AIG is arguing that its people are uniquely qualified to clean up the mess they made and therefore need big retention payments.
Of course, there are many things that are different and complex about this crisis in general and credit default swaps in particular. But in every crisis I’ve ever seen, the (banking/corporate/government) insiders responsible for major problems always want to stay on – arguing that they have unique skills and can sort things out better than anyone else. Countless times around the world I’ve heard some version of, “it’s very complex, no one else can figure it out, and you’ll lose a lot more money unless you keep us on.”
Yet, whenever possible, it’s better to clean house and bring in new talent at all levels to wind down bad business and more generally clean up/recapitalize/reprivatize the financial sector.
In the New York Times print edition (p.A25) this morning and online, James and I elaborate on why this is – drawing particular parallels with the Asian crisis of the late 1990s.
By Simon Johnson