Andrews Federal Credit Union

Andrews Federal Credit Union

AIG: The Worst and the Dimmest

By James F. Cotter

 

In September 2008, American International Group--AIG--received $85 billion in  the largest bailout of a private company in the nation's history.  The next week, AIG executives indulged themselves to the tune of $444,000 at a retreat in California that featured spas, golfing, and banquets.  Subsequently, the insurance giant received another $37.8 billion from the Federal Reserve.  (1)

On October 17, the Associated Press reported that AIG executives had spent $86,000 on a hunting trip in England.  On November 10, ABC News reported that the company had spent another $343,000 on a trip to a resort in Phoenix.  This report came shortly before another government bailout was negotiated ($40 billion this time).  (1) 

Federal Reserve Chairman Ben Bernanke, testifying before the Senate Banking Committee in early March, said, "AIG exploited a huge gap in the regulatory system," and "made irresponsible bets and took huge losses."  (2)  In addition to all this, AIG recently announced that it was paying $165 million in bonuses to retain top performers in the Financial Products unit.  The same top performers who ran the company  into the ground.  There were 73 recipients of this largesse, 11 of whom no longer work at AIG.  Evidently AIG is using the word "retention" in some hip new way that most dictionaries have yet to catch up with.

The Financial Products unit, incidentally, is the division that sold credit default swaps.  Says insurance consultant  Andrew Barile, "They were selling an insurance- type product that isn't called insurance so it wasn't regulated like insurance.  By calling it A Credit default swap, you have invented a new product, but it's no different than insurance."  (3)

Senator Chuck Schumer of New York refers to such antics as "Alice in Wonderland business practices," and concludes:  "It boggles the mind."  (4)

AIG has received four government bailouts so far, totaling $182 billion.  (5)

As CNNMoney  editor  Paul R. LaMonica says, "Paying out $165 million in bonuses to people at a company that lost nearly $100 billion last year is, to quote Woody Allen, ‘a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham.'"  (6)   

But AIG is not the only villain in this disastrous drama.  Other companies deserve their fair share of revulsion.  Citigroup, for one,  also plans to pay millions of dollars in bonuses, at least some of them unearned.  The company's Institutional Client Group lost $20 billion last year.  James Forese, who co-heads that unit, is slated to receive $5 million over the next five years.  At least fifteen other Citigroup executives are also scheduled to receive millions of dollars.  Citigroup has refused to say how much it is planning to pay in all.  (7)   

As the president said, "The American people will find it hard, as I do, to accept a situation in which a tiny handful of ... executives, whose pursuit of private power and profit exceeds their sense of public responsibility, can show such utter contempt " for the national  interest.  (8)

No,  not President Obama.  That was President Kennedy in April 1962, following the across-the-board price hikes by the steel companies. 

How little things change.

 

REFERENCES

• 1. http://en.wikipedia.org/wiki/American_International_Group
• 2.http://www.washingtonpost.com/wpdyn/content/article/2009/03/03/AR2009030303810.html?hpid=topnews
• 3. http://cnnmoney.mobi/money/latest_news/latest_news/detail/133037/2
• 4. http://www.reuters.com/article/wtUSInvestingNews/idUKTRE52G4ZJ20090317?virtualBrandChannel=10112
• 5. http://news.yahoo.com/s/ap/20090320/ap_on_bi_ge/citigroup_bonuses_1
• 6. http://money.cnn.com/2009/03/17/markets/thebuzz/
• 7. http://www.time.com/time/business/article/0,8599,1886778,00.html
• 8. http://www.trivia-library.com/a/united-states-and-american-history-early-1962.htm

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http://www.breadstreet.com/ was established in 2004 to help entrepreneurs meet qualified accredited angel investors. BreadStreet.com provides instant access to a 10,000 + angel investors database. Both start-up companies and well established organizations are welcome. So, what is an angel capital investor, and what do they do? The term "angel capital" was coined in the early part of the 20th century. Angel capital investor was the term given to investors that would fund Broadway plays. Over time, the term angel capital investor or angel investor became synonymous with any investor willing to become involved with a startup business or a high risk venture. However historically, finding angel investors was a daunting task. But, today some groups have organized to make getting angel capital investors an easier process; BreadStreet is such an organization. Best Accredited Investor Profile: BreadStreet delivers a signed statement from the individual accredited investor; it includes the investor’s industry interests, contact details, annual income, net worth, available liquidity, investor’s financial professional’s contact information, and project confidentiality agreement. Further, prior to delivery, the investor will have expressed an interest in speaking with you about your investment and will be expecting your call. These are the best accredited angel investor leads available. Many of the accredited investor leads are currently liquid in the millions of dollars with written proof! BreadStreet.com can further provide assistance in filing with the SEC, qualifying for the Private Offering Exemption and possibly with getting a business valuation by an accredited appraiser. Visit www.breadstreet.com

9 13 2009 andrews federal creditunion

 

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