Stupid is as stupid does.
This whole thing with AIG and the retention bonuses is just so much crap. Congress fucks up the security laws that have guided this country for better than half a century and now they are upset about less than $200 million in retention bonuses. As Bill Clinton would say, “give me a break.”
After listening to the CEO of AIG in front of a committee of Congress yesterday, it was easy for me to understand why these bonuses were paid and how they related to the bigger picture of security positions that added up into the trillions of dollars. Congress getting all worked up about less than $200 million when the CEO is trying to work out AIG’s position in some very complicated swaps, with the help of certain key employees, is ridiculous to my way of thinking. But, whoever said Congress does or understands the smart way through a problem.
Let us say you are on the operating table having open heart surgery and on a heart lung machine. Would you want the hospital to pay the heart surgeon a retention bonus to finish the operation and close you up, or, would you like the hospital to fire the surgeon and risk your life because they may not be able to get another skilled heart surgeon in the operating room in time to finish your operation? That is pretty much what the CEO of AIG described to the committee of Congress yesterday.
When a trader or portfolio manager is working on a position that must be hedged every night before they go home, AIG can not afford to switch horses in mid stream. Liddy, the CEO of AIG, made the right decision when you consider he was paying out less than $200 million to protect a position that had a value of more than a trillion dollars. Only our Congress would berate a man, who came out of retirement and was willing to work for ONE DOLLAR a year, through such shit.
The level of understanding of the financial industry in the 21st century by our Congress is abysmal. God help us all if these clowns can not get up to speed on this shit. If they truly understand this stuff, but are acting like clowns to squeeze the last ounce of drama out of this, then I think we are not any better off. If these jokers will wrap themselves in the flag, why would they not take advantage of the bonus nonsense to make some noise?
Stay tuned.
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5 comments:
What I have witnessed in my lifetime is that many so called "leaders" are not really that knowledgable. I've seen this over and over in my industry and we've seen this ad naseum in politics. Perhaps what happens is when people achieve certian "higher" positions, they stop asking questions and learning, assuming they are now the expert. The best example I can think of is Greenspan. When he stated just a few weeks ago that whatever happened in the financial world was inevitable; that intervention was impossible to change the course of human events, it made me sick.....that's why he was paid megabucks....he was supposed to know better than me.
Years ago, the company I worked for brought in MBA interns as part of the MBA program at a local university. There was a ditzy blond (I'm stereotypng to be funny)that everyone thought was not too intelligent. Low and behold, my company hired this MBA graduate as a VP and she was over my department. Her first "demand" was for me to provide immediate backdated information that took me 3 days to compile (no computers in those days). This information had no brearing on our department operation. Anyway, she married another top level executive, had a child and left her position. I'm sure she is a high ranking official somewhere today.
Winslow, I don't expect you to mention these people by name, but I remember a similar situation that was in the news back in the 1970s. This woman wound up marrying the CEO. The whole affair was on TV and in the press. You might recall this famous couple.
Quite simply this guy Liddy did not deserve the treatment he got from that committee of Congress. The guy explained his reasoning and the representatives did not get it.
I winder what's REALLY going on that they DON'T want us to focus on ...?
With regards to the bonuses? I think it is a miss-step by Congress and the previous administration. The Obama administration is now catching hell for the mistakes of the original 'bailout" language. Spending $156 million on bonuses to protect positions in the market that amount to over a trillion dollars, in my opinion, is money well spent. No one has the balls to say this in Congress, but it needs to be said. The Government gets this guy Liddy out of retirement and they ask him to manage the situation for ONE DOLLAR a year. He weighs the situation and pays the bonuses to keep people in place to close out these positions that must be hedged every night that total up to over a trillion dollars. The guy made the right decision and now Congress is beating him over the head. Who is going to beat Congress over the head for years of deregulation that put us in the situation we are in in the first place?
About the analogy of the heart surgeon in mid operation, the hospital doesn't have to fire him, but can't he finish his job with his regular salary? It seems dysfunctional that there has been such an inflation in wages of executives, surgeons and so forth that a company must keep jacking up wages and offering bonuses to retain their upper level staff. Are there that many jobs which offer so much more that the top staff is always about to bolt for the door and go elsewhere? It's the brain drain theory that has justified pay raises for so many top public sector employees for fear they might abandoned ship to the vastly more lucrative private sector. Actually, maybe the theory is correct only this time, rather than too many higher paid positions luring executives away, the executives are tempted to just quit the mess and downsize. Maybe they have to offer bonuses to keep them from quitting the job and going on an extended and relaxing bicycle tour.
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