The Washington Post published an op-ed today by Martin Feldstein. Feldstein explains how Obama's proposed limitation on the deductibility of charitable contributions by upper-income taxpayers is a horrible idea. He's identified as "an economics professor at Harvard University [and] president emeritus of the National Bureau of Economic Research."
One affiliation the Post left out is that Martin Feldstein is a longtime member of AIG's Board of Directors. He's also a member of the board's Finance Committee.
Read the rest for the second punchline. And then read this petulant whine from someone who made a $750,000 bonus from AIGFP and feels so hurt and betrayed by all the mean things that are being said about him that he's going to quit and give his bonus to charity. No word about whether he thinks he should get his charitable deduction, but I'll bet he'll scream bloody murder if he doesn't get it.
This person said that despite the fact that he worked for AIGFP he was in the commodities division and had nothing to do with the CDOs and is, therefore, blameless. And for all I know, that's true. But what he seems not to want to recognize is that the whole company would have gone down without the government intervening and he would have been left with nothing. It happens every day. Bonus contracts with bankrupt companies really aren't worth the paper they're printed on.
This crisis in AIG required that people such as this, who admittedly made a ton of money over the years, work for very little for a time until they could get the company back on its feet. They might not be rewarded to the tune of 750 thousand dollars for a years work, but if they made arrangements for deferred compensation down the road, after the taxpayers were repaid, I have little doubt they would have made out very well in the long run. Instead they are having a public tantrum at a time when they should be keeping the lowest possible profile. (Why are we supposed to believe these people are so smart that thes ecompanies can't do without them, again? I keep forgetting.)I mentioned narcissism in passing yesterday and got an interesting email from journalist and author Tim Hall, who wrote an extremely interesting article for the NY Press on the subject during the Enron scandal. He explains what Narcissistic Personality Disorder is and interviews a well known expert on the subject:
I’m very interested in the concept of corporate narcissism. Many companies are successful without also engaging in criminal behavior. In your opinion, how much of the recent wave of business scandals in the U.S. is attributable to a corporate "culture of narcissism," and how much to a number of very misguided—and possibly narcissistic—individuals?
The "few rotten apples" theory ignores the fact that affairs like Enron and WorldCom were not isolated incidents—nor were they conducted conspiratorially and surreptitiously. What is now conveniently labeled "misconduct" was an open secret. Information—albeit often relegated to footnotes—was available. The charismatic malignant narcissists who headed these corporations were cheered on by investors—small and institutional alike. Their grandiose fantasies were construed as visionary. Their sense of entitlement—never commensurate with their actual achievements—was tolerated forgivingly. Their blatant exploitation of co-workers and stakeholders was part of the ethos of the virile Anglo-Saxon, natural selection, can-do, dare-do version of capitalism. Everyone colluded in this mass psychosis. There are no victims here—only scapegoats.
I would have to say that this particular virus is contagious among the ruling class in general.
In the late 1990s, you couldn’t swing a dead cat on lower Broadway without hitting a dozen Internet "visionaries," touting companies that then went bankrupt. These individuals seemed to literally come out of nowhere—suddenly everybody was a Genius with a Big Idea. Do you have any thoughts on whether certain business cycles (like the Internet boom) actually create narcissists? Or do they simply attract preexisting narcissists looking for quick and easy wealth?
The latter. Pathological (or malignant) narcissism is the outcome of a confluence of an appropriate genetic predisposition and early childhood abuse by role models, caretakers or peers. It is ubiquitous, because every human being—regardless of the nature of his society and culture—develops healthy narcissism early in life. Healthy narcissism is rendered pathological by abuse—and abuse, alas, is a universal human behavior. By "abuse" I mean any refusal to acknowledge the emerging boundaries of the individual. Thus, smothering, doting and excessive expectations are as abusive as beating and incest.
Pathological narcissism, though, can be latent and induced to emerge by what I call "collective narcissism." The way pathological narcissism manifests and is experienced is dependent on the particulars of societies and cultures. In some cultures, it is encouraged. In others suppressed. In collectivist societies, it may be projected onto the collective; in individualistic societies, it is an individual’s trait.
Families, businesses, industries, organizations, ethnic groups, churches and even whole nations can be safely described as "narcissistic" or "pathologically self-absorbed."
The longer the association or affiliation of the members, the more cohesive and conformist the inner dynamics of the group, the more shared are its grandiose fantasies ("the vision thing"), the more persecutory or numerous its enemies, the more misunderstood and exclusionary it feels, the more intensive the physical and emotional experiences of its members—the stronger the bonding myth. The more rigorous the common pathology.
Such an all-pervasive and extensive malaise manifests itself in the behavior of each and every member. It is a defining—though often implicit or underlying—mental structure. It has explanatory and predictive powers. It is recurrent and invariable—a pattern of conduct melded with distorted cognition and stunted emotions. And it is often vehemently denied.
What steps might a corporation take to protect itself from being ruined by this kind of narcissistic contagion?
The first—and most obvious—step is screening. Mental health management is often considered a low organizational priority—frequently with calamitous outcomes. Employees on all levels—especially the upper echelons—should be tested periodically and regularly by professional diagnosticians for personality disorders. Those who test positive should be sacked.
There is no way of containing narcissism. It is contagious—weaker people tend to emulate narcissists, stronger ones tend to adopt narcissistic behaviors in order to fend off the narcissist’s unwelcome attentions and overweening demands.
Carlos: Is the angry mob trying to destroy any chance of recovery? JP Morgan Chase says making the financial industry the enemy hurts the chances at a rebound.Kudos to Carlos for at least putting up a fight.
Contessa: Across the country, there are angry Americans who I know probably scoff at that but an executive vice president at AIG was so furious at the way he was being treated both by the company and the government that he resigned and had the NY Times actually publish his resignation letter today. Jake DeSantis says (she reads the letter)
Let's talk to Melissa Francis from CNBC. You wrote about it and we talked about it yesterday. A lot of concern from people in the financial industry that "you keep doing this and you're going to destroy the very people who can help the nation make a comeback.."
Melissa:Yeah. This is really the case in point of the danger of mob rule. This is somebody who had already agreed to work for a dollar a year. He was in there unwinding a business this Jake DeSantis that he had built for more than a decade. He had nothing to do with the credit default business that had caused so many problems at AIG and he felt like basically he's spending ten, twelve, fourteen hours a day away from his family and for what? You know, to be abused, to be abused in the media, to be abused by congress. And now he's saying, you know,m the ultimate sticking it to everyone, he's not going to give the money back, he's going to give it to charity.
Carlos: Melissa can I play the skeptic here? I read the story by executive vice president Jake DeSantis and he writes that he's an executive vice president, MIT grad, the son of a modest upbringing, and he said, "although I was a vice president I didn't know what was going on." I find that hard to believe. This guy was an executive vice president and he was in the company for eleven years, they're doing literally billions of dollars worth of risky and crazy trades and he's saying that he doesn't know what's going on?
Melissa; His division was completely separate from what was going on. And I'm glad you raised that question because, ...
Carlos: When you say that his division was separate, I know and you know that when you're an executive in a large company you sit in those senior management meetings you hear what's going on in other parts of the business. I find it hard to believe that and I look at the comments on NY Times.com, over 600 comments, and most of the people were a lot like me, saying "come on, you didn't know what was going on?"
Melissa: Yeah. I think that you can hold the CEO and the board of directors to that kind of standard. This is somebody who was in charge of hundreds of people and he knew what his hundreds of people were doing. I don't think he was in charge of this other group. This is a company, you have to understand, that sprawls nations, I mean across oceans. I mean, it's an enormous company. You can hold the CEO to that standard and the board of directors, but I think this person was in charge of a lot of people and, you know, the credit default swap unit wasn't part of that group.
Contessa: And regardless of whether there's credit to be made from that argument, we do know that letting mob mentality leaves no room for logic.
Joseph Cassano and Thomas R. Savage helped start the group in 1987. AIGFP businesses specialize in aircraft and equipment leasing, capital markets, consumer finance and insurance premium finance.
AIGFP focused principally on OTC derivatives markets and acted as principal in nearly all of its transactions involving capital markets offerings and corporate finance, investment and financial risk management products. AIGFP played key roles in the acquisition of London City Airport and, in one of the largest private equity transactions announced in 2006, the management-led buyout of Kinder Morgan Inc.
AIGFP's commodity derivatives and commodity indices helped stimulate the development of this new asset class. AIGFP's sponsored a major study on the historical performance of commodity futures by professors Gary Gorton and K. Geert Rouwenhorst. AIGFP created a specialized credit business. AIGFP focused its business on structured products like CDO's. In 2003, it absorbed subsidiary, AIG Trading Group (AIG-TG) which dealt primarily in over the counter derivatives and created the Dow Jones-AIG Commodity Index (DJ-AIGCI) from their offices in Greenwich, CT. The DJ-AIGCI is a leading commodity benchmark composed of 19 futures contracts on physical commodities. As of the end of June 2007, there was an estimated $38 billion invested in financial products that track the DJ-AIGCI on a global basis.
From 1987 to 2004, AIGFP contributed over $5 billion to AIG’s pre-tax income. During that period, AIG's market capitalization increased from $11 billion to $181 billion, and its stock price increased from $4.50 per share to $62.34 per share.
AIGFP's trading in credit derivatives led to enormous losses. These losses at AIGFP division essentially bankrupted the entire AIG operation, and forced the United States government to bail out the insured.