Quote:
Originally Posted by sugarpop
My understanding is the particular division that caused all the trouble was so complicated, and the contracts were so convoluted, they had to "unwind" those contracts, and they apparently needed people who understood them to stick around to do.
|
Simply fire the people who created the mess and rehire those who originally created this derivative operation. The guys who created the operation that made risk predictions also did not always trust their own creation. Therefore they often rejected obligations that their own predictions recommended.
After Hank Greenberg left, these guys were let go for being too conservative and cautious. If these contracts are so complex, then AIG needs people who would have never made those obligations in the first place. Not the people who got ridiculous bonuses for creating the meltdown.
Meanwhile, a bottom line remains. AIG is dead. It is just not official yet. Any productive parts of AIG should be sold off. Government will never recover that money because when the George Jr administration made multiple commitments, nobody knew how much Enron accounting had hidden such vast losses.
More important is a message that must be sent to finance people. They are not geniuses. They are bureaucrats and salesmen. Their job is to create liquidity as a bank teller and loan officer does for you. To direct money flows so that productive people can do their work.
It's not derivatives that are a problem. Problem are people with too much belief that finance people can be innovative, and that their purpose is to make profits. Derivatives can be useful financial instruments to help productive industries alleviate financial problems such as cash flow.
Does you bank teller deserve a bonus only because you deposit or withdrawal more money? Of course not. They provide a service so that others can be innovative and therefore productive. Derivatives are supposed to be tool to help the economy's productive parts - not enrich finance people through money games.
AIG is dead. It will not be profitable no matter how many lies are spun about saving those employees with bonuses. When the entire company is losing money, nobody - especially any management in any division (even if productive) deserves a bonus. That's what a salary is for. You are expected to perform superbly. The bonus only happens if the company is also profitable. But not in the finance industry where profits rather than service are more important.