Designer Outrage

There are many, many stories in the media about AIG and the stinking bonuses. Are you upset yet? You're supposed to be. Yes it is outrageous. But don't take these clowns seriously, the congressional clowns and the media clowns, because they didn't do their jobs for you when it mattered. They're only making confetti over this for a reason, like maybe to suggest that you should riot or something. I'm just guessing. Thank goodness for the Washington Post (via Pimpin Turtle). We can always count on them to lay the CIA psyops playbook on the table and open it to the right page. Now follow along...

AIG hires renta-cops to protect bankers against "mob effect"

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn’t show up at all. [My God you people are animals.]

“It’s a mob effect,” one senior [anonymous] executive said. “It’s putting people’s lives in danger.” [Mmm hmm.]

Politicians and the public [All together now.] spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products’ complex trades and who are trying to dismantle the division before it further endangers the world’s economy.

“It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”

President Obama yesterday vowed to “pursue every legal avenue to block these bonuses.” But that pledge might have come too late. [Regrettable.] About $165 million in retention payments started to go out Friday to employees at Financial Products, after numerous discussions with the Treasury Department and the Federal Reserve. Attorneys working for the Fed had been examining the matter for months and determined that the retention payments couldn’t be touched because AIG would face costly lawsuits and be subject to penalties from states and foreign governments. [And Oh My God We Can't Have That!!!] Administration officials said over the weekend that they agreed with that assessment. [Hey thanks, you're a real pal.]

AIG disclosed its retention-payment program more than a year ago, [When none of this was foreseen (cough).] and the amount of the bonuses — more than $400 million for Financial Products alone — had been widely reported. But as the payments were coming due in recent days, the White House began to express its indignation. Pressure on the 370-person Financial Products unit, based primarily in Connecticut and London, grew even more intense yesterday when New York Attorney General Andrew M. Cuomo threatened to issue subpoenas if the company failed to provide details about recipients of the retention payments. [Yeah? And what happened?]

The payments represent only the most contentious of a larger group of bonuses being paid throughout AIG. The company’s top seven officials, including chief executive Edward M. Liddy, agreed in November to forgo bonuses through this year. After a Wednesday call between Liddy and Treasury Secretary Timothy F. Geithner, AIG agreed to restructure payments for the next 43 highest-ranking officers at the company, who are to receive half of their bonuses — which total $9.6 million — immediately, one-quarter July 15 and the rest Sept. 15. The last two payments would depend on whether the company makes progress in restructuring its business and paying back taxpayers. In addition, the company is set to pay another $600 million in retention awards to about 4,700 people throughout its global insurance units. [Look how reasonable and selfless they're being. Come on! Have a heart.]

But each dollar remains in question after the president’s reprimand yesterday and the deluge of rage from legislators and the American public. Government leaders [snort] already say they plan to recoup some of the bonus and retention pay while restructuring the company. [I see another regret coming.] In addition, administration officials said that the Treasury is planning to try to recover some of the bonus money by adding provisions to the additional $30 billion it gave AIG access to earlier this month. [And another one.]

The payment plan had been no secret. [That's right. They put it in place way in advance of pulling the plug on the economy so they could have their golden parachutes when the time came.] Beginning in the first quarter of 2008, AIG disclosed the plan to offer retention awards at Financial Products. The unit had already begun to hemorrhage money, a problem that would later grow exponentially. The unit’s executives, fearing they might lose valuable employees in the tumultuous months to come, successfully negotiated more than $400 million for their workers, to be paid this month and again next year.

At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. [Wow I am impressed. Really.] The conclusion: If the bonuses weren’t paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.

Moreover, Fed officials also hope to keep current employees with the company. [They know where all the bodies are buried.] The senior executives whose decisions caused the company’s collapse are long gone. Most of those left behind are trying to unwind complicated derivative contracts. Completing that process correctly is essential to preserving as much value as possible for taxpayers, officials at both the government and AIG have argued. If it is mishandled, it could expose taxpayers to billions of dollars in additional losses. [I smell more regrets coming. This is complicated. Instead of writing their bad bets down to zero, like they should, they're going to get all mixed up in the paperwork.]

Law professors [anonymous, apparently] agreed with the Fed’s assessment but said AIG employees could still agree to reduce their own bonuses. And the outrage expressed by the president and lawmakers was designed to put pressure on these officers to do just that, the legal experts said. [Designer outrage? Yes it really does say that.]

Jonathan Macey, a professor at Yale Law School, said it was unlikely that any AIG employees would end up suing the company for changing compensation contracts, mainly because their names would be revealed publicly in a lawsuit and they would then be excoriated. Macey added that the government is caught in a difficult position, squeezed between public outrage over the bonuses and the need to keep AIG Financial Products going so the company can restructure and the government can recoup some of its money.

“What’s good for AIG is definitely not good for the country,” Macey said. “But now that the government is invested, it may have to do what’s good for AIG.” [Isn't it funny how it always seems to work out that way?]

Liddy is scheduled to appear tomorrow in front of a House financial services subcommittee. [For more kabuki.]