Senators were outraged by the lack of details about where the bailout money has gone.
“That we find ourselves in this situation at all is … quite frankly, sickening,” said Senator Christopher Dodd, the Democrat who chairs the committee. “The lack of transparency and accountability in this process has been rather stunning.”
Eric Dinallo, superintendent of New York State’s Insurance Department, railed on Friday against AIG’s failed business model, likening its insuring credit-default swaps as gambling with somebody else’s money.
“It’s like taking insurance on your neighbor’s house and even maybe contributing to blowing it up,” he said at a panel sponsored by New York University’s Stern School of Business.
U.S. lawmakers have said they are running out of patience with regulators’ refusal to identify AIG’s counterparties.
On Thursday, Richard Shelby, the top Republican on the banking committee, said: “The Fed and Treasury can be secretive for a while but not forever.”
Agreed. What happened to Obama’s transparent government pledge and what is the point of hiding this information?
You can’t just lose money like that. You first have to pretend that it exists, claim your company is worth that much, drive the stock price up, sell your shares while the value is artificially high, and THEN claim to have lost $60 billion.
The next step, after grabbing a pitchfork: find out which insiders sold early. I shall conclude with a single word: guillotine.
American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.
Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.
That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn’t have.
In addition, if AIG’s book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.
All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG.
It is essential for AIG to conduct seminars of this kind to keep independent financial planners abreast of investment products and services including those offered by AIG. The financial planners are responsible for generating almost $200 million in revenue this year for AIG as of September 30th.
On October 10, I issued a directive to all AIG employees and subsidiaries to reduce expenses and conserve cash, including cancelling all nonessential conferences or meetings, unnecessary travel and excessive overhead. Since then, we have canceled more than 160 events. We conducted a top-to-bottom review of all expenses of the Phoenix meeting in advance and found that it was consistent with my October 10th directive. This conference was approved because it provides the kind of communication we must conduct with the people who sell our products if we are to be successful and repay the U.S. taxpayer.”
Before I offer my rebuttal, let me first state that the AIG Media Relations people and the various employees who e-mailed me were very polite and friendly. They all said they understand the scrutiny under which AIG must now operate, but felt that this story unfairly characterized the event, and to some extent, they’re right. After all, sitting at poolside doesn’t cost any more money than already spent, and neither does coffee-drinking, both of which got a strange level of focus in the article.
However, I think the rebuttals miss the point. AIG essentially cast itself as bankrupt and in need of receivership by American taxpayers. If they want to hold conferences – and I agree that sales organizations have to do so – then they can hold them at corporate headquarters and not resort hotels. When times got lean for corporations in which I worked, all of which had major sales organizations within them, they didn’t travel to resorts but had people come back to HQ to get their training. Had they gone into Chapter 11, I doubt that any judge would have approved the outlay in any case, and this is a similar position.
YES – Morrissey gets this one right on the nose. Is it necessary for AIG to use luxury resort escapes for this sort of thing?
This is almost as absurd as celebrity divorces where one party claims they have gotten used to a certain lifestyle, so the other side needs to throw in some premium.
I can’t believe I’m saying this, but:
If you’re bankrupt, NO RESORT VACATIONS!!! Period.
To the outside observer, the 2008 Asset Management Conference held this week at the Pointe Hilton Squaw Peak Resort in Phoenix was nothing out of the ordinary.
Conference participants, however, were notable because of the publicity they’ve received for their role in the ongoing financial crisis.
The conference at the posh resort included many senior managers at American International Group, or AIG, one of the world’s biggest insurers and recipients in September of more than $85 billion from the federal government.
AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property.
Battered by outrage over the $440,000 it spent on a luxury retreat less than a week after the federal government loaned it $85 billion dollars, the giant AIG Insurance Company says it has called off plans to hold a second retreat next week at the exclusive Ritz-Carlton Resort in Half Moon Bay, California.
RTFA has confirmed this story with the Ritz Carlton’s VP of Public Relations.
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