AIG gets taxpayer bailout...BONUS?

[joycenalex]

and is paying bonus...why? any bonus i get is paid to performance and meeting financial goals by my hospital...how in the world is AIG, which has lost millions is paying bonus? if those people were any good at their jobs, their company wouldn't be in this mess....and if the "talent' that created their mess wants to leave for another financial services company...who is hiring today and why do they think their skill set is gonna be wanted elsewhere? .................................................. .......................................David Cho
Washington Post Staff Writer
Saturday, March 14, 2009; 5:25 PM

Despite receiving $170 billion in federal aid and recording a staggering loss for the last quarter, insurance giant American International Group is doling out tens of million of dollars in bonuses this week to senior employees.

While AIG agreed to pay the bonuses months before the government's rescue of the company began, the matter still is a source of anger for government officials. In a phone call on Wednesday, Treasury Secretary Timothy F. Geithner told AIG Chairman and chief executive Edward M. Liddy that the payments were unacceptable and needed to be renegotiated, according to an administration source.

The company has since agreed to change the terms of some of these payments. But in a letter to Geithner, Liddy wrote that the bonuses could not be cancelled altogether because the firm would risk a lawsuit for breaching employment contracts. Liddy also expressed concerns about whether changing the bonuses would lead to an exodus of talented employees who are needed to turn the company around
AIG has agreed to restructure the $9.6 million in bonuses it would have paid to the firm's top 50 officers. AIG's top seven executives, including Liddy, have already agreed to forgo this payment altogether. The next 43 highest ranking officers would still receive half of their bonuses now. A quarter would be dispersed on July 15 and the rest on Sept. 15, but these last two payments would be contingent on whether the company makes progress on its restructuring plan.

Other bonus payments to thousands of employees, which total in the hundreds of millions of dollars, are still on AIG has agreed to restructure the $9.6 million in bonuses it would have paid to the firm's top 50 officers. AIG's top seven executives, including Liddy, have already agreed to forgo this payment altogether. The next 43 highest ranking officers would still receive half of their bonuses now. A quarter would be dispersed on July 15 and the rest on Sept. 15, but these last two payments would be contingent on whether the company makes progress on its restructuring plan.

Other bonus payments to thousands of employees, which total in the hundreds of millions of dollars, are still on track to be paid out.
unreal, just massively unreal

[pomtzu]

Now don't you feel better now that you know where your tax dollars are going??? :rolleyes: :mad:

[joycenalex]

a thought...when you are the owner of something, you take care of and maintain it to make you money...if the bonus were paid out in AIG common stock, NOT CASH, that would make the bonus recipients owners; if they company recovers from their (near criminal) behavior by their honest and hard work, they repay the US treasury first and they make money, then do they deserve a paycheck. the idea that these same yutzs are the best and the brightest, would make a maggot gag.

[momoffuzzyfaces]

If I ran the government, AIGs bailout check would get "lost in the mail"!!!

[RICHARD]

OctoKids or AIG AHs that live way over their means?:confused:

[Catty1]

http://ca.news.yahoo.com/s/reuters/090316/us/politics_us_financial_aig_obama

Obama expresses outrage over AIG bonus payments

53 minutes ago

WASHINGTON (Reuters) - President Barack Obama expressed outrage on Monday over hefty bonus payments awarded to employees of insurer AIG and said he directed his treasury secretary to take all legal measures to block them.

Insurance giant AIG received some $173 billion in government bailout money and is now paying $165 million in employee bonuses.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said of AIG.

"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," he said in remarks at the White House. "How do they justify this outrage to the taxpayers who are keeping the company afloat?"

Obama said he had asked Treasury Secretary Timothy Geithner to use the leverage the government had to pursue "every legal avenue" to push back against the bonus payments.

"I know he's working to resolve this matter with the new CEO, Edward Liddy, who came on board after the contracts that led to these bonuses were agreed to last year," Obama said.

The president said the bonus situation underscored the need for overall financial regulator reform and said the government needed "some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this. We will work with Congress to that end."

(Reporting by Jeff Mason and David Alexander, editing by Jackie Frank)

[momoffuzzyfaces]

I personally think AIG is trying to pull a fast one. The insurance co I used to work for gave us bonuses too, but only at then end of the year and based on the profits. If we didn't have any profits that year, no one got a bonus.

AIG supposidly has contracts to pay these big bonuses or they may be sued. Give me a break!!! If they go bankrupt, they wouldn't have the money for the bonuses!!! What would they do then?

They say AIG is too big to fail. Well, if they keep cutting employee saleries by 30% but still giving the hot shots, who made the mess in the first place, big bonuses sooner or later, there will only be a company of worthless hot shots and no workers. So, then the co will fail any way. This is why monopolies are discouraged!!!

I'm glad we have a president who is outraged by this!!! If they can't stop the money going to AIG, I'd be sure and let AIG know, that's the end of it. When it's gone, they are on their own to sink or swim.

[cassiesmom]

Officials fear the collapse of AIG "would cripple financial markets ... around the world" -- more crippled than they already are? I'm confused. I don't think I like my tax dollars going to a company that's worth $0.45 per share. :confused: Is any company too big to fail?

source: online Saint Petersburg Times (3/3/09)

AIG too big to fail
In Print: Tuesday, March 3, 2009


WASHINGTON — A new definition of desperate times: Even as the government threw a stunning new $30 billion lifeline to American International Group on Monday, the beleaguered insurance giant confirmed it had lost more than twice that much, $62 billion, in a single three-month period.

And many more billions of federal dollars are almost sure to be shoveled into the company for a simple reason: Officials fear its collapse would cripple financial markets in this country and around the world.

The source of trouble for AIG, which has 74 million customers worldwide and operations in more than 130 countries, is its business insuring mortgage-backed securities and other debt against default. That business imploded once the credit crisis struck with force.

The government has now made four separate efforts to save the company, totaling more than $170 billion.

AIG is so big and sprawling, so intertwined with institutions around the globe, that its downfall could set off a vicious chain reaction. Upheaval on such a global scale would plunge the U.S. economy deeper into recession, drive up unemployment and stifle hopes for an economic rebound any time soon.

"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the Treasury Department and the Federal Reserve said in a joint statement Monday.

Turning AIG into a smaller, more viable company, "will take time and possibly further government support," the Treasury and the Fed acknowledged.

Mark Williams, a professor of finance and economics at Boston University and a former Federal Reserve bank examiner, said he thinks at least $200 billion more will have to be extended to AIG.

"AIG is holding the U.S. government hostage at gunpoint," Williams said. "The government can't cut its losses because it is too far into AIG. It has no choice but to keep on pumping money into the company."

Said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco: "If AIG fails, the taxpayer wearing his or her other hats — the worker, the student loan payer, the car buyer, the homeowner — will suffer even more."

Under the new deal, the government revamped its rescue package, saying it will give AIG an additional $30 billion money on an "as needed" basis. AIG's bailout now totals about $173 billion.

Lawmakers have expressed skepticism over the rescue strategies of the new Obama administration and doubting investors have cut the company's share price to 45 cents.

[moosmom]

According to news reports, Obama is furious and is going to try and stop it. Another buy out?? What a bunch of bull!!

It boils down to pure, unadulterated GREED!!! :mad: :mad:

It's about time we had a president with brass ones AND a backbone. Hail Obama!!

[moosmom]

To be honest with you, I'm sick and tired of hearing about the economy and it's demise. I think I'll go stick my head in the sand for a while.:rolleyes:

[sasvermont]

I didn't have high hopes or good feelings about this AIG bailout to begin with, let alone now. Since I am not an expert on financial matters, I hardly know the answers to their problems. That's why they pay the executives the big bucks, yes?

I do know that when a company performs poorly, bonuses are not a good move. I don't know about where you work, but where I have always worked, we knew on a monthly basis, where the company stood. I think it is called accounting, yes? No money, no bonuses or Christmas parties.

Contracts are broken all the time and hey, if they don't have the money, then how would they have paid the bonuses then.... but with the bailout, then its OK? I don't get that part. I know that when you pool your money, including loans and pay off bad debts, it may leave you with enough (for the moment) to pay salaries and bonuses. They should be made to defer all bonuses until the loan and debts are paid back to the government and not a second sooner.

Hell, what would happen with the company you work for? I bet, bonuses would be set aside until the company was again viable. Duh. It is not rocket science, is it?

Stowe, Vermont, a ski area not TOO far from where I live, has a huge, I mean really huge, construction (development) in near completion, and OWNED by AIG. There were talks in place about selling the project, but who would buy it? And with what? I have driven in the area, looked at the golf course etc. etc. and boy, they must have a ton of money tied up in the project. I don't want to see the place go down in flames, but maybe AIG should sell it, and soon. There must be a Warren Buffet out there somewhere, with millions to spare.

I did see the article written by David Cho and it made me sick. I believe he is with the NYT.

I think Obama et al may need to take a nasty step with AIG before they (AIG)GET IT. AIG is making fools of all of us. I wouldn't be surprised if the public begins to seek out the employees, any of them, to make them feel guilty about the company and how it operates.

If I thought there was a way to boycott AIG, I would. I also have no desire to hurt the folks who work there and have nothing to do with these bonuses.

I am so pi$$ed off right now. I truly hope someone comes up with a way to avoid this misuse of funds to pay bonuses. One person I heard, Barney Frank, I do believe, suggested that the bonuses go forward and then fire them so that they have no job! Hmmmmmmmm. An interesting alternative.
I suggest that they defer the bonuses until the company is profitable.

[sparks19]

this is outrageous and obama better put a stop to it.

I wonder how many other companies that the government has given all this bail out money to are doing the same sort of thing.

The fact that they NEEDED to be bailed out shows they don't know how or care to manage their money responsibly...so WHY are we giving them more to bail them out of a mess they created themselves. lets give them MORE money so they can p!ss THAT down the drain too.

Now whenever the next bail out check is written for the next company I hope people remember this.

[moosmom]

AMEN Sparks19 and SasVermont!!!

[momoffuzzyfaces]

You know, AIG may think it's too big to fail but it seems to be determined to anyway no matter what. Anyone with the sense of a two year old would know you can't keep paying bonuses with money you don't have in the first place. What would they do if they had not received any bailout money?

This is just disgraceful!!!

Maybe the government should audit the books of any company who claims to need a bailout and see if they really need one of just need new management. Heck there are plenty of good honest people out there who could do a better job of running some of those companies than the over paid, stuffed shirts who are getting fat on other people's money.

[carole]

I saw Obama being interviewed this morning regarding this, he was so furious, he was all choked up with anger and said as much.

Gosh my hubbys life insurance is with AIG, i wonder if i should change, they keep re-assuring us it is ok down under, but who really knows eh?

yes i have heard that we don't want to let this company go under either, would be devastating, but to read this makes my blood boil too.

Donna i am with you, everyday i feel depressed and scared just hearing all the bad news about the economy, it is all you see on the news and things like how safe is your job? etc etc, i am sick of it too,we all know it is not good, but why concentrate on the bad stuff all the time, let us hear the good news stories for once,yep i want to be an ostrich too right now.

[moosmom]

Carole,

Come on over girl, I share some sand with you!!!

Then there's the Octomom who was on Dr. Phil this morning. She has NO CLUE!!!! Her father bought a house and it's being renovated for the safety of the kids. The neighbors are up in arms about all the news trucks and paparazzi hanging out. Can't blame them.

Speaking of her head being in the sand, she's showed not one ounce of gratefulness to a group who is helping her get situated and will help with the 14 kids for 18 months. UGH!!! Someone needs to biatch slap this idiot. Poor kids.

Oh yeah, and while I'm on my soapbox, the college she wants to return to is "making arrangements" for her to drag her 8 babies to class with her!!!! I see tuition going up as we speak. :mad: :mad: Too bad my baby making days are over. I'd be rich!!

*stepping down off the box and walking away shaking head*

[sasvermont]

Bailout King AIG Still to Pay Millions In Bonuses
Geithner Gets Firm To Make Revisions
By David Cho and Brady Dennis
Washington Post Staff Writers
Sunday, March 15, 2009; A01

Insurance giant American International Group will award hundreds of millions of dollars in employee bonuses and retention pay despite a confrontation Wednesday between the chief executive and Treasury Secretary Timothy F. Geithner.

But the company agreed to revise some executive payments after what AIG's leader, Edward M. Liddy, called a "difficult" conversation.

The bonuses and other payments have been exasperating government officials, who have committed $170 billion to keep the company afloat -- far more than has been offered to any other financial firm.

The issue came to a head when Geithner called Liddy and told him the payments were unacceptable and had to be renegotiated, said an administration official who was not authorized to comment on the Geithner conversation.

In a letter to Geithner yesterday, Liddy agreed to restructure some of the payments. But Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

Lawyers at both the Treasury Department and AIG have concluded that the firm would risk a lawsuit if it scrapped the retention payments at the AIG Financial Products subsidiary, whose troublesome derivative trading nearly sank AIG. The company promised before the government started bailing out the firm in September that employees would be awarded more than $400 million in retention pay this year and next.

"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote.

At the same time, the company said in documents provided to the Treasury, any steps that encourage specialists at AIG Financial Products to leave could open the U.S. government to further risk because of the hazards still posed by the $1.6 trillion portfolio of complex derivatives those employees are working to dispose.

AIG's top seven executives, including Liddy, already agreed in November to forgo their bonuses through this year. Last week, AIG agreed to restructure bonuses for the next 43 highest ranking officers at the company, who are to receive half of their bonuses -- which total $9.6 million -- immediately, the administration official said. Another quarter of that would be disbursed on July 15 and the rest on Sept. 15. But these last two payments would depend on whether the company makes progress in restructuring its business and paying back taxpayers.

In addition, federal officials plan to recoup some of this bonus and retention pay in restructuring the company, an administration official said.

Officials at the Treasury Department and the Federal Reserve took over AIG in the fall, fearing one of the world's most successful conglomerates had grown so intertwined with the global economy that the firm's impending failure could have disastrous consequences.

In return for the bailout, the government took an 80 percent ownership stake in the company. Liddy was recruited by former Treasury secretary Henry M. Paulson Jr. to run the company. Since then, the rescue package has ballooned. But both the Bush and Obama administrations have been reluctant to completely and explicitly nationalize the company, though this could have avoided the current flap over bonus payments, first reported by The Washington Post.

AIG officials said debate over the bonuses and retention pay has been simmering for months. During the past year, the company has repeatedly disclosed these payments in public financial filings. But as lawmakers increasingly clamored for details of their size, outrage grew in Congress and beyond.

Although the AIG Financial Products unit is proceeding with the payments, Liddy said the company would try to reduce future retention pay by at least 30 percent. In addition, the 25 highest-paid employees at Financial Products have agreed to reduce their salary to $1 for the remainder of 2009, Liddy wrote. Salaries for the rest of the firm's employees will be cut by 10 percent.

The Obama administration has been sensitive to how companies receiving government bailout money indulge their employees. Spending on jets, extravagant office furniture and bonus checks -- while not always a significant portion of corporate spending -- sours the public's view of the financial rescue effort at a time when the administration is considering asking Congress for billions of dollars more to help banks.

AIG officials say that some of the upcoming bonuses are relatively modest once they are divided among employees. About 4,700 people in the company's global insurance units are receiving $600 million in retention pay. In addition, about $121 million in corporate bonuses will go to more than 6,400 people, for an average payout of about $19,000, according to AIG.

"These are not Wall Street bonuses," said one AIG executive, who was not authorized to speak on the record. "This is an insurance company." That executive also noted that the retention bonuses at AIG Financial Products were put in place in early 2008 at a time when it hadn't yet melted down. "They knew that the book was running into trouble," the executive said. "They thought they could weather the storm. But they thought they needed to keep people in their seats. They were worried."

Then, of course, everything changed. Financial Products kept posting bigger and bigger losses, burying AIG under a cash crunch from which it has not recovered.

Since that collapse, company officials say, many Financial Products employees have lost nearly two-thirds of their compensation under the firm's deferred payment plan, in which bonuses are doled out over several years based on the firm's profitability.

The new cutbacks raise the risk that more employees will depart before the firm can be wound down and closed.

"These employees are highly specialized and/or are part of businesses that control billions of dollars of revenue and value that will be needed to repay the U.S. taxpayer," Liddy wrote in a letter last month. "Our competitors understand how valuable our top executives are, and we are acutely aware that they would like to siphon off our most talented leaders."

Over time, both the amount of retention pay and the number of recipients throughout AIG have grown.

Since taking over the rescue effort of AIG, the Obama administration has imposed stricter compensation rules, banning golden parachute payments for executives leaving firms and barring executive compensation above $500,000, except in the form of stock that cannot be cashed in until the government's loans are paid back.

But the government could not revoke bonuses promised before the government's rescue efforts began, officials said.

Sen. Christopher J. Dodd (D-Conn.), a leading critic of excessive executive compensation, backed a measure earlier this year to curb the practices but it included an exception for bonuses agreed to before Feb. 11, 2009.

[moosmom]

I agree that maybe the feds SHOULD audit some of the big company's books. I smell a fish.

[Randi]

According to news reports, Obama is furious and is going to try and stop it. Another buy out?? What a bunch of bull!!

It boils down to pure, unadulterated GREED!!! :mad: :mad:

It's about time we had a president with brass ones AND a backbone. Hail Obama!!
I just saw this on the news. I REALLY hope Obama will find a way to stop this greed!! :mad: It's a disgrace!! All these imcompetent people... don't they get payed enough already!! How can they sleep - how can they look at their own face in the mirror! :mad:

[sasvermont]

Reuters Blogs
DealZone
Behind the deals and deal-makers

March 13th, 2009

The pizza guy will miss AIG-FP’s business

In Wilton, Connecticut, a bucolic town an hour’s drive from Manhattan, there is nowhere for AIG’s derivatives whiz kids to run, but neither is there a need to hide.

Even as questions of who is benefiting from AIG’s billions of bailout dollars stir resentment on Wall Street, people in Wilton — where AIG Financial Products, the unit that built highly complex trading instruments that eventually gutted the insurer, is based — aren’t throwing any brickbats.

People who live in the area said they have very little interaction with the dozens of businesses based in Connecticut’s dollar-dripping “Gold Coast,” dotted with golf courses and 10,000 square-foot homes.

Even local politicians didn’t have much to say about AIG-FP. “Ordinarily, I would be happy to answer your questions, but in this case I really have no knowledge of the company other than it is there,” said John Kalamarides, the local Democratic Town Committee chairman.
Michael Tucker, a professor of finance at the nearby Fairfield University, said the university’s business school engages with hedge funds and other financial institutions (in southwestern Connecticut, they’re a dime a dozen) from time to time, but recalled interactions with AIG Financial Products as being minimal.

“I went to one of their (AIG) meetings when Larry Summers was one of the speakers last fall,” Tucker said, jokingly adding, “seems like no one was talking about it at the time.”

Since it moved to Wilton in 2000, AIG-FP seems to have kept a low profile in the town of about 18,000, which seems eons removed from the bustle of Wall Street finance, with its gently rolling hills and colonial-style houses.

But with a median home price of about $750,000, Wilton is no stranger to wealth. Many of its residents work in trade, finance, real estate or services. Why, the town even has a triple A bond rating from Moody’s — the same rating that was once a source of great pride for AIG and helped the Wilton unit to insure so many billions worth of debt derivatives.


The AIG unit’s low profile could be because it only employs about a hundred people. Also, the unit is located on the second floor of an office park on the southern tip of Wilton, along a corridor of strip malls and nail salons about five miles from the heart of town.

The 50 Danbury Road office complex, a 220,000 square foot space that rents at about $40 per square foot, is typically hush-hush in the manner of corporate environs, with all the trappings — tennis courts, a nice gym, inoffensive abstract paintings on the walls, artistic floral arrangements, a cafe that features pan-seared mahi-mahi, red chili-rubbed salmon and other upscale fare.

The AIG-FP employees were pretty tight-lipped when asked about the mood in their office. “I can tell you for sure, it isn’t business as usual,” said one worker. “I’ve got more important things to think about, so I must respectfully decline,” said another, when I asked him if the nervousness was palpable inside.

But one guy sure was upset at the news of AIG winding down its Wilton business. Dan Letizia, who runs Letizia’s Pizza with his brother in Norwalk, one town over, said he’s been delivering pizza to AIG-FP workers for years.

But “they’ve been ordering a lot less lately, ever since the financial mess happened,” Letizia said. “Will we go out of business because of AIG? No. But will we be affected? Yes!”

(Photo 1: A $2.5 million, 6BR home for sale in Wilton; courtesy Hastings Real Estate website. Photo 2: Reuters)

Here is some information on the company:

MISCELLANEOUS FINANCIAL SERVICES
AIG Financial Products Corp.
SnapshotPeople
OverviewBoard of DirectorsCommittees

KEY EXECUTIVES FOR AIG FINANCIAL PRODUCTS CORP.*

Name Board Relationships Title Age
Thomas R. Savage No Relationships President 59
David Ackert No Relationships Head of Transaction Development Group and Energy Group --
Thomas Bruch No Relationships Managing Director --
John Cappetta No Relationships Executive Vice President and Head of North American Marketing --
Karen Fang No Relationships Managing Director --
Thomas Plagemann No Relationships Managing Director --
Matthew Schwab No Relationships Managing Director of Investor Coverage Group --
Russell L. Sherrill No Relationships Managing Director

[sasvermont]

A Meek Ending For Mighty Unit That Gutted AIG
By Brady Dennis
Washington Post Staff Writer
Saturday, February 21, 2009; A01

WILTON, Conn. -- In this small town an hour north of Manhattan, in a bland office park alongside suburban strip malls and gas stations, the unit that wrecked American International Group is dying a slow death.

The employees of AIG Financial Products are mostly in their 30s and 40s. They roam the firm's open trading floor in khakis, button-down shirts and sweaters -- a far cry from the pinstriped pandemonium of Wall Street. Everything appears perfectly normal, from the ringing phones to the meetings unfolding in glass-walled conference rooms to the company newsletters arranged neatly on a lobby table.

But the mission of this once-mighty enterprise has shifted in recent months. Once a virtual money factory, Financial Products is no longer growing and profiting, but shrinking and fading. Its workers, once power brokers of billion-dollar deals, are methodically extracting the firm from a tangled web of transactions that bound it to nearly every major financial institution in the world.

In recent years, Financial Products wrote a series of private contracts that faltered and came back to haunt its parent company in a very public way, leaving the insurance giant on the brink of collapse. Fearing that the failure of AIG could send shock waves throughout the financial system, the federal government stepped in last September with the single largest bailout of a company in U.S. history, a total rescue package of up to $152 billion.

Taxpayers now own nearly 80 percent of AIG. Federal officials are closely monitoring the company's operations and even signing off on key corporate decisions.

In November, AIG hired veteran Morgan Stanley executive Gerry Pasciucco to dismantle Financial Products, to terminate its outstanding trades, eliminate as much risk as possible and shut down its offices around the globe.

"My task is very narrow and very limited," Pasciucco said.

He is a grim reaper of sorts. His task is to take a firm that was once a darling of the financial world and make it go away.

* * *

As word came of the federal bailout in September, a cloud of disbelief and disgrace settled over Financial Products. The firm founded on avoiding risk was suddenly synonymous with recklessness and ruin.

"It was a horrifying experience, watching it happen," said Jim Haas, the firm's co-leader of North American marketing and an employee since 1996. "There was a real badge of honor that one carried when they were able to tell people they worked for AIG, and in particular for AIG Financial Products. That vanished in a flash."

For years, the firm carved out a reputation as an innovative force envied and emulated on Wall Street. It made billions of dollars in the complex world of financial derivatives. But in 1998, executives approved a break from the firm's cautious past. Financial Products began writing credit-default swaps, which essentially insured a company's debt in case of default.

Executives at Financial Products viewed the swaps as "free money" because computer models showed almost no chance of ever having to pay out. But the swaps contracts included provisions requiring the company to put up cash as collateral if AIG's Triple A credit rating ever fell. When those downgrades came, signaling that AIG was no longer as reliable as it once had been, companies like Goldman Sachs that had done business with Financial Products demanded it put up billions of dollars.

By the end of 2007, AIG had suffered write-downs of nearly $8 billion on Financial Products' credit-default swap portfolio. The first two quarters of 2008 brought another $9.5 billion in paper losses.

"AIG bet the ranch on a business that wasn't part of our core business," current AIG chairman Edward Liddy said. "And when things seized up, we paid a hell of a price."

Only when Pasciucco arrived at the Wilton headquarters in November did he discover the full scope of winding down Financial Products. The firm had $2.7 trillion worth of swap contracts and positions; nearly 50,000 outstanding trades; 2,000 firms involved on the other side of those trades; and 450 employees in six offices around the world.

"Most of the business was written here appropriately," he said.

But the failure to prepare for the collateral calls had proved a fatal miscalculation. The firm had written contracts that lasted 50, even 70 years, but had not adequately guarded against the volatility that could bankrupt it along the way.

"If you don't account for that liquidity need, you can blow up the business," Pasciucco said. "That is really the fundamental problem."

As the collateral calls kept coming, the Federal Reserve Bank of New York announced in November it would create a separate company, dubbed Maiden Lane III, to help alleviate AIG's cash crunch caused by the credit-default swaps written by Financial Products. By buying up the underlying mortgage-related securities, the government freed Financial Products to terminate billions of dollars in credit-default swap contracts that had plagued AIG's balance sheet. So far, the government has poured more than $60 billion into the effort.

Pasciucco meets weekly with Federal Reserve employees, "making sure they're fully briefed on what we're doing and what our plans are," he said. In addition, four workstations on the firm's trading floor are reserved for Federal Reserve staff members who regularly visit Wilton. The Fed team sits in on steering committee meetings and must grant a waiver whenever the firm wants to make debt payments.

A bespectacled Harvard Business School alum who runs and plays squash, Pasciucco was a logical choice to oversee the unwinding of Financial Products. He had spent his career working in capital markets. A colleague at Morgan Stanley who was advising the government on the AIG bailout asked Pasciucco whether he'd be willing to help out, and he agreed.

Pasciucco devised a plan early on to divide the firm's portfolio into 22 groups, or "books," of business -- from foreign exchange to interest rates to commodities -- with the intention of closing them out one at a time. The goal was partly to help AIG pay back the government loan, but mostly to stem any further losses.

"You want to look across every one of your books and say, 'Where could I be surprised?'" said Pasciucco, 48. "Where I can be surprised, I want to get rid of that. We're trying to get rid of complexity and risk."

He approached about a dozen counterparties, all major banks in the United States and abroad, about buying Financial Products' holdings. He promised these firms favorable access to the company's holdings in return for their help in addressing Financial Product's need for cash.

"We've described each of the books to them," he said. "They've identified which books they may have an interest in. We've tried to make this a mutually beneficial relationship."

As a result, the firm has cut the number of outstanding trades by 25 percent, with the primary focus on reducing risk.

Last week, it announced the sale of two groups of financing contracts from its energy and infrastructure sectors, worth $60.5 million. That comes on the heels of an agreement last month to sell its commodity index business. There are more sales in the pipeline, Pasciucco said, but the complexity of many deals and unfavorable market conditions require patience and caution. Staffing numbers have fallen to 370 from 450, and the firm plans to close its Tokyo and Hong Kong operations this year.

Ultimately, Pasciucco hopes to have the riskiest fires at Financial Products mostly extinguished by the end of 2009.

"There are definitely some views that there's no way you can reduce a book of this size in less than four or five years," he said. "My view is we're going to break the back of the risk in 12 months."

* * *

The potential for disaster remains.

"There are going to be surprises," Pasciucco said. "There always are."

Few surprises could be worse than further downgrades in AIG's credit rating. Another slip could trigger a new round of collateral calls from Financial Products' counterparties and sink the parent company deeper into debt.

There's also the specter of investigations on both sides of the Atlantic. Last week, Britain's Serious Fraud Office announced that it had opened a preliminary investigation into the Financial Products' London operations, "to determine if there has been criminal conduct," according to the agency's director. Meanwhile, the FBI has been scrutinizing whether executives at AIG knowingly concealed mammoth losses that helped lead to the company's downfall. AIG has vowed cooperation in both investigations.

Then there is the thorny issue of the employees who remain at Financial Products. They are literally working themselves out of a job. As each set of business falls away, so do the people working on it.

"In a situation like this, it's hard to keep everybody on task, motivated, focused. People know they are going to be out of jobs," Pasciucco said. "So they are constantly doing that calculus in their heads, as to what's left in terms of what I get paid here? What can I get paid in a new career? When should I start my new career?"

For the better part of two decades, Financial Products had been a place where workers raked in princely sums, even by Wall Street standards.

Since the collapse, many Financial Products employees have lost nearly two-thirds of their compensation under the firm's deferred payment plan, in which bonuses are doled out over several years based on the firm's profitability.

"It's like the stock going to zero," Pasciucco said. "It's been wiped out."

Still, employees who stick around are eligible for hundreds of millions of dollars in retention payments -- half next month and the rest in March 2010 -- a practice that has roiled some members of Congress and further stoked public anger. Executives say the payments are justified because few people possess the expertise to handle the mind-bending transactions at Financial Products.

Haas, the Financial Products veteran, said no one at the firm is looking for sympathy. "The whole world hurts right now," he said. But he said the vast majority of current employees had no role in the problems that wrecked the firm, and many feel a measure of shame and guilt for how its troubles spread to AIG and helped poison the economy.

"People have great pride in this organization. Everyone is horrified at what happened," he said, adding they are determined to close down the firm with dignity and professionalism. "There's a duty. We owe it to AIG. And now we owe it to the government and the taxpayer."

These days, Haas avoids telling people where he works. But he and the others who remain still show up each week at the office park off Danbury Road. They keep framed pictures of smiling children on their desks. Letizia's Pizza in Norwalk still delivers each night to those who stay late, chipping away at the pieces of Financial Products until it is finally gone.

"The great irony in it," Haas says, "is the better job we do, the sooner we'll be out of a job."

[Puckstop31]

To AIG: This is what you get when you take the peoples money. You become subject to government intervention. Kinda like slavery. You are reaping that which you have sown.


To our benevolent leader: Kudos... As long as you do not overstep your bounds here and use this "crisis" to get your hands on more power over private business. I can't help but think you quietly like the fact that this happened. The people are pissed, but not at you right now. They now have another evil "they" to point their fingers at.


To We the People: We have good reason to be pissed off. But be careful where you point that anger. Be vigilent of government overstepping their bounds here. It will be very easy to allow government more control over private companies and how they spend their money. Stupid companies that took public money deserve every little bit of control they recieve. But it would also be very easy for Congress to sneak some bill thorugh that allows the feds to poke their nose where it does not belong.


MoosMom: "Hail"? Seriously? Obama is like a God to you?

[sasvermont]

You know Puck, you have a way of pissing off so many people here. Why don't you grow up a little. You are like a kid in a school yard, always trying to pick a fight. What is your problem?

[lizbud]

The trouble now is non regulation going on for the past 8-10 years.
The SEC should be broken up & re-staffed with competent people. They
all looked away from downright fraud in business practices.

I did read a recent article that told about money man Buffet's warning
from back in 2002.

http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7BB9E54A5D-4796-4D0D-AC9E-D9124B59D436%7D

[sasvermont]

http://opencrs.com/document/R40249

This might help explain. I haven't read it completely....but it looks informative.

:rolleyes:

[moosmom]

Puckstop,

Get over yourself will ya? Crawl back under the rock you slithered out from.

[carole]

Puckstop it is obvious you don't know Donna very well, or you would not have made such a silly remark.

I have to agree you seem to like to stir things up here.,but hey you are entitled to your opinion like everyone else .

[cassiesmom]

I saw Rep. Frank from Massachusetts (?) or Connecticut (?) on the "News Hour" with Jim Lehrer on WTTW. I don't know much about either Frank or Lehrer (conservative vs. liberal). But Frank said 2 things I had not thought of. The first one makes sense to me. The second one, I don't know how they would make that work.

First - When this bail-out was being planned at the end of the Bush administration into the beginning of Obama's Presidency, the government gave the money to AIG with no conditions attached to it. That is, they did not tell AIG beforehand that AIG could not use the money to pay bonuses -- whether the people who were up for bonuses were entitled to them or not.

Also, since the government has now given AIG so much money, they pretty much own the company, so theoretically they are entitled to some say in how that money is distributed. (this was Rep. Frank talking)

However, AIG contends that they need to pay bonuses to retain the best people in order to earn back the funds to repay American taxpayers.

*sticks head in sand*

[blue]

A little perspective here, from what I can tell the bonus's and retention pay amount to $730.6 million. $730.6 million out of $170 billion is 0.1013%.

AIG got the money without enough strings attached.

[Puckstop31]

Puckstop,

Get over yourself will ya? Crawl back under the rock you slithered out from.


Good grief people....

Just good grief....

[Puckstop31]

You know Puck, you have a way of pissing off so many people here. Why don't you grow up a little. You are like a kid in a school yard, always trying to pick a fight. What is your problem?

I am not trying to pick a fight. I just think differently than you do.

Why is it that so many here see a differing opinion as a threat?

[Edwina's Secretary]

One of my issues with the situation is with the use of the word "bonus." If it is a contractual obligation (as has been represented) then it is not a bonus. The phrase "guaranteed bonus" is an oxymoron. It is not a bonus if it is guaranteed. A bonus is something extra - usually based on results or some unknown (at the time the potential bonus is established)outcome.

This imprecise use of the word "bonus" only further confuses the situation.

[joycenalex]

why did T sec paulsons' people in sept 08 not know about the april 08 contracts "requiring" these "bonus" to be paid ? why did the former Treasury sec people fail to do due diligence in learning about ALL of the obligations that the US taxpayers were about to buy, were those members of sec paulsons staff incompetent to do their job ? seems that AIG did commit fraud in failing to reveal ALL of their contracts, and fraud is a reason to not pay those bonuses. if AIG is "too big to fail", when will the dept of justice break up this criminal monopoly? the arrogance of the AIG execs is beyond simple corporatism, they are delusional that there will be no repercussions.

[smokey the elder]

Probably the same reason that the toothless and clueless SEC missed Madoff's scam right under their noses.

Even though the "bonuses" are a small fraction of the bailout, it's the principal of the thing. There is a so-called "clawback" option which almost always has failed in the past, but may work here.

Congress, especially the House, will be extremely resistant to any further bailouts, so the banks, auto industry, etc. had better have their act together to wisely spend/invest what they have been lent so far.

[pomtzu]

I am not trying to pick a fight. I just think differently than you do.

Why is it that so many here see a differing opinion as a threat?

I too used to think that you were a jerk, but I can say that I view you in a different light now.

You are obviously a very intelligent man, rather opinionated, and definitely controversial. Does that mean that your views are wrong while others' are right? I personally don't think so. I don't necessarily agree with a great deal of what you you say, but I see no need to accuse you of trying to pick a fight or stir up trouble. You are entitled to your opinion, and to be able to state it without being attacked and accused, as is everyone else who posts here. The pendulum swings both ways also.

This is The Dog House - a place for not only controversial subjects, but controversial people as well. Slinging mud at each other accomplishes nothing more than more of the same.

[caseysmom]

I too used to think that you were a jerk, but I can say that I view you in a different light now.

You are obviously a very intelligent man, rather opinionated, and definitely controversial. Does that mean that your views are wrong while others' are right? I personally don't think so. I don't necessarily agree with a great deal of what you you say, but I see no need to accuse you of trying to pick a fight or stir up trouble. You are entitled to your opinion, and to be able to state it without being attacked and accused, as is everyone else who posts here. The pendulum swings both ways also.

This is The Dog House - a place for not only controversial subjects, but controversial people as well. Slinging mud at each other accomplishes nothing more than more of the same.

Agreed, I did not see Puck trying to start a fight.

[Puckstop31]

Congress, especially the House, will be extremely resistant to any further bailouts, so the banks, auto industry, etc. had better have their act together to wisely spend/invest what they have been lent so far.

I honestly hope that this would be true... But I don't see it in the cards. Reckon that comes my view that a lot of elected officials, from both sides of the aisle, see this as an opportunity to gain more power.

But I really, really hope that Congress does not try to pass any more bailouts. History, recent (Japan) and not so recent (The first new deal, the German Weimar Republic), shows us that this kind of "stimulus" does almost nothing to revive ailing economies.

[moosmom]

I also agree that everyone is entitled to their opinion. I take offense when he directs his hostility towards me and MY opinion.

[Puckstop31]

I also agree that everyone is entitled to their opinion. I take offense when he directs his hostility towards me and MY opinion.


I am sorry if you misconstrued my question about your use of the word "hail". It was simply an honest question, with no intention of hostility.

It sends shivers down my spine when people use the word "hail" when talking about elected officials. Remember "Heil Hitler"?

[sasvermont]

This entire banking/financial problem sounds like a huge Ponzi scheme to me. For months I heard comments via various Public Radio stories and on the net, about the mortgage companies dealing with only certain appraisers, ones that would give them a figure they want rather than what was true, homes being worth three times what they were worth 20 years ago....... Others complained about the adjustable rate mortgages and how they were going to come back to bite some butts. There were so many people saying the system was set to fail - and it has been failing for quite some time, we just didn't see it come to a head until this past fall season. Was it sooner than that?

I don't think there is any one solution AND we will get through it. We have been in banking trouble before - just less seriously. This is an international problem.

Printing money? No bail outs? Bail outs? I surely hope we learn our lesson from this **&(*&( mess.

As far as Japan and it's problems years ago, well, from what I have read, they didn't put enough money into their system soon enough and long enough, thus taking 10 years to dig out of their recession. The recession (if you will) right now is WORLD wide, not just the USA. We have nothing to compare it to, as far as I know.

As far as AIG goes, well, give them their ())&&&*^& bonuses and then let the Financial Products division fold. Let them find new jobs, listing AIG, FP on their resumes. Good luck with that.

I think the greed factor is/was our worst enemy and in some strange way, we are all guilty of wanting to earn more money on our investments, own bigger homes, drive faster gas guzzling cars, having babies we cannot now afford to educate and in some cases, feed. But we didn't sign up for the scheme part of it and we aren't getting a bonus for participating. We are getting the debt to bail out this mess. I suppose, we share that with the creeps at the top of the scheme chain, as they too, will be asked to pay taxes - maybe!

[moosmom]

I didn't misconstrue ANYTHING. I was saying "Hail Obana" because the song that's played whenever ANY President of the United States walks in the room is "Hail to the Chief".

You were just looking for an argument and you're not getting it.

[Puckstop31]

As far as Japan and it's problems years ago, well, from what I have read, they didn't put enough money into their system soon enough and long enough, thus taking 10 years to dig out of their recession.

My opinion is that its not about the amount of money put into the system, but how the money is put into the system. Creating money out of thin air and then using it for things that do not create new products and/or services is a bad idea. Because if no new products/services are created with the "stimulus" you get massive inflation after the stimulus money is spent. Because all that "new" money ends up chasing the same amount of products and services. Its basic economics.

Better to let the economy (read: citizens and business) simply keep more of the money they already have via lower tax rates. This allows the economy to have REAL growth. This method is also good for government. Because as new wealth is earned, rather than created, government gets more revenue taxing it at the lower rate. It is a time proven method.

Capitalism is by no means perfect, because you will always have greedy people abusing it. But as situations like Bernie Madoff show, what goes around, comes around.


The recession (if you will) right now is WORLD wide, not just the USA. We have nothing to compare it to, as far as I know.

The depression of the 1930's was a global event. It was made worse by massive government interference. We should have learned from how rapidly the recession/mini depression of 1920 was overcome. Government simply let the market right itself.



I think the greed factor is/was our worst enemy and in some strange way, we are all guilty of wanting to earn more money on our investments, own bigger homes, drive faster gas guzzling cars, having babies we cannot now afford to educate and in some cases, feed. But we didn't sign up for the scheme part of it and we aren't getting a bonus for participating. We are getting the debt to bail out this mess. I suppose, we share that with the creeps at the top of the scheme chain, as they too, will be asked to pay taxes - maybe!

I do not think there is anything wrong with wanting a better life for you and your family. I mean, it IS the promise of this nation. Life, Liberty and the Pursuit of Happiness. We just need to understand that we are NOT promised equal results.

Equal people are not free and free people are never equal.

I know it is difficult for some to understand this. We as a people are caring, compassionate and kind. We do not like to see people suffer. But in a free society, those are the breaks. Of course there needs to be a method to provide for people who are truly in need. But only enough to renew their OWN ability to pursue their OWN happiness. A hand up, rather than a hand out.

[Puckstop31]

I didn't misconstrue ANYTHING. I was saying "Hail Obana" because the song that's played whenever ANY President of the United States walks in the room is "Hail to the Chief".

You were just looking for an argument and you're not getting it.

Fair nuff' I reckon. And of course I was looking for an "arguement". (I prefer the word discussion.) Isn't that the entire point of this part of the board?

FWIW, "Hail to the Chief" gives me that same shudder.

[sasvermont]

Puck, you seem to have all the answers. AND you are right! Why don't you go to DC and discuss your thoughts with the politicians? They might understand it better than the folks here.

I haven't enjoyed reading many of your comments because you come off as a Mr. Know-it-all. You are abrasive and brash and simply not a gentleman.

You cannot ram facts down people's throats and expect them to have fun with it. You take the fun out of debating. You insult people.

You need a new style Puck. It is getting old.

[sasvermont]

House bill would slap surtax on AIG bonuses
Tue Mar 17, 2009 11:41am EDT
WASHINGTON (Reuters) - A Democratic U.S. congressman said on Tuesday he has introduced a bill that would slap a 60 percent surtax on large bonuses to be paid to executives at bailed-out insurer American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz).

Michigan Democratic Rep. Gary Peters introduced the bill and has picked up five co-sponsors. He said in a statement that the bill would "create a 60 percent surtax on bonuses over $10,000 to any company in which the U.S. government has a 79 percent or greater equity stake in the company. Currently, AIG is the only company that meets this threshold."

(Reporting by Kevin Drawbaugh; Editing by Leslie Adler):eek:

[lvpets2002]

I too used to think that you were a jerk, but I can say that I view you in a different light now.

You are obviously a very intelligent man, rather opinionated, and definitely controversial. Does that mean that your views are wrong while others' are right? I personally don't think so. I don't necessarily agree with a great deal of what you you say, but I see no need to accuse you of trying to pick a fight or stir up trouble. You are entitled to your opinion, and to be able to state it without being attacked and accused, as is everyone else who posts here. The pendulum swings both ways also.

This is The Dog House - a place for not only controversial subjects, but controversial people as well. Slinging mud at each other accomplishes nothing more than more of the same.

:cool: I so aggrree.. Could we have a Ref please..

[Catty1]

I so aggrree.. Could we have a Ref please..

Orc? ;)

[lvpets2002]

Orc? ;)

:p Good One Candace.. Ok Orc is going to be the Ref here for now..

http://i22.photobucket.com/albums/b335/lvpets2002/180px-STAGE_ORC.jpg

[pomtzu]

:p Good One Candace.. Ok Orc is going to be the Ref here for now..

http://i22.photobucket.com/albums/b335/lvpets2002/180px-STAGE_ORC.jpg

I think it's a shame that we should need one in the first place! :eek: IMO of course. :p

[lvpets2002]

I think it's a shame that we should need one in the first place! :eek: IMO of course. :p

:cool: Yup I think children could DeBate better than this.. And just think we are the Adults here & to teach the children how to act.. MMmm whats wrong with this picture.. :rolleyes: Like you said we need to read & see more deeper than the Cover of a Book or Person..

[moosmom]

Puckstop,

How about we agree to disagree. Fair?? Friends??

[pomtzu]

Ready for Round 2.........:D

[lvpets2002]

Ready for Round 2.........:D

:p Yup let the Mud Slinging Begin.. I see why this chick has shorts on.. :D

[momoffuzzyfaces]

One of my issues with the situation is with the use of the word "bonus." If it is a contractual obligation (as has been represented) then it is not a bonus. The phrase "guaranteed bonus" is an oxymoron. It is not a bonus if it is guaranteed. A bonus is something extra - usually based on results or some unknown (at the time the potential bonus is established)outcome.

This imprecise use of the word "bonus" only further confuses the situation.

I agree. AIG knew it was in big trouble long before the rest of us heard about it. Why on earth would they write contracts guarenteeing big bonuses when they knew they were sinking? Can they not spell the word DUMB? :p

Of course, the Bush administration didn't help anything by giving them the first bailout with no restrictions. :rolleyes:

[RICHARD]

I vote for Pay-per-view Seppuku!

I'd even buy front row tix for that one!

Of course, it would take a while to saw thru all the fat on them bees turds!

--------------------------

My satisfaction is knowing that they all had become accustomed to a lifestyle that should end real soon.

11 top level managers left AIG overnight. The list of 'goodies' that they made that were to be purchased with their BONUSES/MERIT RAISES is worth about 2 cents or the price of the paper it's written on.

What people do not understand is that they are all panicking trying to figure out how they are going to pay for the maids, kid's college tuition, town cars, vacations, gardeners and spa treatments.

Good, I hope they all find out what the 10 most popular Top Ramen flavors are.

----------------------

That's the scariest part about climbing that corporate ladder. Sometimes the people holding on to the base have had enough and go to lunch.

Hold on, it's a long way down.

----------------------


Add and "e" to Bonus and you get the answer to the bailouts.:confused::(:o

[Puckstop31]

Puck, you seem to have all the answers. AND you are right! Why don't you go to DC and discuss your thoughts with the politicians? They might understand it better than the folks here.

I haven't enjoyed reading many of your comments because you come off as a Mr. Know-it-all. You are abrasive and brash and simply not a gentleman.

You cannot ram facts down people's throats and expect them to have fun with it. You take the fun out of debating. You insult people.

You need a new style Puck. It is getting old.

<sigh>

I clearly do not have all the answers. Also, I have said before that I enjoy posting here because most of the opinion differs from that of mine. I am here to LEARN things. But also on that note, I AM a political, history and news junkie. As such, I think I am up to speed on the current goings on. Also, I read a LOT of history books by a lot of authors. Its just my thing.

Yes, in the past I was way more abrasive than I should have been. I have, repeatedly, apologized for it and am trying to move on.

My last responce to you... What did I say that makes you think I am all the things you called me? I honestly want to know. I thought I was very civil. You made a good and well thought out post, offering your opinion. I replied to it with mine. It was not an attempt to insult you, or one up you.... It is debate/discussion.

Discussion might be more fun when you are talking to people with whom you agree, but that is not debate.

I think, perhaps, you need to give me a chance top prove to you all that I have changed a bit?

[Puckstop31]

Puckstop,

How about we agree to disagree. Fair?? Friends??

Fair Dinkum. :)

[sasvermont]

I found this on the internet and don't know how accurate it is or is not, but none the less, it makes me feel a tad better, knowing that this banking fiasco and financial meltdown was just about due!

A sample of great financial and economic crises since 1870:

2008-09

Global credit crisis arising from U.S. mortgage markets

1999 to 2002

Argentina economic and banking crisis; GDP fell 15% in two years

2001

Tech bubble bursts

1998

Russian ruble crisis

Collapse of Long Term Capital Management fund

Japan bank rescue

1997-98

Asian currency crisis

1995

Mexico peso crisis

World Bank bailout of Argentina's banks

1989-93

Finland's per capita GDP falls 12.4% in wake of Berlin Wall falling

1991

Japan real estate bubble bursts

Early 90s

Swedish banking crisis

1989-91

U.S. Savings and Loan debacle, rescue cost 5% of U.S. GDP

1944-47

U.S. per capita GDP contracts 16.5%

1939-45

Second World War

1929-33

Great Depression: U.S. per capita GDP drops 29%;

Canada's falls 34.8%

1918-21

U.S. financial panic; 11.8% drop in per capita GDP

1906-08

Failure of U.S. banking trusts, per capita GDP falls 10.5%

1914-18

First World War

1893-97

U.S. recession and banking failures

1873-78

U.S. recession and banking failures

1874-78

11.7% contraction in per capita GDP in Canada

- - -

[smokey the elder]

I see your point about economic booms & busts. I think some things make this one different (all this strictly my lay opinion):

1. I thought the option ARMs were so much rope a number of years ago (as in give someone enough, they'll hang themselves.)

2. Point #1 was exacerbated by greedy brokers writing fraudulent mortgage paper.

3. This fraudulent paper gets mixed in with perfectly legit, albeit risky, other subprime paper and gets sold to a hedge fund.

4. Said hedge fund is insured by AIG.

5. Housing prices crash, and ARMs reset, setting off the detonator!

6. Banks become super risk-averse, not lending. Credit enters an Ice Age.

7. The whole economy is dragged down by this mess.

Here's why I think the "bailouts" are the best of a bunch of lousy options: a. Very early data suggest that they may be working. b. This won't be the first time (S&L meltdown, anyone?) that the Fed has had to step in.

Maybe my crystal ball has a bog divot in it. But I think letting the economy "right itself" may take a lot longer (like Japan); but Americans do have a different temperament, and the oil shocks and recession have demonstrated that we can change our habits.

OK, I've rambled on WAY too long!:D:p

[RICHARD]

1998

Russian ruble crisis

Barney Rubble Crisis-BamBam and Pebbles caught playing doctor.

[lizbud]

House bill would slap surtax on AIG bonuses
Tue Mar 17, 2009 11:41am EDT
WASHINGTON (Reuters) - A Democratic U.S. congressman said on Tuesday he has introduced a bill that would slap a 60 percent surtax on large bonuses to be paid to executives at bailed-out insurer American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz).

Michigan Democratic Rep. Gary Peters introduced the bill and has picked up five co-sponsors. He said in a statement that the bill would "create a 60 percent surtax on bonuses over $10,000 to any company in which the U.S. government has a 79 percent or greater equity stake in the company. Currently, AIG is the only company that meets this threshold."

(Reporting by Kevin Drawbaugh; Editing by Leslie Adler):eek:

This sounds like a great idea. Now, they should just get this moving on
to law. I don't know anyone who isn't PO'd about AIG's demanding endless
outputs of cash.

[Puckstop31]

This sounds like a great idea. Now, they should just get this moving on
to law. I don't know anyone who isn't PO'd about AIG's demanding endless
outputs of cash.


I too think this is a good idea. Not only would it be a vessel where the peoples anger could be tamed, but it would be a wonderful way to convince companies that taking money that is not theirs is a bad way to do business.

But also note that the stimulus bill has language in it that allowed AIG to do what they did. Bonuses were to not be allowed by companies taking the money. But a exception was made, Senator Dodd added it, that did allow bonuses that were contractually obligated to be paid. And as ES mentioned earlier, a contractual bonus is kind of a oxymoron.

I reckon Senator Dodd, who is now verbally frying AIG, learned a little something about hindsight, eh? :)

[sasvermont]

2nd UPDATE:73 At AIG Received Bonuses Of $1 Million Or More - NY AG

March 17, 2009: 03:44 PM ET


(Adds White House comment, comment from AIG spokesman beginning in ninth paragraph.)

By Chad Bray

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- New York Attorney General Andrew Cuomo said Tuesday that American International Group Inc. (AIG) granted retention bonuses of $1 million or more to 73 people in its AIG Financial Products subsidiary, including 11 who no longer work at the company.

In a letter to House Financial Services Committee Chairman Barney Frank on Tuesday, Cuomo said the top 10 bonus recipients combined received $42 million, with the top recipient getting more than $6.4 million.

Cuomo has blamed the unit for the insurer's near collapse last year. The attorney general said 11 people who have left the company received retention bonuses of $1 million or more, with one person getting $4.6 million.

"Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo said in the letter. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing taxpayer bailout. Something is deeply wrong with this outcome."

On Monday, Cuomo subpoenaed AIG seeking details on who received retention bonuses in the financial products unit and copies of the contracts underlying the bonuses. In his letter, Cuomo said AIG has refused to provide the names of those who received bonuses.

Over the weekend, news surfaced that AIG had paid $165 million in retention bonuses to individuals in the financial products unit on Friday.

The $165 million is the latest installment of a retention program that is slated to pay the unit's employees about $450 million. AIG had previously paid out $55 million, and an additional $230 million is pending for 2009.

The bonuses have sparked outrage on Capitol Hill and among taxpayers.

On Tuesday, the White House said it is looking into "all remedies" to recoup the bonuses after President Barack Obama denounced the payouts on Monday.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said Monday. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay."

Frank, D-Mass., told reporters in Washington on Tuesday that the U.S. government, which now controls an 80% equity stake in AIG, should assert its ownership of the insurer in order to block the retention payments. Frank said the government had a better chance of prevailing in court if it acted as an owner, rather than as a regulator intervening in the private sector.

Frank's committee is expected to hold a hearing on the AIG bonuses on Wednesday.

AIG has said it is contractually obligated to pay the bonuses and will make efforts to reduce the retention payments by at least 30% in 2009. The bonuses were negotiated in the first quarter of 2008 when the financial products business was expected to have a "significant ongoing role" at AIG, Chief Executive Edward Liddy said in a letter to Treasury Secretary Timothy Geithner on Saturday.

"We understand the Attorney General's concerns, are in ongoing contact with the Attorney General and will respond appropriately to the subpoena," AIG spokesman Mark Herr said in a statement. "In the meantime, the Financial Products unit continues to work diligently to unwind operations and has made significant progress in doing so."

The insurer has accepted more than $170 billion in U.S. government funding, and government officials have said they may have to pump more money into the insurer if the economy continues to worsen. Earlier this month, it reported a $ 61.7 billion fourth-quarter loss.

In his letter Tuesday, Cuomo said the contracts his office has reviewed contained a provision that required most individuals' bonuses to be 100% of their 2007 bonuses.

"Thus, in the spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before," Cuomo said. "My office has thus begun to closely examine the circumstances under which the plan was created."

Cuomo also said AIG was able to bargain with some of its financial products employees, with those employees taking salaries of $1 in 2009 in exchange for their retention bonus packages.

"The fact that AIG engaged in this negotiation flies in the face of AIG's assertion that it had no choice but to make these lavish multi-million dollar bonus payments," Cuomo said. "It appears that AIG had far more leverage than they now claim."

-By Chad Bray, Dow Jones Newswires; 212-227-2017; [email protected]

(Jessica Holzer and Henry J. Pulizzi contributed to this report.)


(END) Dow Jones Newswires
03-17-09 1544ET
Copyright (c) 2009 Dow Jones & Company, Inc.

:rolleyes::rolleyes::rolleyes::o:o:o

[RICHARD]

2nd UPDATE:73 At AIG Received Bonuses Of $1 Million Or More - NY AG

In a letter to House Financial Services Committee Chairman Barney Frank on Tuesday, Cuomo said the top 10 bonus recipients combined received $42 million, with the top recipient getting more than $6.4 million.

Cuomo has blamed the unit for the insurer's near collapse last year. The attorney general said 11 people who have left the company received retention bonuses of $1 million or more, with one person getting $4.6 million.

"Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo said in the letter. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing taxpayer bailout. Something is deeply wrong with this outcome."

On Monday, Cuomo subpoenaed AIG seeking details on who received retention bonuses in the financial products unit and copies of the contracts underlying the bonuses. In his letter, Cuomo said AIG has refused to provide the names of those who received bonuses.

Over the weekend, news surfaced that AIG had paid $165 million in retention bonuses to individuals in the financial products unit on Friday.

The $165 million is the latest installment of a retention program that is slated to pay the unit's employees about $450 million. AIG had previously paid out $55 million, and an additional $230 million is pending for 2009.

The bonuses have sparked outrage on Capitol Hill and among taxpayers.

On Tuesday, the White House said it is looking into "all remedies" to recoup the bonuses after President Barack Obama denounced the payouts on Monday.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said Monday. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay."

Frank, D-Mass., told reporters in Washington on Tuesday that the U.S. government, which now controls an 80% equity stake in AIG, should assert its ownership of the insurer in order to block the retention payments. Frank said the government had a better chance of prevailing in court if it acted as an owner, rather than as a regulator intervening in the private sector.

Frank's committee is expected to hold a hearing on the AIG bonuses on Wednesday.




Did anyone pay attention before all this happened?

BF's SO was on the board of some high flauting company that had a little to do with our econ problems?

Guard that henhouse!:rolleyes:

[momoffuzzyfaces]

Did anyone pay attention before all this happened?

Is anyone paying attention now? If so, why are they going to send these bozos another bailout payment? :confused:

I would cut them off to sink or swim in their own juices!!!

[sasvermont]

If you have the time, this article is very informative. I cannot believe it but this was written in 1994.

http://findarticles.com/p/articles/mi_m1316/is_n10_v26/ai_15818783

This entire mess is making me sick. We've all been "taken" and boy do I feel really stupid. Not that I could have done anything. Hindsight is 20/20!

I need to step away from this situation before I grab a gun and head for Capitol Hill. Just kidding of course, but boy do I feel we are all being taken to the cleaners. Why the hell weren't these "derivatives" being regulated? Was Greenspan in charge then?

[cassiesmom]

Okay, I have another question that shows how little I truly understand this situation. Remember when the phone companies had to be split up because they constituted a monopoly? They were a lot smaller, and then some of them merged with each other, and then there were more mergers and now there are huge companies again (for example: Illinois Bell -> Ameritech -> SBC -> AT&T). Why was that not done with AIG? Why was AIG allowed to continue to operate as one enormous corporation that was recently deemed "too big to fail", instead of being split out into its component businesses? Will the company be divvied up now, I wonder?

Thanks,
Elyse

[smokey the elder]

Part of the conditions of the "bailout" is that AIG sell parts of itself to pay back Uncle Sam (read: us taxpayers.) Unfortunately, with the credit market mired in the Ice Age, and cash flow nonexistent until recently, there was no one in the market for the pieces.

[blue]

THe same congress braying about bonuses, gives themselves a $93,000 increase EACH* in spending money!!!!??

http://www.youtube.com/watch?v=wNRt9R7S8aM

*Edit