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March 24, 2010

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if only Obama didn't use TARP to bail them out! bad Obama! bad!

Well, in protest and as recompense for their appalling treatment at the hands of the market, they are going to join Republican politicians in their quest for the shorter working day -- the whistle now blows at 2:00 pm.

Working men and women await the scussess of this experiment.

"scussess"?

I still don't quite understand the outrage over the DeSantis piece in the NYTimes that Yves excerpts but doesn't link to, so I might be getting some of the following details wrong.

Directly from the excerpts he notes "I was in no way involved in—or responsible for—the credit default swap transactions that have hamstrung A.I.G." and that "profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money."

Also, IIRC, his contract with AIG was "if you stay here until X date, we will pay you Y," he had fulfilled his part of the bargain.

And I don't think Yves quite "shred[s] the logic on display" there, or she doesn't understand how large multinational corporations structure the pay of their employees, at least in my experience.

So, while I would probably take issue with some of his language, as Yves's notes, I don't think I'm quite so outraged by the facts behind DeSantis's somewhat overwrought op-ed.

Am I missing something?

I would note that I didn't read the whole piece so I may, in fact, be missing the larger point.

Ugh: I think the general point is that if your firm/corporation/business tanks, employees of the firm/corp/business suffer regardless of individual culpability/involvement.

DeSantis seems to take the point of view that since his particular actions were clean, he should get a massive payout that - for other reasons - the company is in no position to pay out.

Kind of a warped view of the free market.

Put somewhat differently: How much would DeSantis be getting in bonus payments if AIG hadn't been bailed out to the tune of many tens of billions of taxpayer cash?

Answer: Nothing.

So, a little gratitude and humility might be in order for the fact that he's getting anything at all, and still has a job.

Well, he did suffer as noted in the part Yves excerpts (we can argue over how bad we should feel for him), I guess the question was how much was he going to suffer if, e.g., AIG had declared bankruptcy. But AFAICT, wages owed to employees are pretty high up the list of things that are likely to get paid in bankruptcy court (I think).

And I don't think it is a warped view of the free market, from the employee's perspective, that if the deal you strike is you get paid based on how your business unit does, and some other business unit lost enough money to make the business as a whole unprofitable, that you don't get your bonus that year (maybe you suffer indirectly from that unprofitability if you, e.g., have stock options).

Maybe AIG is a different case because it was so massively underwater it wouldn't have been able to pay him anything, but I think that's far from clear (it's not like AIG had zero assets, for example).

Anyway, it just didn't strike me as an example of some horrible outrage of ungrateful bankerhood as some of the other whiny/sniffy banker stories Yves mentions elsewhere in the piece and that I've previously read.

Ugh, I agree that there were worse examples. I'm not sure how bonus payments work in bankruptcy in terms of priority of creditors.

But he would have been out of a job regardless.

Though I can see how the better part of valor might have been for him to just keep his head down, collect his money and otherwise STFU (much like, say, Tim Tebow).

I still don't quite understand the outrage over the DeSantis piece in the NYTimes

Eric's covered it pretty well, but I also think this from Yves kinda nails it:

Employees of bankrupt enterprises seldom go about chest-beating that they did a good job, it was the guys down the hall who screwed up, so they therefore still deserve a fat bonus check.

To which I would add, especially if the reason the company continues to exist at all is a public bailout.

And, of course, to me it's something of a moot question. None of those guys should be making that kind of dough.

Why? Because it's not their freaking money.

Put your own money at risk, like the old school investment bankers used to, fine. If the company is profitable, you win. If the company is really, really profitable, you win big.

No worries. It's your money.

Work for a publicly traded company, diffrent story. It's not your money.

Pay me or I'll walk? There's the door.

Eric:But he would have been out of a job regardless.

With AIG, IIRC his op-ed said that he had plenty of opportunities to go elsewhere (obviously I'm assuming everything he says is true).

Russell - with respect to Yves chest beating comment, I'm not sure it's quite right either. Sure it's not too often you see someone granted op-ed space in the NYTimes to mention how great a job he was doing for bankrupt company X, but at, say, his next job interview? I would think that would be the first thing out of his mouth.

With AIG, IIRC his op-ed said that he had plenty of opportunities to go elsewhere (obviously I'm assuming everything he says is true).

So he says. Though the top execs in the Times piece tended to stay put despite the pay cuts.

Put your own money at risk, like the old school investment bankers used to, fine. If the company is profitable, you win. If the company is really, really profitable, you win big.

Ahhhhh. Tracing the delinking of owership and employees of these banks (and making these banks publicly traded entities) provided the skewed incentives that have led (or contributed) to much mischief.

Sure it's not too often you see someone granted op-ed space in the NYTimes to mention how great a job he was doing for bankrupt company X

That is for damned sure.

Look, people who work for the big Wall St banks make stupid money. It's really hard to see any realistic connection between what they do, and the compensation they make.

They work hard, they take calls late at night, the work is stressful and intense.

The same thing can be said for any of a thousand other professions which are not compensated at a level that these guys are. Not by order of magnitude.

The connection between the value of what they do, and the compensation they get, just ain't there. As far as I can tell.

Plus, as noted above, it's not their money. The profit they generate does not belong to them, it belongs to the folks who own the company.

If that mantra applies to a machinist, it applies to an investment banker.

The folks at AIG blew the company up, and damned near took a lot of the rest of the economy with them.

The insane, delusional risk taking that led to the Wall St flameout cost a lot of people their savings, homes, and livelihoods.

Is this necessarily DeSantis' fault? No, it probably isn't. Is he legally entitled to his bonus? Yeah, he probably is.

Is he a clueless self-pitying jerk for not only not getting why this would make people angry, but for b*tching about it in the freaking NYT editorial page?

Yeah, he is.

I have nothing against the guy personally, I hope he has good luck and success in the rest of his career. Mazel tov.

But the dude has a world-historical tin ear.

My two cents.

Russell - your 2 cents are always appreciated.

Russell - your 2 cents are always appreciated...by Jake DeSantis (rim shot)

Thanks everyone. I'll be here all week. Try the veal...

Boo.

"Take my bonus... please"

DeSantis seems to take the point of view that since his particular actions were clean, he should get a massive payout that - for other reasons - the company is in no position to pay out.

This is simply not the way things work at any sane company.

Even on a smaller level, usually: our performance at my job is largely measured in terms of downtime, or more specifically the lack thereof--in other words, availability. If we exceed a certain number of minutes of downtime--as a company, even if our individual team was not responsible for the outage--bonuses are reduced or eliminated.

It ain't always fair, but that's how it works.

Loved that piece--it's sort of the two minute version of her book.

Just a few points that I think might be important:

1. He probably would not have been out of a job in a bankruptcy.

If his business unit was profitable then it would have been an asset that the bankruptcy court would have likely sold. This would have been good for the crd=eitors as it migh have provided some amount of money to pay them back.

2. If his pay was a small part of the total revenue of the business unit and it made industry standard returns then he very likely was under compensated by industry standards.

3. Unlike smaller companies, it is quite normal for executives in succesful units to get full bonuses even though the overall company showed a loss in conglomerate organizations. Even when they are all doing things right.

4. It is unlikely that any bankruptcy court would have lowered or delayed his bonus in a pure bankruptcy proceeding with the amount of assets available. Payroll almost always gets paid first.

If his business unit was profitable then it would have been an asset that the bankruptcy court would have likely sold.

And the people who actually generated the income would have still had jobs. The top executives might well have gotten contracts for a few months of transition, if that. At least, that's what's happened in the acquisitions I've been part of.

Just a few points that I think might be important

All reasonable points.

As it happens, DeSantis was in Financial Products, which was the black hole that blew the rest of AIG up. He just wasn't involved in the credit swap stuff.

He's legally entitled to his bonus. I'm just not interested in listening to him whine. In print, no less.

The sense of entitlement in the financial sector and C-level management is out of hand. These people need to get a sense of perspective, and they need to develop a sense of responsibility to all of the other people in the world who are affected by their actions.

If they fail to do so, a sense of perspective and a sense of responsibility should be imposed upon them.

Because right now they're a freaking cancer on the economy and on the body politic.

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