ON FINANCIAL McCARTHYISM (Part II)

COLLATERAL DAMAGE

This letter titled "Dear AIG, I Quit", written by a senior executive at the AIG Financial Products Group at the center of the current national Bonus controversy, should be a must-read for anyone with an opinion either way on this issue.  As he explains, Mr. Jake DeSantis did not have anything to do with the products that ultimately caused the downfall of AIG.  Here are some salient excerpts:

"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."

Mr. DeSantis goes on to add:

"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. "

It's one thing for an outsider like me to talk about how our politician and the media are encouraging what amounts to Financial McCarthyism around this issue, and quite another to read the opinion on all this from someone in the middle of all this, through no fault of their own.
What's particularly poignant is the way he goes on to describe his decision process regarding the compensation these he and his peers were due for hard work done in good faith:

"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."

He goes on to describe how he's donating what''ll be left of his bonus to people affected by the global downturn.
In yesterday's post, I described what was going on in the context of getting AIG employees to "return" their bonuses as "Reputational Waterboarding". 
It's clear from the comments by folks like Mr. DeSantis and others that are sure to follow, that we'll look back at this period in our history and feel the same national shame over how we're treating what's left of AIG and the financial industry at large (aka "Wall Street"), as we now do over our treatment of U.S. citizens of Japanese origin interned in camps during World War II, and the lives of thousands of Americans carelessly trampled during the McCarthy hysteria in the Fifties. 
This one hasn't been going that long and the collateral damage is not as bad as it could be. 

So it's not too late for us to all calm down a little bit, take a deep breath, and think some more about our misdirected rage. 

Oh, and let's not rush to cancel those AIG policies, unless of course we get a better deal.

Update:  Fred Wilson also had a post on this matter yesterday that's worth read, especially the comments from his readers on either side of this issue.

Comments

[Kurt Sussman]

I don't accept this made-to-leak letter as fact. It is certainly worth investigating, though.

Since we (the taxpayers) are 80% owners of AIG now, let's demand the facts, and then either apologize profusely, or get out our tiny violins.

[Alex Tolley]

That any executives are getting any compensation at all is due to public money used to bailout AIG. Without it, they would be out on the street.

It is irrelevant who is at fault. The perpetrators have left the firm, leaving everyone else, including the rest of US, holding the bag. But that doesn't mean that the people who are left, good honest folks I sure they are, are owed anything.

If they don't like "onerous" conditions of the bailout, they can leave AIG.

The government's sole responsibility is to ensure that public money restores the economy in the most efficient way. So far it is looking like it is mostly being used to keep bankers' wealth and income intact. That is not a good idea IMO.

[mark slater]

please explain what would happen if there was no bailout - yes - it would be a clear out.

Oh i forgot - they are too big to fail so that makes all of this ok.

Its absurd. If i am at a company and it fails through no direct fault of mine - i lose my job. This is the case with 95% of America. To claim that you weren't part of the division that caused the collapse and to use this as the crux of your argument to keep your bonus - one paid by me - is highly and rightfully insulting.

this MOTU approach is a cancer on wall street - its now being cut out.

thats extremely nice that he saw fit to return taxpayer money.

[A Morin]

Is he really comparing the Million Dollar AIG Bonus babies to American-Japanese Internment camp prisoners? really?

[Christopher Wishnie]

I think the people who labored under a contract in expectation of payment are entitled to their compensation. And it is very troubling to me when the government enacts punitive legislation to confiscate citizens' property. Taxpayer funds should not have been used to "bail out" a private institution in the first place. None of our private property is safe from confiscation by a government intent on its socialist agenda. If a government will unjustly seize their money its only a matter of time before they come for yours and mine too.