Ashamed of AIG

It was just last week that I wrote about how much of the AIG (AIG) bailout money went to European banks. Now we hear about how they are planning on paying $1.2 billion in bonuses, and this money is reportedly going towards the derivatives trading staff, which got them into trouble in the first place.

The outrageousness is unbelievable!!! The stock sells for pennies yet they have received over $11 per share in bailout money! And by the way, whatever happened to the fraud investigation of AIG that started in 2007?

I get asked by readers, what should the government do for AIG instead of the bailouts? Here is the answer:

1. The government should immediately offer to back any life and disability insurance policies and annuities of AIG.
2. Since the government is "80% owner of the company", it should immediately vote out all the members of the Board of Directors, put in their own directors, who should in turn, terminate and replace all top executives.
3. The government should immediately clawback any and all bonuses paid to executives of the company over the last three years.
4. It goes without saying that no bonuses should be paid whatsoever. It AIG can't get out of their "bonus contracts", then the government, as "80% owner", should have the company declare bankruptcy immediately.
5. The government should take back all the bailout funds it can possibly recover that it gave to the company. The government is going to need all the funds it can get to back all of AIG's life insurance policies.
6. After all the above is done, the government should then look for a buyer of the "company" or its "assets".

Disclosure: Author is embarrassed and ashamed to admit he owns AIG, and he would rather have the stock go to zero than have the company receive any bailout money.

Comments

[Dante311:]

"2. Since the government is "80% owner of the company", it should immediately vote out all the members of the Board of Directors, put in their own directors, who should in turn, terminate and replace all top executives."

Although, I am vehemently against the whole bailout/bonues situation with AIG, I am weary of the ability for the government to replace AIG's top directors and executives. My main concern stemming form the fact that the current CEO, Edward Liddy, was appointed by the government and was the very person that has approved these bonuses in question!

Mar 16 07:00 PM

[Kinabalu:]

The only thing worse than the old AIG management continuing to run the Company is the Government trying to run it. This simplistic 6 point plan for this incredibly complex Company would be a disaster! California created "The Deal of the Century" when it sold the junk bond portfolio of the much smaller Executive Life Insurance Company to Apollo Investors in the early '90's. No one company or fund is big enough to buy AIG but there will be a lot of vultures getting very fat on this carcass. These bonus amounts will be miniscule by comparison.

Mar 16 09:30 PM

[User 377624:]

The government could continue to funnel money through AIG after replacing the executives. The terminations would be symbolic and indicate justice, rather than corruption. It would make the pill easier for the public to swallow.

On Mar 16 05:29 PM manya05 wrote:

> AIG is merely the conduit the government has found to funnel unlimited
> amounts of money into the financial system (which is, I repeat, bankrupt
> already for all intents and purposes).

Mar 16 09:48 PM

[VP of Commo...:]

Ahhh AIG, good times all around, eh? Feel free to correct me where I am wrong, because I would love to know what is really going on.

So as I understand it the personal insurance business (life, annuities, etc.) was unrelated to division that insured CDO's, CDS's and the like. So here we are with a personal insurance division that is more or less thriving, and a London based derivitives division that is hemoragging many many billions.

The outrage is because the majority of the disputed bonus money is to go to the derivitives division that is responsible for the giant turd in the punch bowel.

The only reason not to cut these folks loose is all the asset swaps need to be executed. Supposedly even some fully "in the money" assets have been paid off. Which makes me wonder: why are these people being paid again?

Anyway the reason behind paying people money is to get something you (or I) want, right? I would renegotiate the bonuses so that they get paid based on how much of the governments initial outlay is recouped. Sure they may not see any money for three years, but at this point where are they going to go? I can assure you that less than 10 people employed by the company I work for make >$1MM, and the company has annual revenues of about $8B.

Mar 16 10:56 PM

[Calamity Jane:]

Looks to me like this AIG bunch should be tarred and feathered and run out of town on a rail. They are not worried about the mess we are in. They are worried about lining their pockets and no concern for anybody else. I dont know where we will finally end up. Looks like every body is crooked and dishonest in this day and time and there is never anything done about it. I am with the writer that says put them all out and take over the system. There is no use for the tax payers to keep paying them to rob us blind. If we dont have leaders that can do something about this, we dont have any leaders. Looks like they are just dragging us down too. We will never get the economy straightened out with such shenanigans as this going on.

Mar 16 11:05 PM

[Moon Kil Woong:]

AIG has been a big conduit to siphon funds to banks without disclosure. So who should we really be ashamed of? Let's start with the former head of Goldman.... ummm I mean the Treasury.

By the way, when will we start forcing these companies to separate out key businesses from non-key businesses so we can't keep being blackmailed? We all agree that AIGs life insurance policies need to be guaranteed. Aside from that nothing else. If counterparty banks want bailouts to cover their derivatives losses then they should be honest and request it themselves not funnel it through a zombie corporation.

Well, as I said before, the good news is this time AIG is trying to blackmail their counterparty banks for support rather than the government. Unfortunately, since the banks have no free assets that will just mean banks begging the US to keep bailing them out. Really, it's all rather depressing.

But I guess the good news is hey all the banks including Citibank is saying that Q1 is great and they won't need more government money. Sooner or later the market will wise up and figure out saying everything is great tends to mean "Something wicked this way comes."

The first time we heard the brokerages were fine we got Bear bankruptcy. The next time we heard that the banking sector was fine and wound up with TARP and AIG. Then we heard that the government was not going to let any too big to fail financial institutions go under. Rather than that meaning they were fine we got Citibank's continued economic blackmail letters.

Really. This foolery is getting very foolish indeed.

Mar 16 11:47 PM

[sr9web:]

Very good point.

AIG is a menace to the other farm animals and should be put down.


On Mar 16 05:40 PM Just Say Whoa! wrote:

> If it's "too big to fail" without destroying our entire financial
> system, then it's "too big to live".
>
> Think about it.
>

Mar 17 12:34 AM

[zermux:]

Does anyone know of a legal way to refuse to pay taxes, on grounds of goverment incompetence.

Mar 17 01:15 AM

[Fighting Yoda:]

AIG bonuses are an abomination, but the much bigger scandal is payouts to counter parties. Everyone could have easily guessed – Goldman ofcourse. Why are counter parties being made whole, why are they not being made to take a haircut. I am less outraged by $165 Mi bonus than $12 B to Goldman, and rest of counter parties. We as tax payers are on the hook for all this and have to pay bonuses to the fools who got into this mess. Who are these morons that wrote these contracts that do not have an exit clause- company is insolvent many times over – but bonuses still have to be paid. Liddy you idiot just resign (or simply drown yourself), even though he did not create this mess or write those contracts.

The government has a lot of culpability in all this, Liddy is a Govt. appointee and AIG is Govt. owned. This is another botched misadventure by our very foolish government.

As some of us always suspected, some of the institutions have gamed the bailout and are raking in billions – Goldman as always top of the list.

Mar 17 02:44 AM

[sundrenched:]

Rather than grandstand, congress should pass a law NOW that all bonuses in firms receiving aid will be taxed at 100%. End of story.

No need to break bonus contracts and set off a deluge of lawsuits, no need to let AIG go bankrupt and set off a firestorm of CDS.

Mar 17 04:26 AM

[User 377720:]

My European Bank friends still can't believe it..... in Frankfurt and a mutual fund manager said to me......"is anyone driving? otherwise you'll soon hear a crash" And then he made the point, the "we dont need to add to our current stimilus package ....we"ll just continue to take the Americans money"

One has to think what people are thinking while they file there taxes this yr......

Mar 17 05:56 AM

[User 371080:]

Whatever happened to the concept expressed in John Houseman's famous line: "We make money the old-fashioned way. We earn it."?

Mar 17 07:05 AM

[User 371080:]

Business as usual. Just manage the PR more effectively?


On Mar 16 09:48 PM User 377624 wrote:

> The government could continue to funnel money through AIG after replacing
> the executives. The terminations would be symbolic and indicate
> justice, rather than corruption. It would make the pill easier for
> the public to swallow.
>
> On Mar 16 05:29 PM manya05 wrote:

Mar 17 07:11 AM

[User 371080:]

Find employment in another country and spend less than 28 days out of 365 on US soil. Otherwise, you're on the hook to Uncle.


On Mar 17 01:15 AM zermux wrote:

> Does anyone know of a legal way to refuse to pay taxes, on grounds
> of goverment incompetence.

Mar 17 07:16 AM

[User 371080:]

Oh, and don't get paid through a US bank or deposit your funds in a US bank or a foreign branch of a US bank.


On Mar 17 01:15 AM zermux wrote:

> Does anyone know of a legal way to refuse to pay taxes, on grounds
> of goverment incompetence.

Mar 17 07:44 AM

[dare16:]

Aig is like the sun rising from the west then falling to the east, how come employees which caused the company fail are heavily are still around and heavily rewarded, really puzzled me. They all should be sacked immediately after management knew they have caused the company failed.

Mar 17 07:47 AM

[Moon Kil Woong:]

The problem with sacking them is how will the taxpayer get their money back since they are the only competent ones who can run the company.....

What am I saying? That would be the normal defense but in this case we aren't getting our money back anyway and lets subtract the competent thing completely.

There is no reason why they are still making a mess in a company they already destroyed. This is the one of the biggest examples of why bankrupcy is better than government run "public" companies. AIG being public is debatable because it's majority owned by the government and if they were completely public I doubt this type of garbage would be tolerated by its shareholders. Then again, somewhere along the line many corporations effectively neutered shareholders and their rights. But that's another topic all together.

Mar 17 09:35 AM

[rp2009:]

With all this said.. Would it be a good idea to buy AIG for pennies..?? Will their stock eventually go up in the longrun if the government insists it does not fail?? -

Mar 17 10:27 AM

[john s. gordon:]

moon kil -

yes separate the life-insurance business and the derivatives business, and bury the derivatives business in a big pit with lots of lime.
> jack

Mar 17 11:57 AM

[monday1929:]

The Govt. will destroy anyone who even raises these issues. They control us at the point of a gun "Homeland Security" indeed.
How much will the People take?
The American Indian foresaw our downfall. Look for Bison near you soon. More Bison, fewer Malls. It won't be so bad.


On Mar 17 01:15 AM zermux wrote:

> Does anyone know of a legal way to refuse to pay taxes, on grounds
> of goverment incompetence.

Mar 18 08:02 AM