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  Date / Time: 4/14/2009 7:58 PM UTC

  US taxpayers' costs likely to rise after AIGFP staff quit
  

  wenty key executives have left AIG Financial Products (AIGFP) after the furore over their bonuses, increasing the cost of rescuing the troubled business to US taxpayers, its chief executive has said.

  As many as seven of the outgoing executives were from AIGFP's London office, where much of the division's most toxic derivatives business was done. The financial products side has been blamed for pushing AIG to the brink of collapse after selling $2.7 trillion (£1.8 trillion) worth of insurance on securities backed by mortgages and other credit products. As mortgage defaults surged, claims by AIG's counterparties rocketed. The insurer was bailed out last September with $80 billion of US taxpayers' money.

  Gerry Pasciucco, chief executive of AIGFP, said that the process of winding down the complex credit derivatives portfolio had slowed and been made more difficult by staff departures after public anger about $165 million in retention bonuses paid out to about 300 staff.

  Workers were “stunned” by the angry reaction, he said. Many Americans said the bonuses should not have been paid given that the company owed its existence to taxpayers' largesse. Some workers received death threats, others withdrew their children from school or were asked to resign from clubs. “It doesn't surprise me that some senior people said ‘You know what, I've had enough',” he said. “Our wind-down has slowed down,” he added. “Taxpayers probably have been damaged.”

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  In an interview with The Wall Street Journal, Mr Pasciucco said that trading partners, whose co-operation is vital to untangling the trades, were nervous about being drawn into the controversy and had temporarily pulled back from negotiations. The trades were mainly done with other big financial institutions and are hedged to limit potential losses to AIG.

  But he said that the hedges needed to be maintained, which made it important to retain staff that were familiar with the portfolio. AIGFP was still on track to have its remaining $1.4 trillion derivatives book “de-risked” by the end of the year, he said.

  These executives need to be in prison because their operations were based on fraud. They certainly don't deserve bonuses.
  
  And then they used the 180 billion of taxpayer money to pay off the top investment banks (goldman, citi, chase, etc) out of their fraudulent positions

  John, Radcliff, USA

  There is something of an illusion here. The hedges talked about just don't exist. This is the problem. At the moment, few counterparties will enter into contracts that allow you to benefit from worsening credit markets. The market is mostly one way - i.e. banks and institutions lend, not borrow.

  da, london,

  Our congress worked on the whole AIG mess, begged these people to work so AIG wouldnt lose intellectual capital and many did come back to work for a dollar a year, then hangs them out to dry when they get the bonuses congress agreed on. These same congressmen who got millions in campagn money from.

  William, Atlanta, USA

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