Newsflash


Normally I don't get quite as upset about things like this as many folks do, as I often think it is indeed a necessary part of doing business, and feel the need to weigh gut reaction populist anger with business reality. BUT, this is just beyond ridiculous: AIG is paying about $450 million to 400 workers within their derivatives unit as part of a "retention pay" scheme.

(From Bloomberg): "Jan. 27 (Bloomberg) -- American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.

About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because details of the payments were confidential. The business was responsible for about $34 billion in writedowns since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.

The payments bring to more than $1 billion the amount AIG has committed to keep its employees from leaving. The New York- based insurer in September took a federal bailout to avoid bankruptcy and is selling subsidiaries to repay the government. AIG said the program was disclosed before the government rescue, which is now valued at $150 billion.

“I was extremely disappointed -- but not surprised -- to learn that AIG will be awarding bonuses to the very division that drove the company into the ground,” said Representative Elijah Cummings , a member of the House Committee on Oversight and Government Reform, in an e-mail. AIG shouldn’t be awarding “millions of unmerited dollars to employees while at the same time begging the U.S. government for financial life support.”

Maintaining Value

Chief Executive Officer Edward Liddy , 62, has been providing data on employee compensation to Congress, saying retention programs are needed to keep the value of the units from eroding as AIG seeks buyers. The payments have drawn criticism from legislators including Cummings, 58, the Maryland Democrat who has said that the awards are unnecessary while employment markets are weak and has called for hearings into the compensation. The U.S. lost almost 2.6 million jobs in 2008.

“We adopted and disclosed this contractual retention program months before the government provided support to AIG,” said Christina Pretto , a spokeswoman for the insurer. “It was clear, given the market environment, that we would need to retain employees to manage the complex issues arising in our financial products business, which we are now unwinding.”"

Look, I understand that this was a retention program that was started before the company was in trouble, however considering that the company would be dead if it weren't for the U.S. taxpayer, the right thing to do would be to either cancel or extensively modify the program in recognition of the fact that the company is on some very thin ice.

Furthermore, it would be one thing if these were workers that were bringing in money, were doing the work that was going to save the company in the end, were productive and highly-valuable workers in a business unit that is one of the company's few bright spots, etc., etc., but that's not the case here. Instead these are the clowns that effectively destroyed the company and are responsible for about $34 billion in write downs. So I'm just not buying the CEO's excuse that the retention is needed to keep the value of the division from decreasing, nothing that they're still getting less than they would normally, etc, etc.

AIG is effectively bankrupt and without the backing of the U.S. government the employees receiving "retention pay" would all be unemployed. Personally I think they already got their retention pay in the form of not losing their jobs in the first place. All things considered AIG should've been a lot more responsible about this, and should instead be basing retention pay on some sort of merit system that would reward people (after the company recovers) for sticking around AND contributing to the future. As opposed to "here's a few million bucks, please don't quit".

Source:

Bloomberg.com: "AIG Said to Pay $450 Million to Retain Swaps Staff" -- Hugh Son January 27, 2009.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.



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Home arrow Blog arrow U.S. Marines Try to Retake Afghan Valley From Taliban
U.S. Marines Try to Retake Afghan Valley From Taliban PDF Print E-mail
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Wednesday, 01 July 2009

Published: July 1, 2009
 
PHOTO: US troops in Helmand Province, Afghanistan
U.S. Lt. Col. Christian Cabaniss speaks to his Marines at Camp Dwyer on July 1, 2009 in Helmand Province, Afghanistan.The Marines are part of a stepped up effort by American troops fighting Taliban fighters in Southern Afghanistan.
(Joe Raedle/Getty Images)
 

KABUL, Afghanistan — Almost 4,000 United States Marines, backed by helicopter gunships, pushed into the volatile Helmand River valley in southwestern Afghanistan early Thursday morning to try to take back the region from Taliban fighters whose control of poppy harvests and opium smuggling in Helmand provides major financing for the Afghan insurgency.

The Marine Expeditionary Brigade leading the operation represents a large number of the 21,000 additional troops that President Obama ordered to Afghanistan earlier this year amid rising violence and the Taliban’s increasing domination in much of the country. The operation is billed as the first major push in southern Afghanistan by the newly bolstered American force.

Helmand is one of the deadliest provinces in Afghanistan, where Taliban fighters have practiced a sleek, hit-and-run guerrilla warfare against the British forces who have been based there.

British troops in Helmand say they rarely get a clear shot at Taliban attackers, who ambush them with improvised explosive devices, rocket-propelled grenades and assault rifles. The explosive devices — some made with fertilizer distributed to Afghan farmers to wean them from opium production — are the most feared weapon. The Taliban favor ambushes in the morning and evening and do not often strike during the blazing afternoon heat.

In recent weeks some British troops have been setting up what are known as “blocking positions” on bridges over irrigation canals and at other locations, apparently to help stop the flow of insurgents during the main military operation and to establish greater security before the presidential election scheduled for August. The British forces, whose main base in Helmand is adjacent to the main Marine base, will continue to support the new operation.

The British have had too few troops to conduct full-scale counterinsurgency operations and have often relied on heavy aerial weapons, including bombs and helicopter gunships, to attack suspected fighters and their hide-outs. The strategy has alienated much of the population because of the potential for civilian deaths.

Now, the Marines say their new mission, dubbed Operation Khanjar, will include more troops and resources than ever before, as well as a commitment by the troops to live and patrol near population centers to ensure that residents are protected. More than 600 Afghan soldiers and police officers are also involved.

“What makes Operation Khanjar different from those that have occurred before is the massive size of the force introduced, the speed at which it will insert, and the fact that where we go we will stay, and where we stay, we will hold, build and work toward transition of all security responsibilities to Afghan forces,” the Marine commander in Helmand Province, Brig. Gen. Larry Nicholson, said in a statement released after the operation began.

The Marines will be pushing into areas where NATO and Afghan troops have not previously established a permanent presence. As part of the counterinsurgency strategy, the troops will meet with local leaders, help determine their needs and take a variety of actions to make towns and villages more secure, said Capt. Bill Pelletier, a spokesman for the Marines, according to The Associated Press.

“We do not want people of Helmand Province to see us as an enemy, we want to protect them from the enemy,” Captain Pelletier said, The A.P. reported.

The goal of the operation is to put pressure on the Taliban militants “and to show our commitment to the Afghan people that when we come in we are going to stay long enough to set up their own institutions,” he said.

The 21,000 additional American troops that Mr. Obama authorized after taking office in January almost precisely matches the original number of additional troops that President George W. Bush sent to Iraq two years ago. It will bring the overall American deployment in Afghanistan to about 60,000 troops. But Mr. Obama avoided calling it a surge and resisted sending the full reinforcements initially sought by military commanders.

Instead, Mr. Obama chose to re-evaluate troop levels at a series of specific moments over the next year, officials said. The Obama administration has said that the additional American commitment has three main strategies for denying havens for the Taliban and Al Qaeda: training Afghan security forces, supporting the weak central Afghan government in Kabul and securing the population.

In late March, Mr. Obama warned Congressional leaders that he would need more than the $50 billion in his budget for military operations and development efforts. Asked by lawmakers about the prospect of reconciliation with moderate members of the Taliban, officials said Mr. Obama replied that he wanted to sift out hard-core radicals from those who were fighting simply to earn money.

Eros Hoagland contributed reporting.

 



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