Michael Lewis reports:
DeSantis turned out to be a friend of a friend. He’d called because he didn’t know anyone else “in the media.” As a type he was instantly recognizable: a “quant,” a numbers guy who was allowed to take financial risks because of his superior math skills, but who had no taste for company politics or public exposure. He’d grown up in the Midwest, the son of schoolteachers, and discovered Wall Street as a scholarship student at M.I.T. The previous seven years he’d spent running A.I.G. F.P.’s profitable stock-market-related trades. He wasn’t looking for me to write about him or about A.I.G. F.P. He just wanted to know why the public perception of what had happened inside his unit, and the larger company, was so different from the private perception of the people inside it, who actually knew what had happened. The idea that the employees of A.I.G. F.P. had conspired to maximize their short-term gains at the company’s longer-term expense, for instance. He and the other traders had been required to defer about half of their pay for years, and intertwine their long-term interests with their firm’s. The people who lost the most when A.I.G. F.P. went down were the employees of A.I.G. F.P.: DeSantis himself had just watched more than half of what he’d made over the previous nine years vanish. The incentive system at A.I.G. F.P., created in the mid-1990s, wasn’t the short-term-oriented racket that helped doom the Wall Street investment bank as we knew it. It was the very system that U.S. Treasury secretary Timothy Geithner, among others, had proposed as a solution to the problem of Wall Street pay.Via Marginal Revolution.
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