A “bankster” speaks

This isn’t the story about the AIG bonuses we’ve been hearing from Andrew Cuomo.

One of the AIG “bonus babies,” Jake DeSantis, had an op-ed in Tuesday’s New York Times that tells a different story about at least some of those bonuses than the one we’ve been hearing recently.

The narrative that has been going around is that a bunch of the folks who dreamed up the credit-default swaps that put AIG under had arranged “incentive” contracts for themselves, after it was already clear that things were heading south, that guaranteed them at least the same bonuses for 2008 that they took home for the boom year of 2007, and that some of them had pocketed this year’s bonuses on the way out the door, making nonsense of the notion that the bonuses were “retention payments.”

That may be true, or it may be true in some cases. But DeSantis tells a different story about himself:

* He worked in the Financial Products group, but never had anything to do with Credit Default Swaps.

* His side of the business consistenty made money.

* He had a bunch of his deferred compensation tied up in AIG Financial Products funds, and lost all of that money.

* He agreed to take a nominal dollar in salary to stay around and help with the workout, on the promise that the bonus part of his contract would be honored.

* He has contributed to the unwinding of AIG, including the sale of the commodities business to UBS.

* He doesn’t think it right that he is being held up to public scorn, with no support from his bosses.

I never heard of Jake DeSantis and have no particular reason to be confident that he’s telling the truth. But if he is, I think he has a reasonable complaint.

Yes, it’s hard to feel sorry for someone complainaing about having to give back a million-dollar paycheck for a single year. And it’s quite possible that some of the people in AIG-FP were ripping off in exactly the way that’s been described. The people who got big bonuses in previous years based on running the Credit Default Swaps business clearly didn’t earn that money, and it’s pretty outrageous for them to insist on continuing to collect from the corpse of the company they killed.

But it doesn’t sound to me as if this particular person did anything wrong. Think about that the next time you read a rant about how the “banksters” are holding up the country for ransom. There’s a reason for that constitutional ban on bills of attainder.

Update No, I don’t feel sorry for DeSantis financially. He won’t starve. And in general I agree with the claim that the financial services sector, over the past decade, has been paying out excessive incomes to people who, as it turned out, weren’t spinning gold from straw after all, and that both the incomes and the number of people drawing them need to shrink.

But if this account is correct, the people who have been comparing the AIG bonus-getters to terrorists with dynamite belts around their waists threatening to blow up the economy unless they get paid off have been slinging that slur at some people who didn’t deserve it. And we’re now in a phase where both journalists and polticians are feeding the frenzy of the lynch mob without pausing to make any distinctions. This will not be an incident to look back on with pride.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com