Dear A.I.G., I Quit! (Part 1 of 2)

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

Page 2

Those Who Don't Learn From History .... Oh Boy ...

The New Deal
Obama keeps talking about the New Deal as if it was such a great period of prosperity, but the truth is, all that government spending back in the 30's just led to a lot of instability in the financial markets. Instability led to higher interest rates, which then led to the suffocating of the private sector.
Andrew Wilson wrote in the Wall Street Journal,

" the Hoover and Roosevelt administrations -- in disregarding market signals at every turn -- were jointly responsible for turning a (short term) panic into the worst depression of modern times. As late as 1938, after almost a decade of governmental "pump priming," almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth"

That doesn't sound to me like the fantastic Economic Boom I learned about in my history class? They made it sound like it was all bubble gum and lollipops.
Think about this for a moment. When was the last time you went to get a Driver's license office or to the Court house, the Social Security Administration or ANY government run facility and thought to yourself, "Wow, this is a really efficient operation. Everything makes so much sense!" All of us know, instinctively that Government is inefficient and does things in irrational and crazy ways, but now we're going to hand them Trillions of OUR dollars to spend when historically, we know that this has never, ever worked? It's because of this that I support the "Personal Responsibility Act of No Socialism" Our solution to the financial crisis. Call me a dreamer, but who knows. It could happen!
Of course, there's a lot of nay sayers out there that say that us on the "Right Wing" are revisionist trying to re-write history. That we somehow want to besmirch the gains made by the New Deal, however, the government's own statistics, you can find the series in Historical Statistics of the United States here (big PDF) . This isn't "made up stuff, this is government statistics. Historical FACT.
Truth is the "New Deal" didn't pull this country out of the Depression, World War II Did. At the time the war had broken out, we still had fantastic levels of unemployment in this country, so why on earth would we NOT learn from our history and repeat the same exact mistakes of the past?

Japan's Lost Decade
The President spoke last night in his speech about Japan and the "Lost Decade" where he believes the Government didn't act, and that's why they ended up in the situation that they are still in to this day. Let's take a trip down memory lane, so we can see the differences between what the U.S. did during the last financial crisis, and what Japan did that led to their "Lost Decade".
For those of you you may remember, we had a massive stock market crash in 1987, that was very similar to what happened in 2008. Back then, the DOW plunged by 22.6% in a SINGLE Day! Keep in mind that the "Biggest one day point loss ever" of 778 Points on Sept. 29th 2008 AND the "Second Biggest one day point loss ever" of 733 points on Oct. 15th COMBINED was LESS than 20%!
With this in mind, back then most world economists said that we would end up in the next 5 years with a period similar to the Great Depression. Luckily for us, Reagan didn't listen to all this fear mongering and kept a steady hand, did nothing but lower interest rates to maintain liquidity and tighten some regulations on banks. Unsound companies were allowed to fail because stinking rotting corpses of companies that can't survive were NOT propped up. Within a year, the economy was back on track and growing again.
Japan, instead chose a different path. A path that included nearly nationalizing banks. A path that included the Government pumping Trillions of Yen into the Markets. A path that included "Propping up" Dead companies that only prolonged the pain. Here's a great article (reprinted from the WSJ) that highlights 6 lessons that we learned from Japan's "Lost Decade" and unfortunately, it looks like we're set to repeat those same mistakes with this bill. Especially of Interest is Lesson's 4 & 5.

• Lesson Four: Fiscal policy isn't effective: Japanese government repeated trying to rescue the economy by "emergency fiscal stimulus", which resulted only as the vast amount of government deficit, 180% of GDP. As many banks and companies were insolvent, the money supplied by the government was used to make up zombie banks and companies who looked alive but in fact dead.
  
  
• Lesson Five: Until the focus of disease is removed by surgery, no macroeconomic medicine will be effective. In 2002, an economist Heizo Takenaka became the Minister in charge of Economy and Finance. He changed the "soft landing policy" of predecessors and said "I don't think there are too big banks to fail" in an interview with Newsweek. It aroused a panic among bankers, so they stopped postponing the disposal of bad loans.

Yet Lesson 4, is EXACTLY what this stimulus bill is all about, and Lesson 5, well that's the good ol' TARP program right? Some banks are just "Too Big to Fail".

There is a reason that after FDR died, the constitution was amended to not allow anyone to perpetually run for the office of the presidency. Congress knew that FDR was a disaster, but nostalgia from the "War Days" didn't allow a really fair look at his entire administration. Circumstances from that era prevented any kind of opposition, it almost looked un-American to oppose FDR. The insiders knew though, and that is why they passed that law so something like this would never happen again.

It's time to Act. Do your part to stop this MASSIVE Pork bill from happening. It's not too late!