Monday, March 16, 2009

AIG Shows What Is Wrong With Wall Street

Insurance giant American International Group or AIG has now received four bailouts from the federal government. The total tab for these bailouts, so far, to US taxpayers is in excess of $170 billion!

The entirety of the losses from AIG were generated by their financial products unit. The geniuses at this unit are the people who got involved with credit default swaps (CDS) and other exotic derivative instruments and which has put AIG in such dire straits.

These incompetents were clever though and clever enough to have their contracts pay them $220 million in retention pay for 2008. And they have more bonuses coming to them in 2009 and 2010. Talk about rewarding incompetence!

Not one of these people is thinking of giving back their outrageous bonus because of gross incompetence. I recently wrote an article for the Seeking Alpha site about when bad times hit, why in the world should people in the financial industry be treated differently than any other industry.

Executives at AIG and other Wall Street firms say that lavish bonuses are needed to retain talent. I guess the word "talent" has been re-defined to mean people that are incompetent and/or criminals and that have almost destroyed the global economic system.

You do not see lavish bonuses needed in any other industry to retain talent. These other industries use promotions and other similar ways to reward employees. But not Wall Street.

The response to my article from some people who work in the industry that commented on my article? "We are different, we are smarter, we are better than people who work in other industries, we deserve every penny."

That is one major problem with Wall Street that has to be pulled out by the roots - that sense of entitlement and the sense that they are better than other Americans.

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