Among the things he told AIG employees in a company town-hall meeting Aug. 4, according to a recording obtained by Bloomberg:
“(I) had the luxury to say to the government [after the company stock's recent price increase], I’m not going to rush to do this. I’m appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn’t have come in in the first place.”
And never mind what would have happened if the government hadn’t come in in the first place.
Benmosche told staff he was working to get Kenneth Feinberg, the Obama administration’s so-called special master for executive pay, to “buy into” a new compensation plan for all employees expected within months. Benmosche will get $7 million in salary and as much as $3.5 million a year in long- term incentive awards, AIG said.
“I want to make sure we all get paid competitively,” he said. “If you shoot the lights out in a given year, we should have enough flexibility to give you a big increase.”
Two thoughts: 1) I see no danger whatever that anyone with AIG is going to “shoot the lights out” anytime soon, and 2) no bonuses or big increases while the company is still on the hook to the taxpayers for $182 billion. None. Period.
“It’s time the people in Congress stopped talking about you as the problem, because you’re the solution,” he said. “It’s not your fault, it’s their fault, it’s the regulators’ fault.”
The Office of Thrift Supervision “fell short” in its oversight of AIG’s credit-default swaps, Scott Polakoff, a former acting director of the regulator told lawmakers at a hearing in March.
Bless Bloomberg’s heart for getting this recording, but it overlooks two significant points here. First, Benmosche is in effect conceding what many of us have known for even longer than since Alan Greenspan admitted it last fall in Congressional testimony: The financial industry simply cannot or will not regulate itself adequately; wide, deep government oversight is required.
Second, for the full story, once again we must turn to Matt Taibbi:
Two things about this. One, let’s not forget that AIG went out of its way to cherry-pick the weak and understaffed OTS [Office of Thrift Supervision] as its primary regulator by chartering an S&L called the AIG Federal Savings Bank in Wilmington, Delaware back in 1999. By this little maneuver AIG got itself declared a thrift holding company, which made the OTS, which only had one insurance expert on its staff, the primary regulator for the world’s largest insurance company.
Two, the notion that AIGFP was AIG’s only problem is bananas. It may not even have been AIG’s biggest problem. This legend obscures the fact that playing a nearly equal role in the demise of AIG was AIG’s securities-lending business, headed by yet another bombastic narcissist (AIG must lead the world in the hiring of these to senior management) named Win Neuger. Neuger back in the earlier part of this decade issued a clarion call to his subordinates, announcing a plan he called “10 cubed” — securing 1000 million (i.e. $1 billion) dollars a year in profits. Back in 2005 he told his staff that anyone who wasn’t on board with the plan to make a billion in profits a year could hit the road, literally, saying, “If you do not want to be on this bus, it’s a good time to step off.”
But how does one make a billion in annual profits in the normally staid, risk-averse securities lending business? By taking the collateral from the securities you lend out and investing it not in low-risk or risk-free instruments like treasuries, but in residential mortgage backed securities!
Neuger’s insane decision to bet billions in AIG collateral on the residential housing market was the other half of the story of AIG’s death spiral. Fully $43.7 billion of the bailout monies paid to AIG’s counterparties via the Maiden Lane facilities were tied not to Joe Cassano and AIGFP, but to the sec-lending operation. So is it plausible that AIG’s senior management could have simply not understood where all those billions in revenues from AIGFP were really coming from all those years? I don’t think so, but I know one thing for sure: it’s definitely not plausible that AIG’s senior management could have been unaware where the money was coming from from both Cassano’s and Neuger’s operations. …
It wasn’t the OTS that kept Joe Cassano on the payroll for a million bucks a month for seven whole months after it was revealed that he had incurred tens of billions in losses via his CDS portfolio, among other things by steering independent auditors away from his books, and after he had twice declared publicly that he could not foresee even “one dollar” of losses. That would be AIG that did that (they didn’t stop the payments until a month after the bailout).And it wasn’t the OTS that decided to keep Win Neuger around as the Chairman and CEO of AIG Investments to the present day. Hell, Neuger is still an Executive Vice President of AIG. We the taxpayer are probably going to be giving this guy a nice bonus this year, because AIG couldn’t see fit to fire the man who single-handedly inspired $43 billion in bailout payments. It is for the right to increase compensation to valuable retained personnel like Neuger that Benmosche is now going to the mattresses with Kenneth Feinberg, Obama’s special master in charge of executive pay.
And with respect to regulators, there’s also this:
Benmosche told employees not to be immobilized by concern that they will upset regulators.
“My fear is that you’ll say, ‘I don’t know if Treasury wants it, I don’t know if the Fed wants it, I don’t know if the lawyers want it, I don’t know whatever,’” he said. “If you sit there every day not making the right decisions to take us to the next level, we’ll miss an opportunity.”
So, hey, if you don’t immediately get frog-marched out of here in handcuffs, it’s all good.
Your government, Republicans and Democrats alike, is, by and large, standing still and letting this stuff happen. If you’re not communicating with your congresscritters and urging them to head over to AIG HQ right now with torches and pitchforks and a lot of handcuffs, then you deserve whatever happens to your savings, your taxes and your country.
UPDATE: Wouldn’t it be big fun if the Fed became the next AIG?