Did the pricks in the financial products department at AIG take out AIG insurance policies on the bonuses they were hoping to receive from AIG?

Ok, get reading for your head to fucking explode.

John Carney of Clusterstock, who I quoted in the post prior to this one, is reporting that there's a rumor floating around Wall Street, a RUMOR mind you, that the very guys who brought AIG to its knees saw the downfall coming and bought insurance policies from AIG to insure that they'd still get their bonuses in the event of a government takeover.

Yeah.

Here's how Carney explains it...

We've heard from a couple of people now that the guys at the most destructive business in the world, the Financial Products division of AIG, may have taken out a form of credit default swaps on their own bonus payments. Indeed, the rumor is that somehow they took out the CDS with AIG itself.

This is a pretty wild story, and we're not sure we find it all that credible. It seems mind-boggling, and almost insane. What good would it do you to insure your own bonus with the firm that promised to pay it in the first place? If your employer can't afford to pay out your contractual bonus, wouldn't it also be unable to pay out the insurance you took on the bonus?

Except this is AIG we're talking about. A great many of the counterparties on AIG knew that AIG wouldn't be able to pay out on the CDS they purchased. They gambled, it seems, that the government would bail out the company. It seems all too possible that the brainiacs running the Financial Products unit may have actually made the same gamble.

Could this be why AIG has to pay the bonuses? Could AIG have doubled down on its promise to pay the bonuses? That also seems insane. But no more insane than the standard AIG business practices we've discovered.

Feel free to punch yourself in the face now.

In other news, myself and others are astounded that our friend Carney is working on St. Patrick's Day, much less with such lucidity and competence!