Resignation letter from an AIG executive

From Jake DeSantis, Executive V.P. of AIG Financial Products, to Edward Liddy, CEO AIG, with love. Here is an excerpt:

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.

Is this any surprise? Because of the government witch hunt, Wall Street is losing honest, hardworking, seasoned executives like Mr. DeSantis. New York City will no longer be a beacon of capitalism, but a swamp of mediocre bureaucrats treading about. If $500,000 is the most money one can make in Wall Street, who would even want the job? The pay sucks, and the work hours are long.

Mr. DeSantis, I feel sorry for what you (and your family) had to go through recently. Best wishes in your next endeavor. We can only hope you choose to remain in the U.S. as a productive worker instead of joining other firms overseas.

A shimmer of hope in New England for GOP

For the first time in a long time, Republicans may be able to make a dent in the Democratic stronghold of the Northeast region in 2010:

Sen. Chris Dodd (D-CT) is now somewhat vulnerable, no thanks to his association with the recent AIG compensation fiasco. Republican challenger former Rep. Rob Simmons can definitely put up a good fight.

New Jersey Gov. Jon Corzine (D) is trailing Republican challenger Chris Christie, a former U.S. Attorney, in the latest Quinnipiac poll by nearly 10 points.

And in New York, there's going to be plenty of action. March 31 is a special election for Gillibrand's old House seat, Scott Murphy (D) vs. Jim Tedisco (R). I know that Tedisco has been gaining momentum in the blogosphere and Twitterspher!

Gov. Paterson (D-NY) may be in trouble if former NYC mayor Rudy Giuliani (R) commits to a gubernatorial campaign.

Then there are some House races worth following: Michael Arcuri (D-NY) vs. Richard Hanna (R-NY) and John Hall (D-NY) vs. Greg Ball (R-NY).

Congress passes law to tax TARP company execs

In the latest development stemming from the AIG executive compensation mess, Congress passes a bill to tax at a higher rate of executives and employees of companies receiving TARP funds. The Democrats are eager to clean up this mess, therefore wasting no time to draft this legislation and put it to a vote.

But aside from the glaring tactic of political distraction, this piece of legislation should be a cause of concern for everyday Americans. Congress is essentially wearing the hat of a judge, determining who is guilty, and using confiscatory tax rates as punishment.

Andrew Grossman at The Heritage Foundation has a very good analysis:

Whether the legislation before Congress is a bill of attainder, and therefore unconstitutional, is a difficult question not susceptible to any certain answer under existing judicial precedent. But whatever the answer, the legislation does raise strong constitutional concerns animated by the purposes of the prohibition on bills of attainders. The legislation (H.R. 1586), as introduced by Rep. Charles Rangel (D–NY), would apply to income received in 2009 and thereafter by employees of companies receiving more than $5 billion in federal bailout funds, as well as to Fannie Mae and Freddie Mac. The bill defines a new class of income, "TARP Bonus," that consists of any compensation payments in excess of a periodic wage and any income for such employees in excess of $250,000, or $125,000 for married individuals filing separate returns. Under the legislation, any "TARP Bonus" would be taxed at a 90 percent rate.

Article I, § 9, of the Constitution states: "No bill of attainder or ex post facto Law shall be passed." The prohibition has several purposes. First, it enforces the Constitution's separation of powers, thereby protecting individual rights. The judiciary, not the legislature, is the branch that judges the application of the law to specific individuals and entities, resolving the disputes before it on an individualized basis and ensuring that each case is afforded due process. For Congress to adjudge specific parties guilty and due certain punishment would necessarily intrude on this power. The result, as the Framers well knew from the country's colonial experience, would be legislative tyranny: Britain's parliament regularly enacted laws naming or describing particular individuals and sentencing them to death for some asserted infraction, usually treason.

And that's just the start. Read the whole thing... Congress may be crossing its boundaries here.

Stimulus bill allowed executive bonuses

The fury over AIG executive bonuses is now snowballing towards the White House, Congress, and all those in between who'd voted for the stimulus bill. Apparently the infamous stimulus allowed for executive bonuses that so many are ticked off about. And the man who's receiving most of the finger pointing? None other than Sen. Chris Dodd (D-CT), who happens to be the top recipient of AIG political contribution (then Sen. Obama is #2). Sen. Dodd is being blamed for inserting the executive compensation clause into the stimulus bill, and believe it or not, he's blaming Obama for requesting it!

Oh goodie, in-fighting among top Democrats...

Anyone with a "D" next to their written names is staying as far away from this mess as possible. Nobody wants to be near Sen. Dodd, Tim Geithner, or even President Obama these days. What AIG CEO Edward Liddy went through recently is nothing compared to what's going to happen in the Hill.

There's been calls for Geithner's resignation. I'm sure these calls are going to turn into a chorus pretty soon.

AIG a top Obama political contributor

This whole show from President Obama and his crew on the AIG bonuses sickens me. Not only has the administration showed its anti-capitalistic nature with executive pay limits and crying foul about bonuses, but the mainstream media isn't covering the fact that AIG contributed big money to Sens. Chris Dodd and Barack Obama.

Now the W.H. claims it didn't know about these bonuses until March. But wait, I thought this administration is all about transparency! The government gave monetary aid to AIG last fall. Is the W.H. saying that nobody keeps track of any of this money?

What about Fannie and Freddie bonuses?!

Enough about AIG. Let's move on to Fannie and Freddie, and the reported half-a-million dollar bonuses for four executives. This whole bailout deal stinks to high heaven!!!

Fed bails out AIG, blame game begins

The government took control of AIG in a $85 billion deal to prevent total chaos in the world financial markets. This came somewhat as a surprise as most people expected the Fed to let capitalism work as it did in dealing with Lehman Brothers which had to file for bankruptcy. The bailout gives the Fed 80% of ownership of AIG and is secured by AIG's assets.

Now the blame game really begins. When asked whether Congress bears any responsibility in the current financial crisis, Speaker Nancy Pelosi said "no." She blames the Bush administration (of course).

The root of the problem is the subprime mortgage market. This type of mortgage allowed people without the financial means to buy a house instead of what they should be doing: renting. Fannie Mae was established in 1938 as part of President Franklin Roosevelt's (D-N.Y.) New Deal, to provide liquidity in the secondary mortgage market, help the poor, and recover from the Great Depression. The New Deal was the beginning of a trend in big government, wealth redistribution, and government intervention in America. Whether you like it or not, it started with Democratic ideas bordering socialism.

And the rest is history.

Despite market turmoil, economy is OK

Yesterday was a scary day for the market: Dow dropped 500 pts. on news of Lehman Brothers collapse, Merrill Lynch's fire sale to Bank of America, and AIG's credit worries. It was the worst drop since the 9/11 terrorist attack.

Many folks are in a panic. They're losing confidence in their banks. They worry what'll happen to their savings. Their retirement accounts are shrinking. It's like the sky is falling...

The Fed understands this crisis which stemmed from institutions' overexposure to the risky subprime mortgage market. Many banks have already failed and taken over by the FDIC. A few months ago the government engineered a sale of troubled Bear Stearns to JPMorgan Chase. A few weeks ago Fannie Mae and Freddie Mac were seized by the government. Was Lehman Brothers betting on a bailout? No bank would pick up Lehman without the backing of the government, and Treasury Secretary Henry Paulson wasn't keen on another bailout. In the end Lehman was left without a suitor and had no option but to file for bankruptcy, ending its 158-year history and making history as the largest bankruptcy ever.

Credit is due to Secretary Paulson for allowing capitalism to work. In order for capitalism to remain healthy, sometimes it must go through illnesses, just like a human. Now that he has shown the market that he's not always Uncle Sugar, many banks have pooled together cash to improve lending, instead of always relying on the Fed.

What will happen to AIG and other troubled institutions in the future? Nobody knows, but capitalism is also about owning up to the decisions you make, good or bad, and living the consequences.