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Show Me the Money

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Tim Geithner, treasury secretary   

Feinberg is familiar with emotionally charged disputes about money. As the special master of the 9/11 victim fund, Feinberg ruled on the dispensation of $7 billion to victims’ families. “The 9/11 fund was much more emotional and tragic,” he said. “There you’re dealing with dead bodies and burn victims and families that had their husbands and wives and sons incinerated. No, there’s no comparison.”

But in other ways, there are parallels. His true power as pay czar is not only to set specific compensation guidelines for the seven largest firms still using TARP money but also to inform Masters of the Universe what the taxpayers ultimately think they’re worth. It is a painful ego check many of them can’t stomach. “This is about money, but don’t pooh-pooh money,” he says. “In our society, money is a surrogate for worth, integrity, self-respect, power, and so there’s a lot of emotion associated with this. That’s a very important point. Contrary to what many people think, it’s not just about compensation and how much will be earned. It’s not just dollars and cents.”

The previous day, Benmosche had flown by helicopter to Westchester County Airport, a short drive from AIG FP’s headquarters in Wilton, Connecticut, where he addressed a roomful of FP traders. He told them he was fighting for their money. On his first official day on the job in August he told the FP traders, “I think you are all worth every dime that you’re owed in these plans,” he said, according to a person present. “If it had been my son or daughter and they had come home and told me the story of what was going on here, I would have been outraged.”

Next he took on Attorney General Andrew Cuomo, who’d threatened to release names of FP employees who received retention payments. “What [Cuomo] did is so unbelievably wrong,” Benmosche told a group of insurance workers, according to Bloomberg News. “He doesn’t deserve to be in government, and he surely shouldn’t be the attorney general of the State of New York. What he did is criminal. You don’t create lynch mobs to go out to people’s homes and do the things he did.”

The AIG board was not happy that Benmosche was potentially inciting a political fight with Washington. A week after his Cuomo remarks, Benmosche apologized to the directors at a board dinner in New York, telling them he had no idea his comments were being recorded. Since then, AIG has muzzled Benmosche and declined to make him available for this piece. “Repaying taxpayers is AIG’s top priority and we are making progress,” AIG spokesperson Mark Herr said in a statement. “We need to attract and retain the best people to earn money to repay taxpayers. To do that, we must pay competitively.”

By stoking his traders’ sense of victimization, Benmosche was playing a dangerous game. Months after being cast as villains, the traders at AIG were on the verge of a full-scale insurrection. This fall, government-supported Citigroup sold its Phibro energy-trading unit rather than pay Andrew Hall’s $100 million contract.

F inancial products traders won’t capitulate like Citi had. After all, they hadn’t caused the problem. Joseph Cassano, who’d driven the disastrous credit-default swap business, and almost all of his team had left in February 2008—with $150 million in cash. Rather, the traders that remain see themselves as doing a necessary service—cleaning up the mess—and getting treated shabbily for it. FP will go out of business in two to three years, after the complicated derivatives trades are untangled. Someone has got to do it. They see themselves as pawns in a political game being played by the Obama White House, which is anxious to inoculate itself against populist outrage over the bailout.

Wall Street, which collectively brought on the crisis, is once again flying high, while Main Street is struggling. There’s a systemic inequity here, an obvious unfairness by any standard. The problem is that the government only has power over a tiny portion of Wall Street compensation. Those most responsible for almost bringing on a depression have already left. The AIG traders wonder why they are the scapegoats, when, say, Goldman Sachs, which was certainly a participant in the sins of the old system, got to walk away with billions the American public supplied. The traders feel they’re paying largely for the sins of others. “What percentage does that have to be to make a steelworker in Pittsburgh happy?” asks one former FP executive. “If people are angry about the arsonists, it’s not a good idea to go out and shoot the firemen,” one FP executive says. “There were over 40,000 positions on our books, and less than 125 of them blew up the company,” adds an FP executive, who, like many people interviewed for this article, spoke on the condition of anonymity, citing threats against AIG employees. “It’s absurd in the extreme,” says another. “Should we punish everyone at FP? Everyone at AIG, everyone in New York? Everyone on Wall Street? Where does it end?”


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