Whatever comes to mind, and then the interesting directions that thought will take you on the web.

Wednesday, March 18, 2009

AIG Bonuses

One thing. The claim is that AIG is contractually bound to pay these bonuses.

Had AIG filed bankruptcy, rather than being bailed out by the taxpayers, where would the bonus claims have stacked up compared with AIG's other liabilities?

Here's a post that discusses this.

Monday, March 16, 2009

AIG Bonuses

The bizarre thing about salesmen at AIG is that it's really easy to sell something if it is priced too low.

For example, an AIG salesman sells a Credit Default Swap to Goldman Sachs.  AIG is valuing that CDS assuming the underlying instrument will not default.  Goldman Sachs buys it because they have valued it more correctly (their model assumes that there is a risk of default??).

Bottom line, if you sell something at too low a price, customers are going to pull a truck to your door to buy it.

If I was a salesman selling Gold, and I was able to sell at $600/oz, I would have no problem selling a massive amount, and making a great commission.  (Note: I'm not responsible for procuring the gold, my role is just to sell it, and make a commission on the amount sold).