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A friend sent me this very interesting letter written by Jake DeSantis, an Executive Vice President at AIG’s financial services unit, to their CEO. This was published in the New York Times and the International Herald Tribune.
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."
And here are some comments posted on DealBook, by a few readers....
Something doesn’t smell right here.
- Posted by wdm, ny
If we needed proof how out of touch and privileged these AIG traders feel, look no further then this.
Back here in the real world, it does not matter whether you were personally responsible for the activity that made the company collapse, when it happens, there are no bonuses for anyone, retention or not. At 99% of companies, you can scream and yell all you want that you were making money while someone else messed the whole thing up, but that is not going to work, only at tax payer funded AIG evidently.
The only reason that this guy is getting any money at all is because the US government did not allow AIG to go bankrupt, if they had then he would have had to take his contract and get in line with the rest of the creditors. Plus, even if this guy was not in the CDS business himself, where does he think that the money was coming from to pay for his 10 cars and house in the Hamptons? AIG-FP made a fortune off of CDS, and that is why there was plenty of money to spread around.
I am very disappointed at Obama that he is standing up for the rights of scam artists like this to take of with government money, I am glad this guy is giving it away, but it should not have been his choice in the first place.
Everyone else gets hurt by the recession that you guys created buddy, maybe you should have to cut back a little bit like the rest of us. I am sure you can survive on $80 a bottle champagne rather then the stuff you are used to, Jake.
- Posted by IW
A Nation of Misguided Resentment
My husband was a new graduate, starting his career at one of the big banks in 2007. He had just completed a year there when the financial world crashed around him. Over that one year I barely ever saw him. There were weeks when he wouldn’t come home for three days in a row and I would have to take his clothes over. The base salary he drew was far less than any other financial professional so the bonus was all that would compensate his 100 hour week. I am happy to say he did get some severance when he was let go but every time I watch the American news the sudden hysteria against "finance professionals" bothers me. I know my husband had nothing to do with the financial crisis and we have paid dearly for it over the last year. Where is the empathy for people like us?
This lack of empathy is going to snowball into one of the greatest mistake this nation has ever made. My husband found a job abroad since finding a job in banking with an alien visa is next to impossible. So we have moved right across the border and like a friend recently mentioned "have landed on our feet" because we have skills that everyone recognizes as assets. There are thousands like us who are either moving out or considering the idea just because they see no incentive to stay here.
- Posted by D Bose
These people still don’t get it. Good riddance. I’m sure there are plenty of equally smart people who will work for a mere $250k or so without the whining and palpable sense of entitlement. What a self-righteous jerk. All over this country, people are taking pay cuts - significant pay cuts - in order to protect their jobs and those of their co-workers, and this guy feels entitled to be paid a hundred cents on the dollar for a contract made by a BANKRUPT company. Well, at least he’s already looted enough money that he can quit in a fit of pique and sit around at home fuming over the injustice of it all.
- Posted by EWP
The moral back-burner....
The US multinationals lobbied the US government to "engage" with China.
The American got the goods, China created jobs.
The new jobs in China created happiness and this kept the Communist Party in power.
Who cared about Tibet?
And we, the investors, had our fair share of the gravy train.
We bought shares into companies not knowing what they did - as long as they made money.
..now burns us
China has dollars that they don’t want.
But China still wants jobs.
The Tibetans still want more freedom:
He wanted protection for the hedge funds in London so they would create jobs in London. Now Mr. Brown wants the Swiss to open up their banking secrecy laws, while he still protects ill-gotten wealth in the Channel Islands, a British protectorate.
And Secretary of State Clinton said human rights can wait.
The politicians in the US and UK are shouting for blood - maybe they should suck some of their own.
In the US agitated housewives of the sacked financial executives are upset that the husbands they hardly see are not bringing in the bucks like they used to. They deserve it - they squeal - they worked hard.
Tell that to the people in China who sew clothes for USD 1 per day - when the professionals in the financial services industry were being paid USD 1,000 per day.
Tell the people who flip burgers and bake bread for USD 6 per hour that the guys who flip stocks deserved to make USD 100 per hour - and travel first class.
We really must be an advanced civilisation.
We are willing to reward players of electronic games, a lot more than we are willing to reward a teacher or a farmer.
This is the age of information, we tell ourselves, and those who can master it must be paid well.
Nearer to home, some graduates of our IIM's are grumbling that their salaries are lower than what their peers got last year.
Take a look at some salaries in USA.
The teachers build lives; the nurses help cure the ill; the architects blend beauty with use.
Us folks in the financial industry, we are The Chosen - the immortal.
Probably when the teachers were busy teaching children how to read and write, we created the new math equations "2+2=5" and we got away with it.
Prior to 2008, if you had asked any parent what they would like their kids to be: the answer would have been hedge fund manager, investment banker, trader, or a management consultant.
Any why would they contact me again?
Everyone wants their fair share.
But maybe they will come back to see me, now.
Maybe we financial folks are really as mortal as everyone around us.
In Connecticut, bus loads of ordinary Americans went to the homes of the AIG executives who received large bonuses just to let the rich executives know that there are still some poor people in America.
No, there are no easy answers.
We are so lost, so confused, so morally adrift that we no longer can say whether Jake DeSantis - the gentleman who is quitting AIG - is justified in his anger, or not.
What do you think?
Click here to let me know whether you feel sorry or not for Jake DeSantis.