Monday, March 16, 2009

The AIG Bonuses

Imagine an office somewhere in London’s financial district. An executive at AIG’s financial products division is sitting for his annual performance review:
"The good news is you hit your sales targets. The bad news is you have nearly destroyed the global financial system."
The exec's boss shakes his head and continues, "Unfortunately, we had to cut your bonus
. And as for wrecking the global economy, try not to let it happen again."
Of course, we don’t know how these bonuses were handed out. The Times reports that the company is refusing to hand over details to New York attorney general Andrew Cuomo. I can understand why they wouldn’t want their identities made known.
Most of AIG’s business lines performed well last year. It’s the financial products wizards who have made the company a ward of the federal government. Why these guys still have jobs, let alone bonuses, is beyond me.
The financial products group made billions by underwriting–in effect insuring–the global bubble in collateralized debt obligations, without bothering to establish any reserves to actually pay claims, not as if that could ever happen.


Anonymous Anonymous said...

Tommy - Do you think the world could live without the stock market? The chink in it's armor is the internet -- too much access to a too volatile format! You tell me -- I only have a BA in Economics and 2 other masters that landed me in a cool City job - so how do I know. But I saw the collapse of Communism in Russia when I read in a textbook that a glass facory first made glass too thin (sq. meter quota) and then too thick (by the weight quota). Like how long can that last I told my friends. They said forever. That was in 1976. But I'm not a writer so it was just a personal observation. But this stock market thing makes me want to write - it is jank and has pulled us down several times and never pulled anybody up but the uber wealthy because money makes money and they're the ones with all the capital.

2:48 PM, March 24, 2009  

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