“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.

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