More AIG Employees Quit
More employees are leaving AIG, and the financial products unit, which is the division that has brought the company to its current state. I suppose one could say, “Good riddance to bad rubbish,” but a word of caution: you now own this company. The taxpayers are on the hook for this one.
To date, AIG said the situation at the financial products unit remains “manageable,” despite the departures. But if too many employees quit, Chief Executive Edward Liddy has warned it could be disastrous for AIG and, ultimately, for U.S. taxpayers who are the insurer’s majority owners.
The financial products division incurred heavy mark-to- market losses on credit default swaps, a type of derivative that guarantees underlying debt against default, after the downturn in the U.S. housing market, leaving AIG so severely short of cash the U.S. government had to step in with a rescue that has since grown as large as $180 billion.
Liddy, appointed to run AIG after it received the federal bailout last September, last week told a Congressional subcommittee the reason the company paid to retain employees was to prevent “an uncontrolled collapse of that business,” which still has $1.6 trillion in trading positions to unwind before it can close its doors.
“The financial downside for taxpayers is potentially very large and it’s very real. And that’s why we’re winding down that business as quickly as possible,” he said, adding that to “prevent undue risk exposure in the meantime, AIG has made a set of retention payments to employees.”
$1.6 Trillion, sounds manageable, let’s just have the Fed make more money.