No doubt much ink and many pixels will be spilled venting outrage at these antics. For myself, I can only add, somewhat dejected, I am not entirely surprised that this type of thing is going on since the government has made it clear that AIG is not going away.
Bill Kristol on Fox News Sunday summed it up nicely:
AIG sold these credit default swaps to very sophisticated investors, mostly to other banks and other major financial institutions, many of them in Europe, they bought these thinking hey easy profit, no risk....[these were] insurance policies against stocks that they didn't own. They thought they were just making money. AIG thought they were making money and the counterparty thought they were making money. And the way the bailout has worked, as I understand it, is that the counterparties have been relieved of any risk, not only any risk, any loss...If you're a sophisticated bank who bought a credit default swap from AIG you've been made whole. No haircut even, not even 80 percent or 90 percent, 90 cents on the dollar.I was just going to leave it at that, but reading that news story linked above I can't resist these.
"But where there are contracts, binding contracts that were entered into long before the government put any money into AIG -- we're not a country where contracts just get abrogated willy-nilly," he [White House National Economic Council director Larry Summers] added.Well, when you run your company in to the ground and you know, bankrupt it, then it cannot pay its contracts. My question is why should taxpayers have to do so?
Then, there was this item (emphasis added):
In a letter to Geithner Saturday, Liddy [the government-appointed AIG boss] said the bonuses could not be cancelled due to the threat of lawsuits for breach of employment contracts, and that AIG risked an exodus of senior employees if it does not pay them out.Finally some good news! The "senior employees" of AIG are threatening to leave. Why are these people even still on the premises? Is there any reason we would want to keep senior leadership that runs a company the way that AIG has been run?
AIG has got to be the best argument of an "exodus of senior employees" at least since Enron. Here's hoping that exodus or not, we don't end up wandering in an economic desert for forty years.