Wednesday, March 25, 2009

Can we put down the pitchforks now?

The New York Times today published an open resignation letter by Jake DeSantis, Executive VP at AIG. Since it's publication, many computer fonts have been spilled about it's portent. Too many of these comments are simply ill-informed. A typical example from the left is digby's from Hullabaloo. I am a fan of digby, and enjoy his blog. But too often I see liberals rant about business practices that they don't seem to understand, and this is a classic example.

First digby rolls his eyes at at an op-ed piece by Martin Feldstein, who claims that President Obama's proposal to limit the tax deductibility of charitable contributions will hurt charities. Without discussing the merits of Feldstein's argument, digby dismisses him because he is a member of AIG's board, and a member of their Finance Committee. Exactly how those facts makes Feldstein's argument moot, digby does not say. But consider this...would a bazillionaire donates $50 Million to a charity if there were no tax deduction? I think not. And I think Feldstein is correct that Obama's plan will disastrous for charities. But don't take my word for it, call the head of fundraising for your favorite national charity and ask for yourself.

Next digby moves on to DeSantis, describing his letter as a "petulant whine." He then goes on to say, "It's very hard to believe that this person knew nothing of the CDO business since it was the focus of the division in which he worked." He quotes MSNBC commentator Carlos who basically said the same thing: "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." Carlos and digby are simply wrong about this, and their comments lead me to believe they never worked for a large corporation. Busy managers focus on their own departments, and they don't have time to get detailed breakdowns of what others are doing.

MSNBC and digby show a lack of understanding of financial products and large financial organizations. DeSantis worked in commodities, and had nothing to do with CDOs. But digby assumes that every executive working for AIG is guilty by association. It doesn't take every employee to bring down a company. Remember Barings Bank? Barings was the oldest merchant bank in London until its collapse in 1995 after a single employee lost $1.4 billion speculating on futures contracts. One guy killed a 200 year old company.

Just because you worked for AIG does not make you evil or stupid. And we can debate whether anybody deserves to make a $750,000 bonus, but if other executives at other companies were getting similar bonuses (which they were) then AIG executives were not overpaid relatively speaking.

The AIG rhetoric is becoming shrill and is leaving logic behind. digby effectively says that we should not listen to anything that an AIG board member says. The board members deserve their share of blame for this mess. They were wrong about that, but that doesn't make them wrong about everything. DeSantis opened himself up to a lot of scorn by publishing his letter, but I saw it as frustration, not whining. He was angry that the CEO promised to fight for them, then did not. And he was angry that he and the vast majority of AIG employees did nothing wrong, but are being treated like lepers.

I'm not a pro-corporation apologist - far from it. But I think it is important to focus on real issues and not get tied up in witch hunts. Too much has been written about the AIG bonuses. Americans are frustrate at the mess we are in, and want to punish the guilty. I do as well. But a lynch mob is not the answer. Let's put down the pitchforks.

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