I am getting a little sick of hearing this today from AIG CEO Edward Liddy, and that only the employees currently in the Financial Products division can manage them successfully and get them off their balance sheet.
I work in a pretty complex industry (although nothing like this I will admit). And as a senior level person I managed large sums of money and dozens of people.
My boss didn't know everything I was doing. Every little detail. Cause she was managing 4-5 other folks just like myself and it just wasn't possible for her to know every single detail about one client, much less a few dozen of them. That was what I was paid for.
But with that said we spent a lot of the time creating detailed paper trails, so I don't know, if I was hit by a truck somebody could quickly step in and manage my accounts. Cause if something happened to me and we lost the business I was paid well to manage, it could bring down the entire company.
More of course below the fold ...
When Liddy keeps talking about how these folks need to be kept to manage their business, the only conclusion I can come to is that even at this late date, the managers have no idea what their employees did and/or are currently doing. Not even the basics. That there is NO paper trail and pretty much everything is just in their "heads."
Heck, I am not even sure they have the management structure in place to analyze what happened. I mean business is business. And in my industry if a manager totally messed up an account the first thing that would happen (after the employee that managed the account got fired) is a group of senior people from each department would take it over. Spend countless hours finding out what happened, what went wrong, and how could it be corrected.
Then they'd stick around and manage the account until the damage was repaired before it was passed off to a more mid-level person. Then they'd maintain a much more active role in the account then they normally would, to ensure the things they did to "right the ship" were not undone and previous mistakes were not repeated.
Now this is key, every time we started to dig we always found the problems were far, far greater then we initially realized. Far, far greater. When you deal with tens of millions (as I did), much less tens of billions or trillions it is often easier then you might think to hide problems and/or mistakes. Then when you appear to have almost no management structure or oversight it becomes even easier.
So when Liddy keeps talking about having to keep these folks I have to think nothing like the above happened at AIG. That is a pretty scary thought.
Now, and this is really another rant/diary, but the same could maybe said about any firm that got TARP funding. It is my experience that "throwing" money at a problem only appears to help in the short term, but in the long term totally counterproductive. As so many folks have said here before me, how do you begin to solve a problem when you don't even know the scope of it?
Updated: Josh at Talking Points Memo kind of outlines my point exactly, no paper trail:
To give a little more background, a mix of congressional testimony, SEC filings and news reports suggest that there were concerns and suspicions going back at least to 2005 that Joe Cassano wasn't letting AIG corporate or anyone else look at his divisions books. Remember, this is the divisions where the CDSs were written, the ones that played substantial role in triggering the global financial crisis. The auditor they installed to find out what was going on was shut out. Their accountancy, PricewaterhouseCoopers, was disturbed by what it saw and felt obliged to note what was happening in SEC filings. Employment and compensation contracts aren't the issue here. That is a distraction. Think more in terms of RICO. Let us know more about the on-going criminal probe.