^^ hows this for a kick in the nuts.....

I was laid off along with ^. We were basically peers there, but ^ was a team leader in his group so he had a bit of seniority. My last day was December 12, along with about 150 other engineers from our Cary office. Everyone laid off December 12 got 60 days notice (notified in October), full PTO payout, a very generous severance, 3 months COBRA subsidy, and our 2008 bonus, all paid out in full in early January.

A few "lucky" people from each department (the best engineers from each dept, and their managers), including Fail Boat, were picked to stay in the office until January 30, to help close down shop. They were supposed to get the entire severance package that I listed that the Dec 12 people got. ..... Their last day was Jan 30, and they didn't get any of it, even after signing termination contracts.

Then, 3 "extra lucky" people, again including Fail Boat and my former manager, were offered positions at another site. It was treated as a transfer, so they obviously forewent the severance, since they still had jobs, and were promised transfer packages for the move. Their new jobs started in mid-January at the new site. The site laid them and 500 other people off on Feb 3 and announced the site overall was closing by the end of March. Nobody laid off on Feb 3 received any PTO or severance, and the company was not even in Chapter 11 yet.

Then, 3 weeks later, the company announced that 1) finally they were declaring chapter 11, and 2) the people who's last day wasn't on Feb 3 but were continuing to work would not be paid for their work between Feb 3 and the date of Chapter 11.

So, yeah - there was plenty of ineptitude to go around back there

3/18/2009 9:27:52 PM

sucks...

[Edited on March 18, 2009 at 9:38 PM. Reason : s]

3/18/2009 9:31:59 PM

I did some googling about bankruptcy and talked to a lot of guys at the company in the last days and the sad irony is the most experienced guys or the best guys end up staying to the very end until there is no more money and they don't get any severance.

So long as I get paid my PTO and relocation (even if it only covers my actual expenses) I'm at breakeven compared to a Dec 12 stop date. I'm not so hung up on severance like some folks are, I've known since mid October that we were toast and I got paid for all that time and didn't really have to do too much after the first couple weeks.

3/18/2009 9:49:38 PM

Quote :

"They didn't do it on purpose. It's a company in Chap 11, I think it's safe to say if we were selling ineptitude instead of semiconductors, the story would have been drastically different. "

That made me laugh. Im sorry for the two of you agent and fail. It sounds like a shitty situation and it sounds like you were doing a great job and got screwed over for it fail boat. Im very sorry for that.

Im sorry, but what is PTO?

[Edited on March 18, 2009 at 10:03 PM. Reason : .]

3/18/2009 10:01:14 PM

paid time off

3/18/2009 10:03:58 PM

yeah, unused PTO is carried on a company's books as a liability, because it's part of the contract - you get 4 weeks of PTO a year or whatever, and it's included in your annual salary. Therefore, when you quit or get laid off and you have PTO accrued that you haven't used, say 4 weeks, that's just like them not paying you for 4 weeks of work.

3/18/2009 10:15:48 PM

ah, thanks for the lesson fellas.

I only get 10 days off a year and my sick days come out of that too. Kinda sucks since ive been with my boss since 2004. But if im not in the office it doesnt generate any money, so I kinda understand.

3/18/2009 10:21:18 PM

yeah, well believe it or not, we had people with upwards of 2 months worth of saved-up PTO that they never got paid for. Contractually, it's just the same as not being paid for 2 months worth of work, because according to their contract, they could have taken 2 months worth of vacation and still gotten paid the same thing in their time at the company.


btw, now that we're wrapping up this pity-party and love-fest, I assume we'll be back to full-on arguing about minutiae by tomorrow?

[Edited on March 18, 2009 at 10:39 PM. Reason : .]

3/18/2009 10:38:06 PM

I'm trying to fill up my bank of allowable rollover PTO right now... Its like a smaller secondary safety-net, assuming the company doesn't go chapter 11.

3/18/2009 10:39:55 PM

We lent cargo planes full of billions to this company in exchange for a majority ownership share, right?

Why on Earth didn't Congress--acting as board of directors--remove the CEO and/or CFO unless they refused the pay the bonuses out?

While petty compared to the billions we lost in Iraq (as in, vanished), this abject greed is sickening...

3/18/2009 11:35:47 PM

we're moving ever faster down the slippery slope toward nationalization

3/19/2009 12:42:19 AM

Fail Boat

that sucks. you should burn the place down like milton.

3/19/2009 8:04:19 AM

^^ Nationalization isn't necessarily a bad thing, if it's done right.

As Gamecat said, the US Gov't already has a majority share in AIG, and a plurality share in Fannie, Freddie, and Citibank. But we are not doing anything with the shares!.

Gamecat's point is that with a majority stake in AIG, it is the governments right, nigh, the governments obligation to fire the entire board of directors, put in a new board, who will then fire all of the top management. Under new management, the company will reorganize, the Financial Products group will be ripped apart into good and bad assets, then the whole company, hopefully healthier by then, will be sold back to private investors.

What we're doing now, though, is bullshit - we own these companies already. They are Nationalized already in all-but-name, but we are not reaping any of the benefits of nationalization, only the costs.

3/19/2009 9:40:14 AM

That is because there are only costs to reap. Why do you think a new set of managers of a broken and government owned business is going to do any better?

As Liddy said at the hearings, those who received the retention bonuses will most likely turn them back in - along with their resignations. I think this would be a good outcome - as the government would lose its entire investment. "It would be a harsh lesson, but I think a necessary one."

3/19/2009 12:04:59 PM

I can't believe the 90% tax passed, but then again, yes I can

3/19/2009 3:18:52 PM

Quote :

"That is because there are only costs to reap. Why do you think a new set of managers of a broken and government owned business is going to do any better?"

Could they do worse? Of course, no one knows, but we can always just refer to other vaguely similar instances in history and claim without a doubt that this is what will happen in the future. Just because you are attaching the 'government' tag to it doesn't automatically mean it is going to be worse.

No, propping the banks up with unlimited funds that end up in other private institutions, some foreign, is THE strategy that will be taken by existing management and it appears to be the strategy of the current owners of AIG (the taxpayer via congress proxy).

Nationalization via the proper mechanism, Chapter 11, is actually the course that should be prescribed here. I know you can agree with that.

Quote :

"As Liddy said at the hearings, those who received the retention bonuses will most likely turn them back in - along with their resignations. I think this would be a good outcome - as the government would lose its entire investment. "It would be a harsh lesson, but I think a necessary one.""

BFD. They used retarded models that even they didn't understand (because physics academics concocted them out of thin air) to address credit risk and it blew up in their face. What can they really do at this point other than take money from the government and pass it to the other hand? Their only other alternative is to mark it all down, rending them insolvent. It isn't like a CDS product is going to get much action in this market, so why do we care if they stick around?

3/19/2009 4:18:29 PM

Quote :

"House passes bill taxing AIG and other bonuses House passes bill to tax employee bonuses at AIG, other companies with big bailouts WASHINGTON (AP) -- Acting swiftly, the Democratic-led House approved a bill Thursday to slap punishing taxes on big employee bonuses at firms bailed out by taxpayers. In some cases the bonuses might be taxed 100 percent leaving the recipients with nothing. House Minority Leader John Boehner of Ohio gestures during a news conference on Capitol Hill in Washington, Thursday, March 19, 2009. (AP Photo/Evan Vucci) The bill would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at American International Group and other companies that have received at least $5 billion in government bailout money. "We want our money back now for the taxpayers," House Speaker Nancy Pelosi said. Rep. Charles Rangel, a New York Democrat, chairman of the tax-writing House Ways and Means Committee, said he expected local and state governments to take the remaining 10 percent of the bonuses, nullifying the payouts. Rangel said the bill would apply to mortgage giants Fannie Mae and Freddie Mac, among others, while excluding community banks and other smaller companies that have received less bailout money. Democrats led the charge in an attempt to get in front of raging public anger over the AIG bonuses, even though a provision that would have made such payouts illegal was stripped from last month's $787 billion stimulus bill by its Democratic sponsors. The vote to tax back most of the bonuses was 328-93. Voting "yes" were 243 Democrats and 85 Republicans. It was opposed by six Democrats and 87 Republicans. ... "

[Edited on March 19, 2009 at 4:55 PM. Reason : http://finance.yahoo.com/news/House-passes-bill-taxing-AIG-apf-14693850.html]

3/19/2009 4:54:30 PM

Maybe i'm losing touch with the common man, but I can't get worked up about these bonuses.

It's despicable, but it's a drop in the bucket, and stopping or recovering them doesn't do a single thing to the greater underlying problems.

The tax is a worthless token gesture. It'll just make the banks be more clever about compensation.

3/19/2009 4:57:43 PM

Yeah, there has been next to zero discussion about the taxpayer dollars funneled via AIG to foreign corporations at 100%. I dunno if French institution was one of those, but I can imagine they could stir up even more hate if that were the case.

3/19/2009 5:00:02 PM

^ they weren't "funneled" to foreign institutions - AIG owed money to banks, many of which happened to be overseas. They paid that money to those banks, trying to continue their business with them.

Why are we giving AIG money? To keep their business alive, right? And so they can carry on business-as-usual, as much as possible, no? Or at least, try to avoid systematic risk so the whole house-of-cards that is our current financial system doesn't collapse.

Well, a big portion of AIG's business was from CDSs that other banks, sometimes foreign, bought from them. AIG owes money on these CDSs under two circumstances:
1) some of the obligations the CDSs hedged against have defaulted, and therefore the CDSs have been exercised and AIG owes on them
2) AIGs credit rating has decreased. When AIG sold the CDSs, they had an AA rating, and the banks buying the CDSs did not require an collateral. Now that AIG's rating has fallen, some of the CDS contracts require AIG to cough-up collateral to the banks owning the CDSs.


So, we give AIG $170B. What should they do with it? Is there anything they could spend the money on that would make the American people happy? Should just just pad their accounts? In that case, people would complain that they not "doing anything" with the money.

3/19/2009 5:42:32 PM

^ Yeah, I'm still not 100% clear on all the outrage. We gave them money, in theory so they could continue to operate and conduct business as usual. Even better, we specifically write an amendment to the bill that gives them the money that allows them to pay out these bonuses. And then we get all outraged when they take that money and conduct business as usual?

Seems to me, if we didn't want them spending tax payer money on their contractual obligations and wanted the company to be restructured and reinvented, we should have saved the billions and let them go bankrupt.

3/19/2009 9:41:26 PM

^
Exactly. When Dodd put in the amendment to allow these retention payments (not bonuses), the deal was made. Those employees should get to keep that pay. We're allowing a bad precedent by allowing a country to have a temper tantrum and get the congress to tax/punish specific individuals.

Quote :

"Nationalization via the proper mechanism, Chapter 11, is actually the course that should be prescribed here. "

While I agree with you that we souldn't be bailing out anyone....
Chapter 11 is not nationalization. Under Chapter 11, a company reorganizes itself and moves on...still in private hands. Nationalization is the gov't taking over a business and keeping control of it permanently.

Nationalization is bad policy, it can't be "done right". A gov't-owned business is hardly a place of economic innovation.

3/19/2009 10:45:43 PM

http://finance.yahoo.com/news/House-passes-bill-taxing-AIG-apf-14693850.html

[Edited on March 19, 2009 at 10:55 PM. Reason : nvm, already posted]

3/19/2009 10:54:45 PM

Quote :

"We're allowing a bad precedent by allowing a country to have a temper tantrum and get the congress to tax/punish specific individuals. "

technically we are a democracy.....

if the will of the people is to tax 90% on the bonuses of one of the companies in the epicenter of the financial meltdown than what is the problem? Perhaps this outrage is a check against the strong hand AIG and lobbyists of other companies have in Washington to steamroll the bailout to begin with.

3/19/2009 10:59:55 PM

Quote :

"they weren't "funneled" to foreign institutions - AIG owed money to banks, many of which happened to be overseas. They paid that money to those banks, trying to continue their business with them."

Obviously, funneled was hyperbole. And I applaud AIG for honoring contracts, but this whole thing just stinks.

Consider this, if you and I pay for insurance be it health, car, home, if we have to make a substantial claim, what happens? An adjuster comes out to asses the damage to determine payout. It is most certainly common knowledge by now that these CDOs, CDOs^2, cubed, are virtually impossible to value given the current market for them is practically non existent (save for the 22c/$1 deal Merrill did). How is it that AIG has already determined all these massive amounts of payouts in such a short amount of time when these CDOs are apparently hard as hell to value? Shit doesn't add up.

Quote :

"AIG owes money on these CDSs under two circumstances:"

Well, I suppose it is a subset of #1, but you forgot to mention hedge funds that loaded up on CDS contracts that didn't have any underlying assets to protect against. All over the counter and unregulated that our taxpayer dollars went to bail out. This is just infuriating. They had no assets or significant capital deployed that they wanted to protect against, it was just a pure bet. They should have their bet returned to them and the contract torn up.

Quote :

" So, we give AIG $170B. What should they do with it? Is there anything they could spend the money on that would make the American people happy? Should just just pad their accounts? In that case, people would complain that they not "doing anything" with the money."

We should have really figured out if "too big to fail" is a real thing, or, if there was a real belief that it was possible, we should have made a short term implicit guarantee long enough to assess the best way to liquidate their failed business model.

It's pretty easy to see where we go from here. As all the writedowns haven't happened yet, there are certainly more CDS obligations to be made. The American taxpayer is going to continue to give money to AIG so they can give it out to banks and once most of these obligations are paid and the American taxpayer is looted to the full extent possible, AIG will then go into bankruptcy and carved up. Geithner (if he is still around) will proclaim that the terms given to AIG are harsh and they have heavy incentives to pay it back as soon as possible and he expects the taxpayer will come out with a profit in the long run.

Too big to fail might have applied for a short term at the height of the hysteria, but this is the fucking United States and it's simply unacceptable at this point to keep playing these petty "protect your wall street buddy" games.

I'm starting to sound like Denninger.

Quote :

"Chapter 11 is not nationalization. Under Chapter 11, a company reorganizes itself and moves on...still in private hands. Nationalization is the gov't taking over a business and keeping control of it permanently. "

I'm not too interested in playing semantics and discussing what the technical definition of nationalize is, but there is nothing "private hands" about the FDIC seizing control of a bank, and in some cases taking 5 years to dispose of the assets, or a bankruptcy judge controlling your fate as a company as your creditors are held at bay.

Quote :

"Nationalization is bad policy, it can't be "done right". A gov't-owned business is hardly a place of economic innovation."

Of course it can.

[Edited on March 19, 2009 at 11:10 PM. Reason : .]

3/19/2009 11:05:57 PM

Quote :

"technically we are a democracy....."

technically we are a representative democracy. we hope our representatives can temper some of the emotional shit that the "people" come up with and act for the betterment of the entire union, not just to "punish" some execs

3/19/2009 11:19:01 PM

^^ i'm not arguing with or disputing your fundamental point, which I believe can be summed up with "this is all such bullshit." I agree.
But the populist anger that keeps arising against foreign banks getting money or big bonuses or whatever is misdirected and ill-informed. But.... i guess what can you do. If that gets people paying attention or riled up, maybe it's worth it.

Quote :

"Nationalization is the gov't taking over a business and keeping control of it permanently."

where exactly are you getting your definitions from?
Nobody is suggesting the gov't take over and "control it permanently", and no models that the nationalization talk are based on suggests that either. That's not what happened when Continental was nationalized in the 80's, nor what the "sweedish model" proposes. The goal of all of these models is t return the "good banks" back to private hands ASAP.


[Edited on March 19, 2009 at 11:48 PM. Reason : .]

3/19/2009 11:45:13 PM

Quote :

"Of course it can."

An example, pleeez?

Quote :

"technically we are a democracy.....if the will of the people...... "

We are a federal republic. The goal of any legitimate government is to protect the rights of the individual and keep him safe from the majority's abuse.

3/20/2009 1:07:07 AM

Quote :

"The goal of any legitimate government is to protect the rights of the individual and keep him safe from the majority's abuse."

The goal of a government (or at least the individuals within it) is to abuse power, create a power cycle to limit influence to the already-influential, and eliminate political competition except in cases where partisan bickering serves to distract the public from legitimate concerns.

The (largely ignored) responsibility of a government is to protect the rights of the individual and ect.

3/20/2009 1:15:41 AM

the goal of government is to make sure it stays in as 'government.'

3/20/2009 7:33:00 AM

Quote :

"The goal of a government (or at least the individuals within it) is to abuse power, create a power cycle to limit influence to the already-influential, and eliminate political competition except in cases where partisan bickering serves to distract the public from legitimate concerns"

you forgot to appease lobbyists and enact policies to benefit their big corporate buddies. USA USA USA.

3/20/2009 8:18:32 AM

FYI, the latest NPR Planet Money podcast ("#19 Pointing Fingers") discussed exactly the point of "don't we own AIG?" They talk about the Trust that the gov't put in charge of AIG, and what they can and can't do, and why it's not exactly like a normal gov't takeover or nationalization
http://www.npr.org/rss/podcast/podcast_detail.php?siteId=94411890

3/20/2009 10:33:07 AM

I wonder what they will rename the company.

3/20/2009 11:03:50 AM

lol

3/20/2009 11:37:50 AM

Quote :

"Maybe i'm losing touch with the common man, but I can't get worked up about these bonuses. It's despicable, but it's a drop in the bucket, and stopping or recovering them doesn't do a single thing to the greater underlying problems."

3/20/2009 12:09:29 PM

Quote :

"Senate Republicans brake rush to tax AIG bonuses. WASHINGTON – Senate Republicans are drawing out a flap that has made the Obama administration squirm, applying the brakes to Democratic attempts to quickly tax away most of the bonuses at troubled insurance giant AIG and other bailed-out companies. Sen. Jon Kyl, the Republicans' vote counter, blocked Democratic efforts Thursday evening to bring up the Senate version of the tax bill to recoup most of the $165 million paid out by AIG last weekend and other bonuses in 2009. By rushing, Kyl said, Democrats were letting populist outrage trump informed decision making in the Senate, which is supposed to be insulated from the pressures of public passion. "I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences," Kyl said on the Senate floor. "Frankly, I think that's how we got into the current mess.""

Sheez... finally the GOP starts fighting back a little. Will they hold together and stop this persecution?

http://news.yahoo.com/s/ap/20090320/ap_on_bi_ge/aig_bonuses

3/20/2009 9:53:46 PM

to paraphrase a quote from a guest on the Planet Money podcast I posted earlier:
"We (the country, Congress, The President, the media, pretty much everybody) has wasted an entire week doing practically nothing except talking about this bonus bullshit. This was a week when nothing except grandstanding and knee-jerk reactions has gone on, and a week when actual progress could and should have been made towards actions that would actually help the country"

3/21/2009 12:41:28 AM

^ Such as?

I always wonder when someone gives the distraction speech, what law did you wanted congress to be paying attention to instead? And what are the odds they would if they could?

3/21/2009 8:27:06 AM

Well, i suppose in a Libertarian Utopia, Congress would always be spending time grandstanding and giving self-congratulatory speeches, instead of getting actual work done, or as a Libertarian would say: "doing damage".

But last I checked, Geithner still doesn't have a real proposal for the banking system. Congress hasn't create or introduced any new meaningful regulatory legislation, or investigated or held hearings with people who actually did start this crisis (they should be grilling Christopher Cox, not Ed Liddy, who was put in AIG <6 months ago to fix the mess - he didn't get them into the mess). Obama is wasting breath trying to jump on the populist-outrage bandwagon. The press is foaming at the mouth talking about where $160M went, while ignoring where the other $170,000M has gone.

But, in the end, maybe this little episode is worth it. Maybe if this is what it took to get the American people actually engaged and more educated on what's going on, then maybe it was worth the time and energy spent on the topic. (i'm not sure I believe that people are "more educated", however..... the faith I put in normal American's to actually understand or critically view all these problems is incredibly low)

3/21/2009 8:56:57 AM

^ I think over all that's a good thing. The government isn't doing anything, life goes on, the apocalypse continues to be a no show and hopefully more and more people realize that we don't need to "do something right now", that we can take the time to actually measure and consider what we're doing. It's not likely that we will, but in that case, it's better that we not be doing anything than be doing things wrong.

3/21/2009 10:03:25 AM

Quote :

"investigated or held hearings with people who actually did start this crisis (they should be grilling Christopher Cox, not Ed Liddy, who was put in AIG <6 months ago to fix the mess - he didn't get them into the mess)."

Maybe they should investigate Dodd too? Nah, they wouldn't want to do that. Dodd should be thrown out of office and into jail, but he is far to powerful of a Senator, and it would hurt the Democrats to much so he will probably only get a slap on the wrist... yeah.

Hell, from what I have read about AIG, what they were doing was already illegal, so why would we need even more laws and regulations to prevent something that they were doing already?

3/21/2009 12:22:11 PM

Quote :

"what they were doing was already illegal"

hence, the suggestion to grill Christopher Cox, head of the SEC for so many years.

And a lot of what they were doing wasn't illegal. The whole Credit Default Swap mess was explicitly made legal in the late 90's. CDSs clearly need to come under some kind of regulation, and at the least forced out into the open and bought/sold on a public exchange instead of secret private party contracts with no capital requirements.


And investigate Dodd? by all means. Probably half of Congress, from both parties, deserve to be thrown out of office for their parts in creating this fiasco.

3/21/2009 3:07:31 PM

Quote :

"The press is foaming at the mouth talking about where $160M went,"

Yes the press is almost criminally ignoring its responsibilities to keep a check on Obama. Has anyone read but a snippet here and there about Obama's budget producing a $9.3 Trillion deficit over the next decade?

AIG executives and their families are fearing for their lives thanks to congress. Their bonus pay was part of a formal contrract which was approved by the Treasury Dept and congress. And now they are being used as a smokescreen for Obama's spending frenzy.

$5 Billion more for the auto industry.
$1 Trillion purchase by the Fed of gov't treasury bonds.
$50 billion to bail out home owners and lenders.
$2 Trillion for Obama's cap-n-trade to "fix" the global warming hoax.
$1.5 Trillion for socialized medicine.

Obama's "cure" for the recession is going to kill the patient.

3/21/2009 11:57:16 PM

good

the patient is a bloated asshole and its kids are self-indulgent pricks

[Edited on March 22, 2009 at 12:51 PM. Reason : +]

3/22/2009 12:50:00 PM

i love that you have 5 billion and 50 billion sandwiching 1 trillion

WHERES THAT XKCD WHEN YOU NEED IT

3/22/2009 1:03:25 PM

Quote :

" NEW YORK – New York Attorney General Andrew Cuomo said Monday that 15 employees who received some of the largest bonuses from American International Group Inc. have agreed to return the money in full. Cuomo had sought the names of the employees who received bonuses from Liddy through a subpoena. "I applaud the employees who are returning the bonuses," Cuomo said during a conference call with reporters. "I think they are being responsive to the American people.""

More like they are fearing for their lives and their family's lives after Obama/Acorn/liberal media ginned up hatred for people who received pay that was authorized by Obama/Geithner.

Quote :

"Cuomo said he doesn't plan to release the names of the employees who have agreed to return the bonuses, and said there is no implied threat that if an employee doesn't consent to returning the bonus that their name will be released."

Nooo... their names would never be leaked to the press. The war on capitalism rolls on.

http://news.yahoo.com/s/ap/aig_bonuses

[Edited on March 23, 2009 at 7:31 PM. Reason : .]

3/23/2009 7:30:50 PM

Acorn?

Really?

you're bringing Acorn back into this?

Quote :

"The war on capitalism rolls on. "

i'm glad someone is filling the crazy-old-guy spot vacated by hooksaw

[Edited on March 23, 2009 at 9:46 PM. Reason : .]

3/23/2009 9:45:48 PM

Quote :

" Why on Earth didn't Congress--acting as board of directors--remove the CEO and/or CFO unless they refused the pay the bonuses out?"

Quote :

"As Gamecat said, the US Gov't already has a majority share in AIG, and a plurality share in Fannie, Freddie, and Citibank. But we are not doing anything with the shares!. "

It's an interesting question. But as far as I'm aware, the government doesn't own a majority share of AIG, they have warrants for a majority share of it.

Quote :

"Under the plan, the Fed will make a two-year loan to A.I.G. of up to $85 billion and, in return, will receive warrants that can be converted into common stock giving the government nearly 80 percent ownership of the insurer, if the existing shareholders approve."

(http://www.nytimes.com/2008/09/17/business/17insure.html?pagewanted=2&_r=1&hp)

Also, I am aware AIG has sold preferred stock to the treasury, but it's non-voting stock.

Moreover, I believe the strike price of the warrants is $2.50/share, and given the dilution and Holy Shit-factor involved, and the current common share price of 1.48, in all likelihood if the government exercised the warrants today then they would be out their whole equity stake in dollars on AIG.

After all, warrants are derivatives and at a $2.50/share strike price, they are currently worth 0. The whole reason the warrants were issued was (presumably) to give the government a chance to recoup money by exercising them once AIG is worth money again; i.e., when it is solvent and its share price recovers to something a lot higher than $2.50. Even if that's not the actual reason (it's hard to tell), it still seems silly to exercise the warrants for nothing.

So there are a few answers here to your question:

1. Exercising the warrants would mean totally nationalizing AIG, politically a nasty situation unto itself (whether it would work is a different question) -- not done hastily to say the least over a momentary scandal
2. Exercising the warrants would put the government out its entire financial stake in AIG and most likely would screw the taxpayers further

Neither #1 nor #2 seems worthwhile just because of the recent shenanigans. #2 in particular would put us out at least $85 billion plus whatever we'd make if the stock price actually recovered to a reasonable number.

Can AIG be "fixed" with the status quo? Probably; it is still a public company with common shareholders. A lot of common shareholders who are buying at a very low price and wish very much for the government to buy off its bad assets and leave the good business behind. Liddy screwed up with the bonuses but overall I suspect he's a pretty good guy who could become filthy rich(er) if he gets AIG straightened out by cooperating with Geithner and company. Personally I suspect his desire to do just that led to this mess, and that avoiding a lawsuit somehow took precedence with the Obama administration over doing the right thing. Hence the bonus grandfather amendment that sailed through Congress at Geithner's urging.

[Edited on March 24, 2009 at 3:14 AM. Reason : foo]

3/24/2009 2:56:26 AM

Obama 3/24:

Quote :

""You know, there was a lot of outrage and finger-pointing last week, and much of it is understandable. I'm as angry as anybody about those bonuses that went to some of the very same individuals who brought our financial system to its knees." "Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayers' dime is inexcusable, that the days of outsized rewards and reckless speculation that puts us all at risk have to be over.""

"Outsized rewards"? Is it the president's job to decide when someone's income is too big? Rememeber, he wants his income standards to apply to all businesses...not just bailout babies.

Quote :

""At the same time, the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more." "

Sadly, that's about the nicest thing thing Obama has had to say about the private sector. He tacitly acknowledges their evilness, but we just can't beat them up too bad..because they are the ones rotton enough to rip off people by making money.

To him, we have to put up with their nasty profit-making, not because rational self-interest is the moral way to live, but just long enough until the economy is moving again.

[Edited on March 25, 2009 at 11:03 AM. Reason : .]

3/25/2009 11:02:17 AM

http://www.nytimes.com/2009/03/25/opinion/25desantis.html

An interesting letter written by the now resigned executive vice president of the American International Group’s financial products unit, Jake DeSantis. Its interesting to read it from their perspective. If what he claims is true, that most of the people who created the mess have already moved on, then you can't help feel a little sympathy for the guys who were brought in to clean up the mess only to be tarred by the same brush as the former.

Quote :

"The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G. DEAR Mr. Liddy, It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context: I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage. After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself. I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down. You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream. I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer. The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers. I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it. But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut. My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees. That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.” That may also be why you authorized the balance of the payments on March 13. At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress. I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds. You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust. As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house. Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you. The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press. So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree. That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need. On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients. This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear. Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.” Sincerely, Jake DeSantis"

3/25/2009 11:10:58 AM