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The Biz Roundup March 25

AIG is the gift that just keeps giving, isn’t it?

Jake DeSantis, a manager in AIG’s Financial Products unit, said AIG “accelerated by three months [the payment of] more than a quarter” of the $165m of retention bonuses due to the division’s employees.

“That action signified to us your support and was hardly something that one would do if he truly found the contracts ‘distasteful’,” Mr DeSantis wrote to Edward Liddy, AIG’s government-appointed chief executive, in a letter first published in The New York Times. Mr Liddy earlier called the bonuses “distasteful” in an appearance in the House of Representatives.

(“Letter reveals AIG paid bonuses early,” Financial Times, March 25) The letter can be found here. It just goes to show the value of thinking about risk, and I mean really thinking. AIG-FP got into trouble because everyone all the way to the top weren’t properly managing risk. AIG got into trouble over the bonuses because no-one in an organization of really smart people thought about the political risks of these bonuses and began managing that risk early. Like, for instance, deferring those bonuses until after taxpayer money had been returned. Or announcing the bonuses months in advance and stating explicitly that they were going to people who were helping to sell off the toxic assets, not the pencil-necks who created them.


Speaking of bonuses, Ken Lewis really, really, really wans his.

Bank of America Corp. Chief Executive Kenneth D. Lewis said Tuesday that he wanted to start repaying $45 billion in federal bailout funds next month, after the government’s “stress test” of his bank, and to give back the remainder as soon as the nation’s wobbly financial system is stabilized.

(“BofA chief Ken Lewis says he plans to repay bailout funds soon,” Los Angeles Times, March 25) Of course, this may just be a head feint since most of the world outside of Charlotte is convinced BofA is next in line for a crash. Now, I will admit, if you had bought BofA stock at the beginning of the month and sold it today, you would have nearly doubled your money.


It sucks to be California.

The forecasters said the state’s unemployment rate will reach 11.7 percent this fall, and 11.9 percent in the second quarter of 2010. Unemployment will average 11 percent this year and 11.7 percent next year . . .

“California is in the midst of its worst recession since the 1930s,” said Jeff Michael, director of University of the Pacific’s Business Forecasting Center. “The state will lose nearly a million jobs before it ends, and no area of the economy is being spared.”

(“State’s economy to see longer recession,” San Jose Mercury News, March 25) Before any more pink slips get handed out, we need to give the next ones to Governor Schwarzenegger and the whole gaggle of dysfunctional legislators.

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