tag:blogger.com,1999:blog-8152901575140311047.post8763299493650037672..comments2024-03-28T12:49:46.624-04:00Comments on Musings on Markets: My thoughts on the AIG fiascoAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-8152901575140311047.post-82968080867878560282009-03-24T01:41:00.000-04:002009-03-24T01:41:00.000-04:00Where would these fine financial services employee...Where would these fine financial services employees flee to? <BR/><BR/>Current reality is that they are lucky to have a job and there is certainly no need to pamper employees with bonuses in order to retain them.acemanhttps://www.blogger.com/profile/04574991552189901367noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-7408548291872220222009-03-22T14:33:00.000-04:002009-03-22T14:33:00.000-04:00Thanks for the post. There's so much emotion a...Thanks for the post. There's so much emotion around this topic, it's refreshing to have someone actually examine the issues.<BR/><BR/>If you believe Liddy's House testimony, the people receiving bonuses were not in AIGFP's problem areas of CDS or regulatory capital. Here's a link to the relevant part of the testimony: <BR/><BR/>http://www.youtube.com/watch?v=FYrP1avjf1U<BR/><BR/>According to Liddy the trading books are being/have been wound down. At least some of these employees were being paid to unwind trades and then have their employment terminated. So not possible to have employees "focused on the long term".<BR/><BR/>My humble opinion is that Mr. Liddy diligently tried to minimize losses to the shareholders & taxpayers (i.e., avoid contract lawsuits and potential trading losses as books were unwound.) However he failed to have the insight a world-class CEO should have - understanding investor and public relations beyond simple cost calculations. The cost to AIG of taxpayer and government anger will greatly outweigh the cost had AIG refused to honor these contracts.TCaphttps://www.blogger.com/profile/16038867944246702069noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-18380418142019803632009-03-20T10:20:00.000-04:002009-03-20T10:20:00.000-04:00Pay the bonuses in stock.These people still have j...Pay the bonuses in stock.<BR/><BR/>These people still have jobs because of the government - that is those who received bonuses and actually still work for the company.<BR/><BR/>If they are afraid of losing "talent", they should be reminded that they should be focused on maintaining employees that are focused on the long term. A sacrifice of a years bonus is pittance in the long run. I would want people who see this as an opportunity to further their career (long term), rather than people who only care about a quick buck (short term).<BR/><BR/>It seems to me a lot of the risk taking was brought on by people in the latter category.Trust - Mehttps://www.blogger.com/profile/00515106480141315672noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-40589116784457543362009-03-20T07:52:00.000-04:002009-03-20T07:52:00.000-04:00Covered by whom? If AIG had not come through, some...Covered by whom? If AIG had not come through, somebody else would have had to cover the losses. That was the ripple effect that the bailout was supposed to fix.<BR/><BR/>There are thousands of people in the financial services department in AIG. My guess is that most of them had nothing to do with generating these losses. (In fact, one very small group in London alone accounted for a big chunk of the overall losses)Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-4268063943794474532009-03-20T06:49:00.000-04:002009-03-20T06:49:00.000-04:00Apparently, the European banks to which AIG gave a...Apparently, the European banks to which AIG gave away part of the bailout money had their positions already covered, so i think that they could do it without the repayment. But if this was the case why did the payment occured ?<BR/><BR/>The second point is that the distributed bonuses were mainly given to the financial services department of AIG who is apparently responsible of all this chaos.Mohammed AIT LAHCENhttps://www.blogger.com/profile/18221246743888434030noreply@blogger.com