Thursday, May 21, 2009

If I were Edward Liddy, I would have quit long before today

From the New York Times:

Mr. Liddy emerged from retirement to take over A.I.G. immediately after the bailout last September and has worked on a voluntary basis during tough times. He has struggled to execute a plan to sell off A.I.G.’s operating units to raise enough money to pay back the Fed, and been grilled by hostile members of Congress who have sometimes seemed to blame him for the company’s near-collapse.

I've talked about this before - on March 19, as a matter of fact. Let me recap what I said at the time of Liddy's testimony before the House:

First, as I've noted previously, the former management at AIG made a decision that it needed to ensure that certain key employees were given incentives to remain with the firm, and therefore entered into contractual agreements with these employees.

Second, both before and during the hearings Barney Frank was doing his best to imitate Joseph McCarthy, demanding that Liddy reveal the names of all of the people who received the bonuses, and following up his demand with the "we have ways of making you talk" threat of a subpoena. This morning, Bill Handel of KFI played the audio of Liddy's response, in which we basically read two of the many death threats against AIG employees and their families, and then stated that he would only release those names to the subcommittee if the names would be kept completely confidential.

Third, various Congresspeople continue to find any way possible to negate the contractual agreement between AIG and its employees. The latest effort comes from Representative Charles Rangel, who has introduced a bill to tax certain compensation (in other words, the AIG retention payments) up the hilt to ensure that the employees get little, if anything. As Mike Dunford notes, Rangel is going against his own previous statements on the matter. Previously, Rangel had said that the tax code is not "a political weapon." Apparently he changed his mind due to public uproar.

Basically, Liddy voluntarily took a job in which his "Board of Directors" was the U.S. Congress. And the U.S. Congress, Democratic and Republican alike (I talked about Charles Grassley in a separate post on March 17), are not the best Board of Directors for a company:

A Congressperson's prime goal in life is not to make AIG financially viable. A Congressperon's goal in life is to get re-elected. And if the only way to get re-elected is to screw the employees of the firm you are managing, then so be it.

In fact, I offered a prediction back in March, and we'll see whether the first part of it comes to pass (the last part won't come to pass now).

Just wait - a few months from now, some piece of small print will be issued by someone in Congress as quietly as possible, and it will say something like this:

"At this point, one of the chief barriers to the recovery of AIG is the lack of accumulated financial expertise at the company. Because of the departures of key employees over the last few months, and the prospect of losing other key employees in the future, AIG's continued viability is not assured."

Should someone catch this piece of fine print, then the Franks, Grassleys, and Rangels of the world will then begin to harrass Edward Liddy, asking him why he didn't do anything to retain key employees.

Well, Liddy must have read my advice to every AIG employee to leave the company before Congress mismanages it into the ground, and he's decided to take off himself. Good for him - he tried to help out and got harrassed by the grandstanders.

Let Frank, Rangel, and Grassley run A.I.G. directly, and we'll see how good THEY do.
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