bunch of hard working, highly motivated and intelligent individuals working in finance got paid a lot, what was amiss was that the wider culture led by people like W Bush and Dick Fuld and Jimmy Cayne set and reinforced the example that money was the ultimate arbiter of goodness and rightness and that people who stuck to their traditional values and actually cared about the institutions they worked in and refused to do crappy business that would blow up their banks were sidelined and underpaid and made to feel like fools for “not getting it”. My team contained a Slovak physicist who in act of great courage and wisdom, defected from the eastern block during the cold war. A French civil engineer who would like to build bridges but couldn’t resist the lucre of finance. A Russian-Jewish immigrant who has worked his way up from busboy in a brooklyn diner to key member of the the commodities business and an indian graduate of IIT who fixes his own broken electronics gear on his desk at work.. These people are not corrupt. They have earned their success. Their stories are even testament to the simple fact that anyone could come get a job in finance and succeed. If anything, the tragedy is that so many talented people worked in finance when they and society would have been better off with their efforts focussed else where.
I and most of colleagues at FP are in that group. Last year, amidst the greatest financial crisis in a long time and the crumbling of AIG, the businesses I ran made tens of millions of profit eve after deducting losses taken when we had to pay others to take over our books of business after AIG failed. In my career I have probably made something like a billion dollars for the banks I worked for (Bear Stearns and AIG) and doing this required all my intelligence, energy and hours. I have spent over 15 years waking up at 5am and coming home late at night , playing by the rules, making thought-through, ethical and conscientious decisions in the framework of an industry that has existed for thousands of years and currently employs hundreds of thousands of people in the major financial centers. None of What I did was illegal, none of what I did was unethical, none of what I did keeps me up at night. I will happily stand in front of congress and justify every deal, every mark, every decision I made. And most of the employees at FP, many of whom I count as friends and honorable people, will happily do the same. …
What is happening in the US political system today is a travesty of fairness, basic rights and transparency. Where was this congressional outrage and mob-baiting over abu-ghraib, guantanomo, the failing educational system, the failing health care system, the incredible inequality of opportunity and outcome in the US, the illegal war in iraq and I’m sure this list can go on? This outrage is manufactured by the very politicians, Barney Frank, Chris Dodd, Andrew Cuomo and others who supervised the system, who took it’s fruits as campaign contributions, to hide their own far greater culpability in the creation of the mess we are in. The crisis is systemic and the leaders of the system are trying to blame it on 10 guys in connecticut. Please, you should feel insulted to your core that the US political establishment tries to lie to you again.
I am not shocked. I am an observer of US foreign policy. I see how the US corrupts, betrays, its principles lies, mis-names its deeds and turns on its allies all over the world all day every day. That this rot and corruption are now being evidenced domestically in the form of a McCarthy like witch-hunt of “bankers” is much less shocking than that they would kill a million Iraqi’s and then declare victory for democracy. I am not shocked that in a country where only 30% of the population can name the three branches of government (but 70% can name an America Idol judge) that it does not seem important that congress is trying to pass ex-post-facto taxes or secure bills of attainder. It flows naturally that the vitiation of contract law doesn’t seem worthy of remark. THE ENTIRE US SYSTEM IS COMMITTING SUICIDE. And why? Because congressman only really care about the next election and care nothing about the long term. The same crappy incentive scheme that has destroyed finance is destroying the US government. The real leaders are being mocked for their stands on principle. Today it is not god bless america, it is god help america.
Now on the specific case of the AIG bonuses, let me spread a little fact:
1) On October 22nd 2008 (one month after bailout) Andrew Cuomo reaffirmed our right to payments under the retention plan.
2) On October 9th Bill Dooley, the head of financial services at AIG, restated that the treasury and AIG were committed to payments under the ERP.
3) AIG reduced the value of our deferred compensation to zero, effectively cutting the value of the contracts under the ERP by about 30-50% depending on the amount due to each employee.
4) AIG wiped out the value of our previously earned deferred compensation, costing me, for example, about half my saving and many others in the company the same.
5) At no time did AIG ask to renegotiate the contracts or plead extenuating circumstances. Many of us would have worked for much less or for nothing just to clean things up.
6) AIG prepaid 30% of the ERP amount in December with their hearty thanks for a job well done. The treasury knew of and had to approve this.
Is it really fair of them to try to renegotiate after we have performed on our half of the contract? It would have been fair in september during the bailout, or in october. Those were extraordinary circumstances. But is it fair of them to come to us after the end of the contract and then ask for the money back after many of us have made personal and professional sacrifices based on these contracts? I, along with many of my colleagues, have expressed a willingness to give the money to charity. But under no circumstances will we accept that we did not earn the money. …
Lastly, let me say one thing on the matter of the practicality of running AIG FP with out us. AIG FP is the nexus of thousands of contracts of incredible complexity. These are managed in purpose built systems using carefully crafted procedures. If all of us leave, who will maintain the systems for which there are no manuals? Who will know how to operate the technological machinery that is totally purpose built in house? Who will have the relationship with the relevant client with whom we have to negotiate as we unwind their contracts? True one or two or ten of us could be replaced (although after the current furor they would would want to paid a lot and in advance and with a letter from the president and the treasury and the supreme court that they can keep their pay) but if we all leave? Even a hijacker has enough sense not to shoot the pilot unless he can fly. Mr Frank, Mr Dodd and Mr Cuomo, can any of you run AIG FP? I didn’t think so.
Not sure the author meant it that way, but hijacking is probably one of the best analogies for the current financial fiasco.
Related links:
Dear AIG… – FT Alphaville
A letter from the inside – Clusterstock