11
   

Dear A.I.G., I Quit!

 
 
DrewDad
 
  1  
Reply Tue 31 Mar, 2009 09:00 pm
@Robert Gentel,
Robert Gentel wrote:
what do you have against writing an op-ed piece?

It's called, "throwing gasoline on the fire."
0 Replies
 
MagicBlackCat
 
  2  
Reply Wed 1 Apr, 2009 12:24 pm
Could not find this searching the New York Times page but thought I'd share what I found at work on our intranet site.


TALKING BUSINESS
Business/Financial Desk; SECTB
Why Flogging A.I.G. Isn't Solving the Underlying Problem
By JOE NOCERA
1,725 words
21 March 2009
The New York Times
Late Edition - Final

Can we all just calm down a little?
Yes, the $165 million in bonuses handed out to executives in the financial products division of American
International Group was infuriating. Truly, it was. As many others have noted, this is the same unit whose
shenanigans came perilously close to bringing the world's financial system to its knees. When the Federal
Reserve chairman, Ben Bernanke, said recently that A.I.G.'s ''irresponsible bets'' had made him ''more
angry'' than anything else about the financial crisis, he could have been speaking for most Americans.
But death threats? ''All the executives and their families should be executed with piano wire -- my greatest
hope,'' wrote one person in an e-mail message to the company. Another suggested publishing a list of the
''Yankee'' bankers ''so some good old southern boys can take care of them.''
Or how about those efforts to publicize names of individual executives who received bonuses -- efforts
championed by Attorney General Andrew Cuomo of New York and Barney Frank, chairman of the House
Financial Services Committee. To what end?
How does outing these executives fix skewed compensation incentives, which have created that unjustified
sense of entitlement that pervades Wall Street? No, it's mostly about using subpoena power to satisfy the
public's thirst for blood. (In light of the death threats, when Mr. Cuomo received the list of A.I.G. bonus
recipients on Thursday, he promised to consider ''individual security'' and ''privacy rights'' in deciding
whether to publicize the names.)
Then there was that awful Congressional hearing on Wednesday, in which A.I.G.'s newly installed chief
executive, Edward Liddy, was forced to listen to one outraged member of Congress after another rail about
bonuses -- and obsess about when Treasury Secretary Timothy Geithner learned about them -- while
ignoring far more troubling problems surrounding the A.I.G. rescue.
Oh, and let's not forget the bill that was passed on Thursday by the House of Representatives. It would tax
at a 90 percent rate bonus payments made to anyone who earned over $250,000 at any financial institution
receiving significant bailout funds. Should it become law, it will affect tens of thousands of employees who
had absolutely nothing to do with creating the crisis, and who are trying to help fix their companies.
Meanwhile, the real culprits -- like Joseph J. Cassano, the former head of A.I.G.'s financial products
division-- are counting their money in ''retirement.'' Nobody on Capitol Hill seems much interested in getting
that money back. (And the bill does nothing about bonuses that were paid before 2009, meaning that most
of those egregious Merrill Lynch bonuses, paid at the end of last year, will not be touched.)
By week's end, I was more depressed about the financial crisis than I've been since last September. Back
then, the issue was the disintegration of the financial system, as the Lehman bankruptcy set off a terrible
chain reaction. Now I'm worried that the political response is making the crisis worse. The Obama
administration appears to have lost its grip on Congress, while the Treasury Department always seems
caught off guard by bad news.
And Congress, with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to
the crowds, is out of control. This week, the body politic ran off the rails.
There are times when anger is cathartic. There are other times when anger makes a bad situation worse.

''We need to stop committing economic arson,'' Bert Ely, a banking consultant, said to me this week. That is
what Congress committed: economic arson.
How is the political reaction to the crisis making it worse? Let us count the ways.
IT IS DESTROYING VALUE During his testimony on Wednesday, Mr. Liddy pointed out that much of the
money the government turned over to A.I.G. was a loan, not a gift. The company's goal, he kept saying, was
to pay that money back. But how? Mr. Liddy's plan is to sell off the healthy insurance units -- or, failing that,
give them to the government to sell when they can muster a good price.
In other words, it is in the taxpayers' best interest to position A.I.G. as a company with many profitable units,
worth potentially billions, and one bad unit that needs to be unwound. Which, by the way, is the truth. But as
Mr. Ely puts it, ''the indiscriminate pounding that A.I.G. is taking is destroying the value of the company.''
Potential buyers are wary. Customers are going elsewhere. Employees are looking to leave. Treating all of
A.I.G. like Public Enemy No. 1 is a pretty dumb way for a majority shareholder to act when he hopes to sell
the company for top dollar.
IT IS, UNFORTUNATELY, BESIDE THE POINT Even on Wall Street this week, I didn't hear anyone
condoning the A.I.G. bonuses. They should never have been granted, and Mr. Liddy should have been
tougher about renegotiating them. (A rich irony here is that any nonfinancial company in A.I.G.'s straits
would be in bankruptcy, and contracts would have to be renegotiated. The fact that the government is afraid
to force A.I.G. into bankruptcy, despite its crippled state, is the main reason Mr. Liddy felt he couldn't try to
redo the contracts.)
But there is a much bigger issue that has barely been touched upon by Congress: the way tens of billions of
dollars of taxpayers' money has been funneled to A.I.G.'s counterparties -- at 100 cents on the dollar. How
can it possibly make sense that Goldman Sachs, Bank of America, Citigroup and every other company that
bought credit-default swaps from A.I.G. should be made whole by the government? Why isn't it forcing them
to take a haircut?
What's worse, some of those companies are foreign banks that used credit-default swaps to exploit a
regulatory loophole. Should the United States taxpayer really be responsible for ensuring the safety of
European banks that were taking advantage of European regulations?
The person who has made this point most forcefully is Eliot Spitzer, of all people. In his column for
Slate.com, he wrote: ''Why did Goldman have to get back 100 cents on the dollar? Didn't we already give
Goldman a $25 billion cash infusion, and aren't they sitting on more than $100 billion in cash?'' Mr. Spitzer
told me that while ''there is a legitimate sense of outrage over the bonuses, the larger outrage should be the
use of A.I.G. funding as a second bailout for the large investment houses.'' Precisely.
IT IS DESTABILIZING How can you run a company when the rules keep changing, when you have to worry
about being second-guessed by Congress? Who can do business under those circumstances?
Take, for instance, that new securitization program the government is trying to get off the ground, called the
Term Asset-Backed Securities Loan Facility -- or TALF. Although it is backed by large government loans, it
requires people in the marketplace -- Wall Street bankers! -- to participate.
This program could help revive the consumer credit market. But at this point, most Wall Street bankers
would rather be attacked by wild dogs than take part. They fear that they'll do something -- make money
perhaps? -- that will arouse Congressional ire. Or that the rules will change. ''The constant flip-flopping is
terrible,'' said Simon Johnson, a banking expert who teaches at the M.I.T. Sloan School of Business.
A.I.G. offers another good example. Not all the employees who face the possibility of having their bonuses
taxed out from under them work for the evil financial products division. Manyof them work in insurance
divisions. Very few of them pull down million-dollar bonuses, and none of them brought A.I.G. to its knees.
(And employees who bought the company's stock are already hurting financially, having seen its value
virtually wiped out.) They are the ones the company badly needs to keep if it hopes to sell those units at a
healthy price. Taking away their bonuses -- after they've already put the money in their bank accounts --
hardly seems like the right way to motivate them. And demonizing them in Congressional hearings doesn't
help either.
In previous columns, I have been an advocate of nationalizing big banks like Citigroup. But after watching
Congress this week, I'm having second thoughts. If this is how Congress treats A.I.G., what would it do if it
had a bank in its paws?
What the country really needs right now from Congress is facts instead of rhetoric. Instead of these ''raise
your hand if you took a private jet to get here'' exercises of outraged populism, we need hearings that

educate and illuminate. Hearings like the old Watergate hearings. Hearings in which knowledge is
accumulated over time, and a record is established. Hearings that might actually help us get out of this
crisis. It's happened before. In 1932, Congress established the Pecora committee, named for its chief
counsel, Ferdinand Pecora. It was an intense, two-year inquiry, and its findings -- executives shorting their
own company's stock, for instance -- shocked the country. It also led to the establishment of the Securities
and Exchange Commission and other investor protections. One person who has been calling for a new
Pecora committee is Senator Richard Shelby of Alabama, a Republican and key member of the Senate
Banking Committee.
''As we restructure our regulatory system, we need to be thorough,'' he told me. ''We need to understand
what caused it. We shouldn't rush it.''
Meanwhile, the House Financial Services Committee has scheduled a hearing on Tuesday featuring Mr.
Bernanke and Mr. Geithner. The hearing has been called to find out only one thing: what did the two men
know about the A.I.G. bonuses, and when did they know it?
Is that Nero I hear fiddling?
rabel22
 
  1  
Reply Wed 1 Apr, 2009 01:15 pm
@MagicBlackCat,
So keeping my mouth shut about how AIG and the other big wall street companies who screwed me out of 45% of my 401k plan and other investments I made in the stock market is the proper thing to do. Dont speak badly of my betters on wall street. Screw you and the writer of this stupid article. The more light that is shined on the dishonest dealings of wall street the better it is for the middle class, what there is left of it. Class warfare you bet. The rich have been practiceing it for the last 28 years.
MagicBlackCat
 
  1  
Reply Wed 1 Apr, 2009 03:40 pm
@rabel22,
So I get that you don't agree with it but really there is no need to treat me like one of those on wall street. I am very far from it.

What do you think the remaining companies are to be used for? Wouldn't you like the goverment debt repaid?
rabel22
 
  1  
Reply Wed 1 Apr, 2009 07:11 pm
@MagicBlackCat,
Yes. I would like to see the tax money paid back. But big business ownes our politicians and government so the chances of the taxpayers being paid back are about equal to me winning the mega million lottery.
MagicBlackCat
 
  1  
Reply Wed 1 Apr, 2009 07:45 pm
@rabel22,
That's an interesting assumption. The financial division which brought turmoil on the company is not it's only business. I think it's safe to assume the hundred thousand employees who continue to work for AIG are in the same financial boat as the rest of us.
0 Replies
 
hawkeye10
 
  1  
Reply Tue 28 Sep, 2010 08:35 pm
Quote:
The Obama administration is pressing aggressively for a deal to end its support of the American International Group and hopes to have a completed plan to announce by next week, ahead of the midterm elections.

The goal is for the Treasury Department to convert its A.I.G. stake to common stock in a deal that would be completed by the end of the year, according to two people briefed on the negotiations but not authorized to discuss them publicly. The Treasury would sell those shares to private investors over time.

http://www.nytimes.com/2010/09/29/business/29aig.html?_r=1&hp

WOW, this would if true be the biggest mistake of the governments handling of the financial crash. The original idea was that the government was propping up AIG so that it could be unwound in an organized way. Allowing AIG to live, after what they did, is a crime against capitalism.

Not that I am shocked mind you, Washington is owned by the corporate interests, and Obama has no balls.
0 Replies
 
 

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