Are AIG FP Employees Using Bailout Cash To Get Jobs Elsewhere? Looks Like It, Says AIG Source

May 8, 2009 12:00 pm

Remember the rumors that AIG Financial Products had “thrown in the towel,” handing over massive portfolios of derivatives to the trading desks of major investment banks to unwind in a process that gave the beleaguered banking sector a profitable first quarter?

We first heard them back in March from the blog Zero Hedge. Then, sure enough, the banks began reporting first quarter earnings that for the most part beat expectations — all thanks to record and near-record revenues for their trading operations.

Then the fixed income chief at the hedge fund BlackRock essentially confirmed the story to Bloomberg Radio in a wry interview we partially transcribed.

And now we’ve heard from an anonymous executive at AIG who is “familiar” with AIG FP…Our source says it “is becoming assumed throughout the industry that AIG FP finding new ways to roll over” — which is to say, using bailout money to offer counterparties on its trades generous terms in closing out its contracts with the massive issuer of credit default swaps and other exotic derivatives options. While he did not want to name names or go into detail about any specific transactions, he said we should watch for signs of AIG FP employees being rewarded for their generosity with jobs working for their old counterparties under eyebrow-raising terms — “like if you have a noncompete,” the source explained, “and you go to a competing firm doing something far below you for an extreme salary.”

An exodus of employees at AIG Financial Products has already threatened to cost taxpayers hundreds of billions more dollars. And to think some executives might be hastening their departure from the zombie insurer by squandering billions of taxpayer dollars is…while perhaps unsurprising, still a little nuts.

“The staggering thing,” our source says, “is the size of these deals.”

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