The New York Times carries an email from AIG Executive Vice President Jake DeSantis to Edward Liddy announcing his resignation, and explaining his reasoning, as an Op-Ed.  DeSantis, who started with AIG in 1998 as a trader and worked his way up the ladder to head AIG Financial Products, provides a level of insight into the thinking of finance folk that we would rarely get to see.  Below are excerpts from the email:

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.

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.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands.  Once all the money is donated, you will immediately receive a list of all recipients.

Sincerely,

Jake DeSantis

On the one hand, this email shows that the management of AIG led its people down the garden path of expectations, fostering the belief that they should stick with the company and wait out the tough times.  On the other hand, however, it shows a level of self-serving naiveté that is simply astounding from someone, despite his youth, who holds a reasonably responsible position and receives compensation that would be sufficient to fund a small village. 

DeSantis received almost three quarters of a million dollars, after taxes, as his third payment of the 2008 bonus.  Do the math.  Any way you turn the tax issue, that’s a lot of money.  That he’s entitled to be paid for his work is beyond question, but to analogize it to “cheating” the plumber shows a monumental disconnect from reality.  Jake’s no plumber.

Had the bonus been half a million, it’s unlikely that anyone would have been screaming for blood.  And half a mill isn’t a bad take for a year.  Few families go hungry on half a mill, even in Connecticut.  But DeSantis’ email shows that he truly believes that he “earned” his money; he did something during that 12 month period that justifies the actual numbers. Not merely was this a matter of his having a contractual right to a huge payday, but a moral right to the payday he deserved. 

If you read the email in its entirety, you will see that DeSantis emphatically notes that neither he nor his department had anything to do with the horrendous credit default swaps that proved disastrous for AIG.  From this, he argues that he shouldn’t be penalized because somebody else screwed up royally.  He did his job.

What DeSantis fails to recognize is the inseparability of the taxpayer funding of AIG, the corporate entity, to assure its survival.  Had the government failed to shore it up, it would have gone bankrupt.  No soup for you, Jake.  The internal fault may have been the credit default swaps, but the dead carcass would have been AIG.  His success wasn’t enough to save the company as a going concern.  His company crashed.  His company failed.  AIG was his employer, not the financial products division or any of the divisions that similarly had no connection to the credit default swaps.  Had they locked the door to the building, all employees would have been shut out.  Not just the evil ones.

This ability to compartmentalize fault and blame, and thus proclaim that the fault wasn’t his, allows him to claim with a straight face that his ersatz bankrupt employer owes him big money, and had no right to make him the scapegoat for someone else’s screw up.  When a company fails, it fails for all its employees, the good ones as well as the bad. 

I can’t help but wonder whether the entitlement demonstrated by this email, the gross vision of self-worth, the ability to lay blame elsewhere and thereby remove any personal responsibility within a single entity, is the real culprit.  Sure, the bubble burst when the credit default swaps were revealed as bundles of crap, but the demand for ever-increasing new products, not to mention a piece of the real estate profit pie, was as much a driving force in the AIG profitability picture as old school equity trading.  It’s goal was to generate these huge bonuses that every worthy employee of AIG believed he deserved. 

It seems from the email that AIG misled DeSantis, leaving him to believe that he would receive his bonus, that he earned his bonus, and that the company stood behind him.  Now DeSantis feels betrayed by AIG.  Finally, he’s come to feel what the rest of us feel about the entire financial services industry.  Now that Jake quit, maybe he can land a decent job as a plumber.  Of course, being a plumber takes training and skill, and I doubt that Jake has the ability to do the job just yet.