Quick Hits: Government Gives AIG Time-Out
By Scott Reeves Oct 23, 2008 11:35 am
Brief scrutiny of today's headlines.
The adult hand comes from government - not generally associated with rational allocation of resources.
New York Attorney General Andrew Cuomo says Edward Liddy, AIG's chief executive officer, agreed to freeze all of the $19 million in compensation the company owes former chief Martin Sullivan.
In addition, Liddy has agreed to make no payments out of AIG's $600 million bonus pool for employees in the firm's financial products group, the folks responsible for actions that led to the government bailout.
AIG has been forced to sell assets to stay afloat. Nevertheless, top executives spent $440,000 on a retreat at the St. Regis Monarch Beach Resort in Southern California after pocketing a taxpayer-backed bailout.
Four AIG top dogs also traveled to England to go partridge hunting. The cost: A mere $87,000. One aspiring Einstein told a reporter: "The recession will go on until about 2011, but the shooting was great today and we are all relaxing fine."
Against this backdrop, Cuomo said in a letter to Liddy, "It is my position that until the taxpayers are repaid with interest, the more than $120 billion that has been used in the rescue financing of AIG, no funds should be paid out of these pools to any executives. As AIG recovers using taxpayer money, these pools should not be used to reward executives ahead of taxpayers."
Joseph Cassano, former head of the financial products group, was due to receive $69 million from the $600 million bonus pool. He stepped down in March, but received $1 million a month in consulting fees until Uncle Sam took over AIG.The freeze on bonuses is good news for taxpayers, but it took major huffing and puffing from the Attorney General to get Liddy to agree. Liddy was appointed head of AIG after the government took control of the company in September.
But c'mon, Andrew: You're a lawyer, and you didn't say anything about banning future junkets to Tahiti or anywhere else.
Oh, wait: Liddy has agreed to cancel all junkets and perks not justified by AIG's business.
That's reassuring.
But maybe you should have nailed down the definition of "justified," Mr. Cuomo.
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2008-10-23 11:59:51
Sounds like a good idea. Now for the unintended consequences.
Talent leaves for greener pastures.
These folks are largely compensated through bonuses. If they have departments that are making money it seems very unfair for the government to step in and say "Hey just because you produced 100 million in business you don't deserve your bonus because people in that department lost 200 million.
Person who produces sees the unfairness and leaves for competitor taking the business with him.
Heres the sales call.
Hey John its Mike from Aig. I appreciate your concerns over the current situation with AIG. I have met with the top people on my team and we have determined that inorder to insure the best interests of our clients we have decided to move the team to AAA rated anycorp incorporated. We have discussed with anycorp your current contract with AIG and although in this environment they can't offer you a lower bid they do have the resources to insure all your needs will be taken care of at your agreed upon rates with AIG. We have all the paperwork prepared and just need your ok to get you guys back on track and moving forward.
Aig Now has 100 million in business to make up for in addition to their other losing businesses.
I agree non profitable sections should not recieve bonuses but you have to reward success or you will lose far more money.
Talent leaves for greener pastures.
These folks are largely compensated through bonuses. If they have departments that are making money it seems very unfair for the government to step in and say "Hey just because you produced 100 million in business you don't deserve your bonus because people in that department lost 200 million.
Person who produces sees the unfairness and leaves for competitor taking the business with him.
Heres the sales call.
Hey John its Mike from Aig. I appreciate your concerns over the current situation with AIG. I have met with the top people on my team and we have determined that inorder to insure the best interests of our clients we have decided to move the team to AAA rated anycorp incorporated. We have discussed with anycorp your current contract with AIG and although in this environment they can't offer you a lower bid they do have the resources to insure all your needs will be taken care of at your agreed upon rates with AIG. We have all the paperwork prepared and just need your ok to get you guys back on track and moving forward.
Aig Now has 100 million in business to make up for in addition to their other losing businesses.
I agree non profitable sections should not recieve bonuses but you have to reward success or you will lose far more money.
2008-10-23 12:09:02
Get the story straight
NO executives of AIG were present at the retreat in California that is referenced in the article. This was primarily for independent insurance brokers who provide business to AIG and several staff members.
This 'myth' about Senior Executievs being at that retreat are completely untrue.
Granted, the partridge hunt in Europe was attended by Group Executives - who have been asked to repay the cost of the trip from their own pockets.
This 'myth' about Senior Executievs being at that retreat are completely untrue.
Granted, the partridge hunt in Europe was attended by Group Executives - who have been asked to repay the cost of the trip from their own pockets.
2008-10-23 12:32:32
New York Attorney General Andrew Cuomo
New York Attorney General Andrew Cuomo, is that the same Andrew Cuomo who, as head of HUD during Clintons administration held produce this mess by going after Banks for discriminatory lending (i.e. failure to make enough subprime loans)
Seems many of the folks responsibel for this are now pretending to be the onew who will fix it. Obama (with law firm worked for Acorn), Cuomo, Dodd, Barne Frank and Schummer.
just amazing.
Seems many of the folks responsibel for this are now pretending to be the onew who will fix it. Obama (with law firm worked for Acorn), Cuomo, Dodd, Barne Frank and Schummer.
just amazing.
2008-10-23 12:52:54
Get your thinking straight
It seems reasonable to ask a thief to refund what they stole out of their own pockets rather than the taxpayer's pockets.
2008-10-23 20:36:57
What Talent?
AIG went bust remember?
They could probably do much worse than replacing everyone at the top.
They could probably do much worse than replacing everyone at the top.
2008-10-24 13:43:33
What Talent?
aig is a company made up of multiple departments and businesses that have all been brought together under one company. I assure you they have a lot of very good people doing amazing things. I know its easy just to assume they are all incompetent fools busy spending government money but that just isn't the reality. You don't build a trillion dollar business on the backs of fools.
2008-10-25 18:38:27
What Talent?
Sorry Brad, but that argument doesn't hold sway. AIG,and many other entities,made illusionary profits. When their products are held up to the light of day,they are just the tip of a huge pyramid scheme. Their "talent" are no more than old time carnival barkers in fancy clothes.
2008-10-25 19:10:36
What Talent?
Brad,
What trillion dollar business?
AIG is now owned by U.S. taxpayers.
"Good people" with "talent" aren't generally avaricious or prone to running trillion dollar companies into the ground. Sometimes they are hard working intelligent folk who have earned their place, and other times they are trust fund prep school punks with less brains and character than the janitors that empty their trash can.
A partridge hunt in England? Oh, in that case...
What are you smoking!?!?
The monarchy may have reincarnated themselves but their heads can roll just as easily now as in the past; they would be wise to mind their P's and Q's.
What trillion dollar business?
AIG is now owned by U.S. taxpayers.
"Good people" with "talent" aren't generally avaricious or prone to running trillion dollar companies into the ground. Sometimes they are hard working intelligent folk who have earned their place, and other times they are trust fund prep school punks with less brains and character than the janitors that empty their trash can.
A partridge hunt in England? Oh, in that case...
What are you smoking!?!?
The monarchy may have reincarnated themselves but their heads can roll just as easily now as in the past; they would be wise to mind their P's and Q's.
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