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AIG “Robs the Bank”

Posted by Larry Doyle on March 15, 2009 9:07 AM |

When an entity has an 80% equity stake in a company, one may think that nothing of substance could happen there without that majority shareholder’s consent. Well, how is it that the black hole known as AIG to Pay $450 Million in Bonuses

We may see some arm waving and loud pronouncements from Congress about investigations, but the question still begs as to how this happened. The government took this majority stake in AIG last September. Are we to believe government representatives were both unaware of potential contractual payments and that they did not approve them? How could the government approve payments within a division that brought the global markets to its knees? 

Perhaps we should revisit the theme of my piece, How Wall Street Bought Washington.  Embedded in that piece, we can see the insurance industry lavished $220 million in campaign contributions and $1.1 billion in lobbying dollars on Washington over the last decade. AIG was one of the primary sources of that money.

Follow the money!!

LD

  • Mountainaires

    Who is “outside council” and when will said “council” appear before the congressional hearing to answer questions publicly regarding this contractual “obligation” to reward the “financial products” division? Who will receive these bonuses and when will they appear before said congressional hearing to identify themselves?

    Transparency in government, remember Mr. President? You said you would name them and shame them. Let’s have at it.

    According toThe Wall Street Journal, AIG (AIG) will pay-out $450 million in bonuses and the money will go to people in the firm’s financial products group, where may of the insurance company’s losses originated, will get the cash.

    The paper writes that AIG has told that government that “outside counsel” had advised that the previously agreed to payments to employees at the financial products unit are “legal, binding obligations of AIG.”
    Too bad the government can’t void those agreements. If it can, it should. The news will probably turn a number of members of Congress against approving more capital for saving American financial firms. That, in turn, will make the process of stabilizing the credit markets more difficult.

    AIG has the chance to turn Congress, and the public, completely against salvaging the financial firms essential to the national economy all by itself.

    Douglas A. McIntyre
    http://247wallst.com/2009/03/15/financial-outrage-of-the-week-aig-aig-to-pay-450-million-in-bonuses/#more-27003

  • Mountainaires

    I see Treasury has complained and they will seek to redress this contractual bonus issue. Of course, we may never learn how they do this. But, AIG’s Liddy will be testifying on Wednesday.

    http://www.reuters.com/article/newsOne/idUSN1448418420090315

    • Larry Doyle

      It once again defies logic that Treasury was not FULLY aware of these so called contracts.

      I will share with you that when I was at JP Morgan we had contracts for a lot of people as we were building our department. The firm “strongly” encouraged those holding the contracts to renegotiate them after the firm had a tough year. There was NO government money involved. Every single individual “renegotiatied”.

      These AIG payouts are a travesty.

      • TeakWoodKite

        LD, correct me if I am wrong, would not these
        contractual obligations be on the balance sheet as a liability?

        Who are the people doing the examination
        of these books? One would think that anything of a political nature that would create “problems” would get kicked upstairs.
        One would think that BO would use that to his
        advantage politically. Tone deaf BO.

        • Larry Doyle

          Why is it that in legislation written in the Senate Banking Committee and proposed by Senator Dodd regarding compensation it did not include language specifically for AIG?

          They knew this issue a long time ago. The bonuses being delivered here largely center on the AIG Financial Products division that generated all of these losses.

          This is a travesty!!

  • fiscalliberal

    LD – kind of off topic, but there is a issue currently happening with FHA. There was a newspaper article talking about how FHA was experienceing new payment defaults on new loans. I notified my congressman Gary Peters who sits on the Barney Frank Financial Services committee. His staffer said that they talked about it, but FHA needed more money for enforcement.

    I reminded him that the FHA administrater testified how he had a mechanism in place to eliminate bad loan originaters. It follows that the next news story should be that FHA is getting rid of the people who wrote the new 2008 and 2009 loans.

    This does not take new money, it is spending the existing money better. It looks like FHA is another SEC buracracy.

    Our government continues to be broken. I will have more later in the day. Beautiful sunshine here. Spring has sprung, the grass has ris – wonder where the flowers is.

  • Larry Doyle

    I admire your dogged determination in both raising and following through on these points.

    My sense is that the rise in FHA defaults is as a result of mortgagors who had taken sub-prime mortgages earlier this decade shifting to FHA insured mortgages now.

  • Keep up the great work. I enjoyed it all and agreed with 99% of it!






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