Updated from Wednesday, March 25

Political grandstanding and a media blitz over bonuses at financial firms receiving government funds has created a flight of talent that is not helping the industry recover, human resources experts say.

Jake DeSantis, an executive vice president in American International Group's ( AIG) maligned financial products unit, fought back on Wednesday against what he characterized as misplaced anger, and a lack of support from superiors who pledged to stand behind employees.

DeSantis publicly aired his resignation letter on the op-ed pages of The New York Times, just days after CEO Edward Liddy told Congress that $165 million in bonuses awarded to AIG executives were "distasteful" and the House of Representatives passed a punitive bill that would essentially wipe the payments out through taxes.

In his letter, DeSantis noted that the equity and commodity units he oversaw consistently booked profits, in many cases "well over" $100 million annually. In his 11 years at the firm, DeSantis claims to have never handled any of the credit-default swaps which brought AIG down, and indicated that he had earned the $742,006.40 in post-tax bonus payments he received for the long hours he put in during 2008.

"As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings," DeSantis writes. "We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house."

Of course, Americans losing their jobs and homes while watching retirement savings evaporate probably have little cause to be sympathetic to that point of view. If taxpayer funds were not used to prop up his ailing employer, DeSantis and his peers may not have had to work those 12 long months, or fight for their compensation, because AIG probably would have collapsed.

But what's done is done, and the government has now dedicated over $170 billion to saving AIG. The firm must now dismantle its complex web of businesses to get back to basics and wind down what remains of its toxic assets, all while remaining competitive in the businesses that remained healthy and profitable.

Government dollars alone will not transform AIG. The company needs to retain employees with know-how -- whether for selling off a business, unwinding credit-default swaps or selling life insurance policies. Those people don't work for free, and have little incentive to remain at a company where compensation is arbitrarily slashed, morale is low, and their employee-badges might as well be a scarlet letter. This notion was reiterated late Wednesday, when The Wall Street Journal reported two top managers at Paris-based Banque AIG were resigning, sending company executives scrambling to replace them.

Sen. Charles Grassley (R., Iowa) went so far as to suggest that AIG executives commit suicide last week. Grassley later recanted his statement, but that type of invective comes as employees have been forced to hire security guards to protect their homes and families after receiving death threats and tour buses full of angry taxpayers lining up in driveways.

Even executives and talented professionals who stay out of loyalty to the company or a sense of duty to help the country's financial system have come under intense pressure. That was evidenced by Liddy's harsh questioning before Congress about the bonuses last week, as well as the resignation of Freddie Mac ( FRE) CEO David Moffett, who left to seek out a new job back in the banking world, after months of being hamstrung by political considerations.

"The greatest asset -- especially for a financial services company -- is its people," says Clark Beecher, a principal at professional services firm Magellan International. "It's not their online banking, their pitch book on services, or any of that stuff -- it's the people behind them. If you lose those people, then you're basically limiting those firms' ability to exist and putting additional risk to taxpayer dollars, not helping them pay it back."

AIG seems to agree. While the firm would not respond to specific questions about DeSantis' departure, but released the following statement.

"Ed deeply appreciates the frustration expressed in this letter and believes that the recent vilification and harassment of AIG employees is grossly unfair and unwarranted. As Ed noted in his testimony to Congress, most of today's FP employees had nothing to do with the credit default swaps that were at the heart of the company's liquidity crisis. FP employees continue to successfully execute precisely the job asked of them: de-risk and unwind the FP business. They have reduced the trade count from 44,000 to 28,000 -- nearly 40%."

AIG doesn't break out headcount figures for individual units, though it has been reported that as many as 400 people once worked in its financial-services division.

"I don't think it's that high anymore," says spokesman Peter Tulupman. " We've said that other people than DeSantis have resigned but that's about it."

AIG is not alone in its struggle to maintain the best and brightest. While there are no industry figures available and the companies will not comment publicly on how many of their best-in-class have departed, sources at executive-search firms say that big TARP recipients have become a well of top talent for mid-tier competitors and small, entrepreneurial firms.

Others are taking a hiatus, starting on a new career path, or leaving the firms to start their own businesses, with the following of clients they developed over their years on Wall Street.

There have been widespread reports of an apparent flight of talent from Bank of America's ( BAC) newly acquired Merrill Lynch unit -- similar to what happened at US Trust years before, sources say. When Wells Fargo ( WFC) said it would slash Wachovia investment-bank bonuses by 90%, many of those employees headed for the hills. And anyone who made it through Citigroup's ( C) tens of thousands of layoffs last year weren't eager to stick around for the rest that have been announced.

"I've seen a definite flow of people going from firms that have received TARP funds to smaller or more independent firms where they can control their destiny," says Pete Deragon, a director and financial services specialist at the executive-search firm Stanton Chase. "Or, you sell yourself instead of selling the big name plate behind you."

Deragon says that big firms are "very good targets for personnel" and that the TARP albatross has disallowed white-shoe firms like Goldman Sachs ( GS) and Morgan Stanley ( MS) from being as "opportunistic" about snatching top talent as they were in years past. At the other end of the spectrum, UBS ( UBS) has been hiring hundreds of advisers away from other firms.

Beecher adds that mid-tier banks like SunTrust ( STI) or Regions ( RF) are also "looking at it as an opportunity to get the big boys."

Unfortunately for taxpayers, the big boys like AIG, BofA and Citi are the companies in which the government has the biggest stake. The sooner we figure out how to undo the damage that's been wrought, the sooner they pay us back.

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