Why I Have No Sympathy for Jake DeSantis
On Tuesday the New York Times ran on its op-ed page the resignation letter written by Jake DeSantis, a vice president of AIG's infamous financial products division. DeSantis essentially argues that he had nothing to do with the credit default swaps that nearly brought down the company (and the world economy), and that since he agreed to work for a $1 salary plus his bonus, AIG CEO Edward Liddy should have stood up for him and "innocent" executives like him.
The lawyer in me (I should really say "recovering lawyer," since I haven't practiced in 15 years) understands his point. He contracted to work with his salary essentially being his bonus, and after fulfilling his obligations (he argues that it was a form of public service, but let's just stick to the idea that he served the company), the CEO is asking him to forgo his pay. It's an argument, in strictly letter-of-the-law terms, I could comfortably make to a judge or jury.
But as a person, I am not the least bit moved by DeSantis's point of view, because over the last several years, he has tremendously profited from a larger financial culture that is completely out of whack. Those working in the financial industry made untold sums of money from a bubble that was bound to burst, and they did so in an environment that rewarded risk with no consequences for failure.
In other words, DeSantis has become wealthy beyond his wildest dreams, with no worries about money for the rest of his life, at the expense of most Americans and the financial system as a whole, all by taking advantage of a set of rules that skewed in his favor. He profited from an industry that rejected decades of regulations and took crazy risks that a bubble could be sustained against all logic to the contrary, and that firm's could leverage themselves at unhealthy levels with no consequences. And now that some semblance of order is trying to be applied to the financial industry, with the bill being footed in billions of dollars by the American people, he has the audacity to complain that he is being treated unfairly? It's like someone finding a hole in the side of a bank vault and stopping by once a year to take millions of dollars from the structure, only to complain on the 15th trip when the hole has been sealed up.
DeSantis writes in his resignation letter that his bonus amounted to $742,006.40 after taxes. In the letter, he acknowledges that he and Liddy "have never met or spoken to each other," so it's clear that DeSantis was not at the most senior levels of management, which would lead one to believe that there are several (even many) other AIG employees at DeSantis's level, making this kind of money. All for a company that has required hundreds of billions of dollars from the U.S. government to survive.
My point in listing DeSantis's bloated salary isn't, as my friends on the right will probably immediately accuse me of doing, an effort to attack wealth or wealth creation. Rather, my quarrel with DeSantis's letter is that it represents an unwillingness to confront the culture that not only caused the current financial collapse, but that will prevent true recovery if it's not addressed.
It seems that those in the upper reaches of the financial industry would prefer to completely ignore the fact that a combination of greed, a system that encouraged risk for short-term profits without consequences, and a total absence of regulation has created a global financial meltdown. From unemployment, to a lack of available credit, to the plummeting of the stock market, the recklessness of financial institutions has created massive damage. The current administration has had to contend with the fallout from this damage, and there is no easy answer in sight.
You would think that those who created this mess would have some humility. But you would be wrong. DeSantis's letter is just one example. In a front-page New York Times article on Monday discussing the administration's attempts to get private equity firms and hedge funds to buy into Treasury secretary Timothy Geithner's new plan to purchase toxic assets from banks, the chief executive of a "major investment firm" is quoted as saying,
"The deal is good, but it's not worth it if I'm buying myself into a retroactive tax or a Congressional hearing."The article notes that
"some executives at private equity firms and hedge funds, who were briefed on the plan Sunday afternoon, are anxious about the recent uproar over millions of dollars in bonus payments made to executives of (AIG)."When I read observations like these, I just cannot believe that these people are so blind as to what has happened to the financial industry in the last six months. I know these individuals profited from a bubble, but apparently they are also living in one. And it makes me feel like solving the current difficult problems will be even harder, because we are not learning the lessons of how we got here in the first place.
A plan to rescue the banks without addressing and changing the compensation culture on Wall Street is like treating a cancer patient's symptoms without eradicating the tumors. The relief will be only temporary.
As President Obama noted in his 60 Minutes interview on Sunday:
"You know, you look at how finance used to operate just 20 years ago, or 25 years ago. People, if you went into -- investment banking, you were making 20 times what a teacher made. You weren't making 200 times what a teacher made."
When the American public was outraged over the AIG bonuses last week, there was incredulity in some quarters. But while the bonuses are a drop in the bucket relative to the overall billions given to the company by the government, the distress and anger voiced by the American people was about more than just AIG. The rage comes from the fact that a small group of people in the financial industry (relative to the population as a whole) brought down the economy with their greed, and, more importantly, have failed to take any responsibility for their industry's role in the debacle. That was what the AIG bonuses stood for to a lot of people. There was outrage that the executives in this industry had not learned their lesson, that they wanted the gravy train to keep rolling, despite the calamity that had occurred.
Even if Geithner's plan rehabilitates the banks and restores a functioning financial system, it will be for naught if the same compensation-frenzied culture exists in the industry, since it will mean that it's only a matter of time before the system is threatened again. And based on the statements of the anonymous investment firm CEO quoted in the Times and DeSantis, it doesn't look like financial executives are ready to adjust their expectations, despite the damage caused by greed run amok.
That is why DeSantis's resignation letter failed to stir any sympathy in me. President's Obama's comment about the escalation of financial executive compensation is far more compelling. If DeSantis doesn't want to be a part of the solution, if he wants to hold onto a system in which it is reasonable to pay him (and, presumably, many others) $742,006.40 after taxes, by a company accepting hundreds of billions from the federal government, I can only come to the conclusion that he doesn't understand where we need to go. He is part of the problem, not the solution. Good riddance to him, and let the door hit him on the butt on the way out. DeSantis may have a valid contract, but it's a product of a corrupt system. And it's time for the system to change, if we truly want to rebuild the nation's financial institutions and economy.
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Jake DeSantis is my son-in-law. He's an honorable man and a patriotic American. In spite of numerous death threats at work and, as of March 31, to my daughter at their home, he's still on the job, trying desperately to unwind intricate, complicated business contracts -- all over the world -- worth $1.6 trillion dollars. He has his finger in the dike! He could leave, with the dollar he got for the past 12 months of work, and change his name (thanks to the death threats!!!) but he's trying to DO THE RIGHT THING. If he and the other dedicated employees of AIG succeed, the company will repay the bailout money. If they are all chased away by the mob, the collapse of banks around the world will be cataclysmic. PLEASE, stop the demonizing. We all want someone to blame. It's a human trait. But it's not helping get our economy (and the world's economy) out of the maelstrom that we are ALL in.
American CEOs are a bunch of SCAMMERS who fleece American people and
steal as much money as possible while crashing their own corporations.
Do they go to jail for this?
Nope.
They get paid HUGE BONUSES, then keep hanging around for more, more, more...
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
that Americans are STUPID ENOUGH TO PAY OUT.
It's the same "AMERICAN DISEASE" as voting twice for Bush-Cheney. UGH.
GROW UP AMERICA!
The guy pretty much said that because he was not personally responsible for the collapse of AIG that he deserved his bonus. His opinion piece was stomach churning in its refusal to acknowledge responsibility. No one cares except those like him who serve to benefit from the corrupt system they benefit from.
Cont
Remember this, while you are slaving away on the phones, lying to the customers that "we used to be AIG, but now we're not" your income is less and executives still get bonuses. While you are lying to the customers about why their premiums have been raised yet again, executives are out on retreats. And yet they come to you and ask "your tone sounded really somber and flat on the phone today, anything wrong?" Well it's kind of hard to be energetic when 52 former executives receive retention bonuses of more than $1,000,000 and we are left to answer calls from angry customers as to why AIG is stealing taxpayer dollars.
Our old company values of People, Customer Focus, Performance, Integrity, Respect, and Entrepreneurship have been replaced by GREED. So since we are continually told "you are the voice of the customer" SPEAK UP! What is the worst case scenario? CEO forces the sale of the company under the guise of "Expansion, Restructuring and Re-branding" only to walk out the door with $40,000,000 a la Bruce Marlow or company bankruptcy? For Mr. Liddy that would be about $165,000,000 plus his $1 annual salary, for us the lumpen........... nothing.
I would say call your congressman, but unfortunately many of them have already taken campaign money from, guess who? That’s right AIG, see everybody gets paid for doing nothing, except for you and me.
Sincerely,
Bottom Of The Food Chain
This a letter sent to customer service employees of AIG on March 27, 2009:
I am an AIG employee within the Personal Auto Group line, in November 2008 we were advised by management that all lower level employees (Supervisor and below) would lose part or all of our shift differential beginning January 1, 2009 which for some amounts to a loss of 5-20% in income, depending upon what schedule we work. The attitude of management at the time of the announcement was "be thankful we still have our jobs", AIG executives are the biggest bunch of hypocrites ever.
Our company newsletter is called "Seize the Future" for a reason, to give select individuals bonuses for playing golf on a work day and brown nosing is appalling. The average employee who actually performs the lion's share of work within our ranks is lucky to receive a 3-4% merit increase in any given year. Remember the good ol' days when we got $1.83 after taxes for a $5 referral and an ice cream sandwich on Friday?
I challenge every non-exempt AIG employee to exercise your rights by submitting a complaint to your states Attorney General’s Office or Department of Labor, do not sit by and allow Ed "Dollar Bill" Liddy and his Band of Brothers to deceive you any further.
One has to agree with Mr. Bard's comment: "It's an argument, in strictly letter-of-the-law terms, I could comfortably make to a judge or jury. But as a person, I am not the least bit moved by DeSantis's point of view, ..."
As a filmaker, he will remember the following dialogue from 1970ish movie "Love Story" (based on Erich Segal's book of the same name):
"Do you have The Waning of the Middle Ages?" Oliver Barrett IV (Harvard undergrad at the check out desk of the Radcliffe Library)
"Do you have your own library?" Jennifer Cavilleri (Radcliffe music major manning the desk)
"Listen, Harvard is allowed to use the Radcliffe library." OB IV
"I'm not talking legality, Preppie, I'm talking ethics. You guys have five million books. We have a few lousy thousand." JC
There then is the ENTIRE POINT.
Love is......never having to read your commented again, Ms. de Menses.
Mr. Bard: thank you. agree with everything you had to say about another whiner from Wall Street. Maybe I would have felt some "sympathy" for Mr. Bard had he shown some compassion for the thousands of folks who got hoodwinked by the scheming and gambling these companies did to put money in Mr. DeSantis's pockets and others like him. I'm curious as to what Mr. DeSantis's real salary was that he agreed to take the "bonus" and draw the $1 salary.
And by the way to those who are outraged that his "contract" was not honored - it was, he could have walked away with the bonus and said nothing. It's the proverbial - "it was all about Jake DeSantis" - screw the American public that made it possible for Mr. DeSantis to even remain at AIG (remember they were teetering on collapse.)
Yeah, it hit me the same way.
Just couldn't muster any sympathy for someone that is basically set for life at an income I could never dream of. His "bonus" after taxes is more than double what my house is worth (now).
He can cry all he wants in his bloated MacMansion and his servants can wipe up his tears from the floor.
In the meantime I'm (lucky to be) working full time with no retirement in sight for a lot less than his bonus. I get a fixed salary. No bonus. Nada. So yeah. I'm afraid no sympathy from me.
One more thing that really upsets about Jake, he is acting as if by nobly donating $750K to charity he really isn't going to get the money. He is getting the money and is going to receive all the accolades afforded to big donors.
I like buying girl scout cookies for two reasons, I get a nice warm feeling for supporting the scouts, and the cookies are good. I believe there is a girl scout cookie factor in any donation.
By the way, when the US Government infused cash into your company, all AIG contracts effectively became renegotiated.
It kills me how this guy wants sympathy for:
- Being part of the company that did OK. As if people are only compensated on how their department does instead of how healthy the whole company is.
- Working hard. As if he is the only person in the USA who works 10-14 hour days. Hey buddy, most Americans who work the same kind of hours or more would be happy to take home 1% of your bonus or $75K per year. So cry me a river.
- Not being the direct cause of the problem. Well, join the fricken club. Most of us didn't directly cause the economy to tank but we are all living with the consequences.
- Only taking $1 salary for the past year. If he couldn't afford it, he wouldn't do it. How many people do you know could live on $1 yearly salary and still be OK?
- For donating his 3/4 million dollar "bonus" to charity. First of all, people are only supposed to get bonuses if their company does well. Otherwise that's really his salary and his company is guilty of financial books cooking.
- Second, see comment above. No one is holding a gun to his head to get rid of the money. Plus, would Jake DeSantis have given dime 1 to charity if he wasn't under a microscope?
Misplaced decimal.
take home 1% of your bonus or $75K per year
should be
take home 10% of your bonus or about $75K per year
Think of the outrage we don't read about of millions of hardworking americans that are being hurt by obscene credit card interest rates.
The best part, all those bonuses, all the salaries that are 300 times what the average worker makes, all of it is a tax deduction for the companies!!!
Because salary and bonuses are an "expense," paying them reduces the profit the company is taxed on. But there is an easy fix. Max out the deductable portion of salary and bonuses per employee at the US President's salary. If an company chooses to pay someone more than the President of the USA gets, the portion above that is not an expense for tax laws, meaning the company cannot get us to pay 35% of the salary.
The best part is that this number would stick out like a sore thumb on SEC filings (if done right) so that every stockholder could see what portion of the company's income was taken up by excessive salaries. Wanna bet that such a figure would not affect stock prices?
Doing this small change, and doing it right, could finally put some downward pressure on bloated executive salaries.
How much he gets paid for what he does is not the issue. That's another issue. The issue is that he was contracted to do a job for a certain salary. They may call it a bonus but if it was not tied to performance (which it was apparently not) then it is a salary. Whether he was involved in the default swaps or not he deserved to be paid, cause that how the system works. You say because he works for a corrupt system then he has no right to the money. What about the janitor at AIG? And the secretaries? They work for that same corrupt system. Do they deserved to be paid?
Tell that to the auto workers, the teachers, the firefighters, the police officers and all of the other people out there who may have had a contract but are being told "Tough luck, pal."
How much to you want to bet that instead of a bonus, these same executives will now be offered $0 stock options or 0% "loans" that never need repayment. There are a million ways that executives get "paid" that don't involve salary or bonuses; that most certainly is not the case for the secretary, the janitor, equity trader or sales person. All of them work hard too, but time and again when the downturn hits, it's "Well, tough luck but things will get better... Hope the line at the soup kitchen isn't too long..."
Give me a break. By his own admission in his letter, he isn't starving or likely to lose his house. Boy to these people like to howl when the shoe is on the other foot....
All those people(auto workers, firefighters, etc) with contracts got paid for what they did up to that point. They did not get paid going forward which of course sucks. But they did not work for 9 months with no pay then get told they weren't going to be paid.
Please Mr. Bard -- Tell to 2 things. With all your great wisdom and ability to be indignant towards folks at AIG who weren't part of the derivatives mess that became a sinkhole:
1. Since we clearly can't trust the market...then who should set wages and prices. Is the likes of Barney Frank and Chris Dodd really the answer?
2. While it may be great fodder for bloggers such as yourself to entertain the public with your righteous indignation for these finance types that didn't create anything and got paid well.....when is the American public going to take some responsibility for abusing the leverage that the banks offered. This bubble took place because Wall Street found new ways outside of Fed and Bank Regulation to create credit -- then since there was an oversupply of credit at existing terms -- everybody took on more credit than they should have...many were very irresponsible....not just the finance guys that thought the bubble would continue...but the home buyers, the condo builders, most of California, etc.....You, Obama, and the US Congress may find it entertaining and valuable to deflect responsibility onto Wall Street -- we always love a good culprit in our stories, but the real culprit is the RELATIVE GREED on all levels that thought they could buy things on credit for ever. This is not going to get better until we all start taking responsibility -- and you are not helping....but then again your job is to entertain...not lead!!
People will misbehave. That's why we had regulation until the notion of "free-markets" took over and the protections were evicerated (see Gramm, Leach, Bliley).
If I understand you correctly, it's like you're saying, "criminals should learn to be less criminal."
We have laws and preventative measures for a reason.
That's absurd....
1. Nobody broke laws -- if they did -- prosecute them -- don't abuse the tax code to demonize and moralize -- who made you King??
2. The Greed was not just on Wall Street -- they just preyed on our individual greed.
3. With the exception of Citicorp -- thanks to Mr Rubin -- non-of the banks are in trouble because of the elimination of the Depression era regulatory rules, i.e Glass-Steagle;
4. Bank that are in trouble were the ones that did plain old mortgages with relaxed terms and conditions and then held onto them, they got hurt again when the restricted capital they held -- FANNIE MAE Preferred turned to toast when the overleveraged Fannie 30-1 -- got put into conservatorship.
Interesting analogy of yours at the end....your words not mine calling the average individual a criminal...I just think that we need to take personal responsibility for our role in this.....Greed is a relative thing...Yes. Wall Street was greedy -- so is the guy that buys a house on terms that he knows he can't meet if anything bad happens; so is the employee of GM who demands to make 38% more than the workers at Honda even though its running his company into bankruptcy...so are the folks on SS and Medicare that refuse us to make a reasonable fix combining raise taxes and lowering benefits.....
"then since there was an oversupply of credit at existing terms -- everybody took on more credit than they should have"
I'm sorry, but that's not true. EVERYBODY didn't do anything. I'm not taking responsibility for something that I didn't do. I, and people like me, know better and don't even have credit cards. Unfortunately, we are the minority, but we have to ride out the storm just like everyone else. Besides, the writer is only expressing how millions of Americans feel, especially those of us who really had nothing to do with this mess!
The guys who pick up my trash "work hard", and certainly do more to improve the human condition than the pigs in the financial industry. Where is the equity?
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