March 2009

Mr. Jake DeSantis, an Exec. VP at A.I.G. has decided to quit, and explains himself in the Op-Ed pages of NYTimes. He admits to recieving $742,000 after taxes as a bonus payment per contracted terms. He will donate all this money “directly to organizations that are helping people who are suffering from the global downturn.” He admits no guilt; he worked hard and deserves the money; he too–like the rest of us–is a victim of the credit default swap creators in his own Financial Products sector. He can’t work in this environment, and he has been betrayed by people like the CEO Mr. Liddy and the Congress who have let him down. He is being persecuted by the attorneys general of CT and NY, and now just wants to move on with his life.

This is exactly the sort of thing we should like to see from such overpaid financial sector executives amid this economic fallout. I say overpaid: De Santis admits as much:

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

I don’t don’t doubt that Mr. DeSantis and others in his profession/social class/tax bracket “work hard” (he says 10, 12, 14 hrs a day). But the real point is: does the sort of work that Mr. DeSantis does merit hundreds or thousands of times the rate of compensation that the rest of the hardworking world makes for their blood, sweat, time and tears? Let’s do a few comparisons:

$742,000 = $30,000 of annual take-home pay (let’s say) for ~25 workers

= the total price for 4+ good modest homes in rural/suburban America (something that most people work 30 years to pay off)

= A full year of mortgage payments for somewhere between ~500-750 of similar modest family homes

= The total annual income of 2033 of those millions of people who we are always told live on $1 / day

Mr. DeSantis admits no guilt–in causing the mess we are now in, that is. But his admission that his profession is “overpaid” is also an admission of guilt by complicity in a radically unjust economic system. His noble act of giving away his “hard-earned” bonus (again, I don’t doubt that he’s worked hard–though being a pencil-pushing desk-sitter myself, I think I understand the qualitative difference between the sort of work we do and the kind my father, a commercial cabinet builder, does)–more or less concedes that he is driven by some sense of guilt or shame at the unfair rewards that his profession lavishes upon itself to the impoverishment of millions or billions of other human beings around the world. But as he says, in his brief rags to riches bio, through hard work and talent (and the meritocratic generosity of academic institutions like M.I.T.), “I had fulfilled my American dream.” It’s the American dream that we can rise through hard work–and unfair rewards–to tower over others. We all share that dream in some measure; it’s what gets us up in the morning; and alas it seems now to be what we are all being forced to wake up from.


“AIG could have decided to keep the money, but determined it might then have had to pay $1 billion in damages in legal fees and lawsuits, more than double what it was contractually obligated to pay the division’s employees in bonuses. It also figured it would have lost the quants, something Liddy and others felt they couldn’t risk.

The beleaguered company believes AIG’s quants, who created the complicated credit swap defaults that got much of Wall Street into the financial crisis, are the only ones who can unwind them. If they leave, it could make today’s crisis worse.” (The HILL)

I’ve been saying to myself over the last couple days, “Contractual obligations? Why don’t they just fire these guys? There’s no contractual obligation to keep them employed!” But now it makes perfect sense. It’d be like hiring someone to build you a really complicated bomb, then when they’ve built it and the clock is ticking down you wish you’d never hired them, but now the factory is going to explode if you don’t pay them to dismantle the bomb, since they’re the only ones who know how it works. It’s called extortion. Or the end-game of a devil’s bargain.

In any case, I don’t believe the hype. They should still be fired. There are other people who can figure out the accounting. And whatever is so secretive or arcane that you need the “quants” to figure it out, use subpoena power to discover it.