Action on AIG Unit May Cost Taxpayers

Wall Street Journal ^ | April 13, 2009 | Liam Pleven and Randall Smith

[reaganaut1]

American International Group Inc.'s financial-products unit is on track to wind down by year end, but the controversy over bonuses that led to the loss of some key people may have made the process more costly for taxpayers, the unit's head said.

AIG Financial Products head Gerry Pasciucco, in his first extensive public interview since the bonus dustup last month, said 20 of the unit's 370 employees quit amid the controversy, in which taxpayers and members of Congress decried retention payments to employees at the unit that helped topple the big insurer.

While the drama over the $450 million bonus program, which reached a fevered pitch last month in Washington during testimony of AIG Chief Executive Edward Liddy, has faded, the financial-products staff still needs "certainty" about compensation, Mr. Pasciucco says, but the situation "seems to have stabilized."

AIG Financial Products is the unit largely responsible for the parent company's collapse. It sold billions of dollars of guarantees on complicated securities tied to mortgages, and those guarantees pushed the company into the arms of the government. AIG told the Treasury in March that the unit's overall portfolio stood at $1.6 trillion and represented "significant risk."

"Failure to pay the required retention payments, therefore, could have very significant business ramifications" as AIG needed the employees to complete the job, the company said. AIG paid the bonuses, but Mr. Liddy asked some employees to give at least some of the money back voluntarily.

[reaganaut1]

The government should not have propped up AIG in the first place. Once it decided to do so and enter into contracts with AIG employees to stay and wind down the business, Congress and the Administration should not have acted shocked when people were paid under the contracts.

[nyconse]

I believe this sort of threat is knows on the street as black mail...these arrogant #$%$### are insufferable...just infuriating.

[mnehring]

The government should not have propped up AIG in the first place.

Most government pensions are in AIG, they will never let it go under.

[TYVets]

,,,AIG employees to stay and wind down the business,

Management contracts that the government does not pay could get expensive if they wind up as class act law suits or individual law suits.

On one of the earlier threads it was disclosed that in Connecticut if you loose you pay double.

[devane617]

The Gov (Congress) is heavely invested in AIG thus it will not BK. AIG is here to stay, because many in congress want their money back. If BK, shrs become worthless.

[Sarajevo]

20 of the unit's 370 employees quit

If AIG can't get by with a 7-8% loss of personnel, maybe they should fire some managers.