Time for a little review on AIG. First, let’s recall that we as taxpayers have a $170 billion dollar investment in AIG, which amounts to an 80% ownership of the company. Of course, in real life, you and I don’t have any say in how AIG is run. We didn’t even get asked if we wanted to buy AIG (we didn’t). And, even if you offered your unsolicited opinion on buying AIG with taxpayer dollars, you were ignored. But I digress.
So AIG had long ago written contracts with some of its higher paid executives in which they were asked to work for an annual salary of $1 per year, with the promise of bonuses to be paid in March 2009. The stated purpose of this was to retain the services of those who would be most able to lead AIG out of its huge pit of quicksand. It’s actually a decent argument. After all, if you were a competent person at the top of AIG and you knew first-hand what a house of cards it really was, wouldn’t you want to leave when the cards started to tumble? And besides, who really wants to work for $1 per year for a company whose name has become synonymous with “pile of crap?”
Now, even though it’s currently the trendy thing to deny any knowledge of said contracts and to simultaneously express disgust and outrage at the payment of these contractually obligatory bonuses, somebody somewhere stuck that provision into the “stimulus” package. Exactly who did it and at whose behest is up for grabs at the moment, and it really doesn’t even matter that much. The point is this: The stimulus package that nobody had time to read, that emergency spending measure that was supposed to stimulate the economy and get it moving again to avoid the meltdown — remember it? Anybody who voted for it, and certainly the messiah who signed it into law, now has proverbial blood on his hands, whether they read the thing or not. Their votes and signatures are endorsements of whatever was in that bloated bill. But, again, I digress.
So the media picks up on these bonus payments by AIG to some of its top executives, which, as previously noted, totaled $165 million, or less than 0.1% of the amount of the taxpayer dollars that AIG has received. Obviously this doesn’t look good, and the public is outraged that their dollars are being used to pay giant sums of money to people who apparently aren’t very good at their jobs. Congresspeeps, sensing a ripe opportunity for their favorite activity, grandstanding, decide to levy an astounding 90% tax on that bonus money, which effectively amounts to a bill of attainder, which is, of course, clearly unconstitutional and illegal. And stupid, too.
Here is the relevant part of the Constitution. Article I, Section 9, Clause 3 says that “No bill of attainder, ex post facto law, nor any law impairing the obligation of contracts, shall ever be passed, and no conviction shall work corruption of blood or forfeiture of estate.”
Now, I’m not a lawyer (yet), but it seems to me to be pretty clear. There are a ton of lawyers in Congress, and how they can reconcile their 90% bonus tax with the Constitution is beyond me. AIG had negotiated these contracts — whether anybody else likes them or not — and they had to be honored. We can’t have the federal government coming in and tearing up contracts made between two consenting entities just because they become unpopular. If the government wanted to negate the bonus contracts, they should have let AIG go bankrupt. The fact that AIG needed a bailout at all proves that maybe, just maybe, there are some money management problems there, so no one should be surprised when AIG does some stupid things with taxpayer dollars. Nevertheless, under pressure from Congress, the White House, the media, and buses full of angry mobs, some of these AIG executives have agreed to give back at least a portion of their bonus money.
But not Jake DeSantis. Channeling Ayn Rand, Mr. DeSantis submitted his resignation letter not only to Edward Liddy, CEO of AIG (who is also working for $1 per year), but also to the New York Times for publication on today’s editorial page and for the enjoyment of all. The full two-page letter can be found here, and it’s really worth the read if you have time, but here are a few of my favorite excerpts (emphasis added):
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DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter…
…I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
…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.
…I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
…At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.
…You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings.
…As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threa
tened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
…I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
…I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Sincerely,
Jake DeSantis
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Brilliant.
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