We should all care about them doing the best possible job and paying us back. If that's not what we want, we should have let them file.

No one cared about saving AIG.  No one believes AIG is going to pay us back.  We'll be lucky if we can sell off a few divisions and get back a tiny fraction of what we've put in.

I'd strike a deal to pay half in stock at the average price since Sept. and say you can't sell until the taxpayer is repaid.

Also and related, one of the ideas floating around TL these past few days (not from BTD) is to tax the bejesus out of all the bonuses of AIG and all the wall street finance wizard types and/or anyone making over $X.

What I think we're forgetting is that we live in a world market. If you remove these people's ability to earn big here, they'll go to Europe or Asia or wherever and earn big there.

FP (Financial products division) had at its peak maybe a trillon dollar notional of derivatives many of which were unique, complex transactions. Only a small portion of the work to unwind is dealing with toxic stuff.

"The particular risks that brought the company (AIG) to the brink of bankruptcy seem to lie not with its core insurance businesses but with its derivatives-trading subsidiary AIG Financial Products. AIG FP, as it's called, merits a mere paragraph in the nine-page description of the company's businesses in its most recent annual report. But it's a huge player in the new and mysterious business of credit-default swaps: derivative securities that allow banks, hedge funds and other financial players to insure against loans gone bad."

Time, September 17, 2008

And How about this brush with burning reality from Connecticut Man1

While it may look superficially similar to the recent implosions of such investment giants as Fannie Mae, Freddie Mac and Lehman, the takeover and bailout of AIG is quite different, and means that the market is entering the next and even more dangerous phase. What is driving the fall of AIG - and potential government losses that may far, far exceed the $85 billion bailout announced late on September 16th - is not mortgages or real estate (directly), but fears that AIG's huge, global credit-default swap positions will unravel. The $62 trillion dollar credit derivatives market is 50 times the size of the subprime mortgage derivatives market, and is indeed larger than the entire global economy. Unfortunately, few people understand credit derivatives, or the full risks to the United States and global markets and economies. In this article, I will take a Credit Derivatives Primer that I published in the spring of 2008 - which anticipated this exact type of event - and update it for the current situation. Through reading this article, you should be able to greatly increase your knowledge of what credit derivatives are, and why they are a far greater danger than subprime mortgages. We will end with introducing some concepts about how individuals can protect themselves and even profit from these unprecedented market conditions - something you won't find in recent financial history or conventional investments. ...snip... On September 1st, few knew that AIG, the largest insurance company in the world with over $1 trillion in assets, was in deep trouble. By September 12th, the rumors about major trouble were everywhere. By September 15th AIG's corporate life expectancy was being measured in days, and the question was: bankruptcy, buyer or bailout? By the evening of September 16th, the federal government had massively intervened, making an $85 billion loan to AIG in exchange for a controlling 79.9% equity share of the company. Welcome to the brave new world of credit derivatives driven collapses. A world that is far more dangerous than the world of subprime mortgage derivatives. A complex world that because of its sheer size can potentially cause more damage in a matter of days than the subprime mortgage derivatives caused in their first year in the headlines.
Go to the following link and apply what you learned from the horse race to it remembering that a credit derivative is just a bet or a side bet. Bets where the oddsmakers start messing with the odds in unreal ways: The people that were selling and buying these scraps of paper, their managers, partners and firms profiting from and behind it all are negligent in their dealings - criminally negligent, IMHO - AND the Feds that backed all of this are equally criminal. But whom exactly will all of the taxpayer money benefit? A little clue to Joe and Suzy Sixpack: Unless you own a bank or one of these other failing businesses, it ain't you! They gambled, they lost... And now they want you to pay off their gambling debts.

Those employees who worked at financial products did so for the benefits of working in that organization. They could have moved on if they disapproved. But they were given opportunities for gain most of them were unwilling to leave. As Josh Marshall is beginning to document, there was also criminal conduct happening, and while Caccano may have known and approved, he certainly didn't do it by himself. He just set the tone.

So while the CEO has first responsibility for the tone he or she sets, everyone who stays or comes in later quickly becomes similarly responsible for the nature of that organization. The military is to some extent an exception, but even there most officers and NCOs can arrange a transfer out. The legal doctrine of Employment at will that applies in America works both ways, both for the employees and for the employer who hires them.

That makes every employee of financial products responsible for destroying AIG as a going concern. That fact cannot be redefined away, as much as they would all like to do.

Well, so much for retaining them.

As reported in the NYTimes,

Seventy-three employees were paid more than $1 million in the latest bonuses at the insurance giant American International Group, according to the New York attorney general, Andrew M. Cuomo.

Snip

"A.I.G. made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout," Mr. Cuomo wrote in the letter. "Something is deeply wrong with this outcome."

Mr. Cuomo did not name the bonus recipients, but the numbers are eye-popping, given A.I.G.'s fragile state. The highest bonus was $6.4 million, and six other employees received more than $4 million, according to Mr. Cuomo. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses of $1 million to $2 million, Mr. Cuomo said. Eleven of those who received "retention" bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said.  (My emphasis)

Cuomo seems to think there is a basis for no honoring the bonuses.

He said the fact that 11 people who received some of the money were no longer at A.I.G., raised questions about whether the bonuses were truly for retention purposes. {Ya think?]

Mr. Cuomo may be able to use a state law about fraudulent conveyance to force A.I.G. to rescind the bonuses. Mr. Cuomo would have to show that A.I.G. was undercapitalized when it paid the bonuses and that the people who received the bonuses did not earn them.

"I understand they have contracts," Mr. Cuomo said in an interview on Monday. "That's not necessarily determinant because a lot has happened since that contract was signed." (My emphasis)

I tend to side with the anonymous e-mailer in thinking that there are employees at AIG who have information and skills that are very useful in unwinding the CDS transactions and setting up that unit for sale.  And paying them the retention may be the best and cheapest bang for the buck.  (I don't buy the argument that they will have an easy time getting a comparable job given that the pool of possible employers who aren't in similar situations to AIG may not be the big.)  I also think that painting all employees with the same brush is not fair.  

But why isn't Obama or Geithner making this argument?  Instead they fueled the populist outrage by joining in the choir.  Maybe the retentions aren't defensible.  But if they are, by joining in the choir, Obama and Geithner have thrown all of the employees under the bus.    

If not, usually criminal actions run the company. Phony cooked books play in, its not that the company is too big to fail, the company is mismanaged to be so big, more secret in its operations, as is this derivative stuff, complicated , no it is deliberate fraud, actually sounds like a Cheney connection, like secret criminal actions are layered through out and whistle blowing is going now. Everyone in corporate experience knows departments are created to be deliberately filled and shut down at will because of failure. Who the heck is going to have confidence to buy in to this company now that it is disintegrating?

Finally, does the business plan originated which supports AIG's license to operate which must receive local, state, federal and International permits  validate this match of company structure to its operating mission. Probability not, which from the get go, Bush and Company knew, deliberately avoided with layered immediate need, at the eleventh hour.