In a letter to Edward Libby of AIG detailing his resignation from the company, Jake DeSantis provides the evidence that will most likely be missed by the populist rush to further the class warfare that this administration is waging as to why a political body has no business dabbling in running a business. President Obama, who’s supporters claim is a pragmatist, showed the exact opposite character trait and instead displayed a wonderful example of demagoguery.
First, couple of facts that are missed by anyone who didn’t listen to the hearings on the AIG bonsuses because I don’t recall any of the news media pointing these things out.
* No one invovled in default credit-swaps received a bonsus. I keep hearing that ‘we should not be rewarding the people who ran the company into the ground’. The fact is, none of them were. They individuals were all removed from the company long ago.
* The people who received bonuses were working in still profitable or non-loss areas of the company that were being wound down.
* Most, if not all, who received the bonuses were working, like Mr Liddy, for $1 a year.
* The people who receiving bonuses could have left the company while winding down their divisions leaving those areas in tough straights and possibly causing more losses in revenue, which is why the bonuses were offered to them.
Now, with that out of the way, let’s look at the result of what was told would happen by Mr Libby and is now currently occurring. The people in charge and responsible for profitable areas of the company, having nothing to do with the failed default credit-swap area, were continuing to work in a division that was about to close and put them out of a job. They were being asked to work for $1 a year. They were needed to ensure that this wind-down occurred smoothly and, most importantly, with no further losses to the company. In return for staying and not leaving, they would work themselves out of a job.
This happens from time to time in business. Providing an incentive to keep the knowledgeable and integral part of a division is the best way to ensure that this type of action happens without upheaval. In addition, if these people were to leave, the job will still need to be done, who is going to come in to learn the details of a job quickly at $1 a year and walk away 9 months later with nothing to show for it? In fact, who is now going to replace Mr. DeSantis at his position and how much is it going to cost to replace him?
Mr. Libby attempted to make this point during hearings and was basically told to pound sand. He stated that he felt it was the best, most pragmatic, business decision to ensure that the company was able to return to profitability sooner. He didn’t like the bonuses and was not involved in their being promised, but understood the business sense that it meant and feared this result.
Instead, with bluster and fury, the president and those on the banking committee who apparently don’t understand how businesses work or were pandering to a populist constituency, decided to berate the bonus receivers, demanded their names (even though they were receiving death threats) and were made out to be the villains. The people who turned down jobs with other firms to ensure the smooth running of the other areas of AIGFP were turned into an example of all that is evil with America.
In other words, politics.
The end result is that it is now likely that the money we borrowed from someone else to lend to AIG will be paid back much later, if at all. This will place the company in worse business footing and result in the people who were still being serviced by AIG to suffer further. This is the result of injecting politics into the running of a business and what pragmatism is not about. A pragmatic president would have first figured out that his own Secretary of the Treasury was involved in protectung these bonuses and found a way to explain thae need for them to a public that would be better served by having these people remain on and serve the company as they had agreed than to turn them into the purveyors of all that is unholy in our society.
Good job and Bravo. This is going to end up costing the US taxpayer more in interest on the money that we borrowed and MAY get back but most likely much further down the road if we do. If we were really worried about the cost to the taxpayer, this debacle would never have happened.
I think it is obvious what it was all about.