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AIG found $10 Billion in New Debt – Continues to Bend the Truth of Their Money Wasting Ways
According to a report in the Wall Street Journal, AIG is in debt to Wall Street’s biggest firms to the tune of $10 Billion. The liability is due to speculative trades that have gone bad. Unfortunately the terms of the $150 Billion bailout made back in September didn’t cover the types of speculative trades that are causing this debt, leaving AIG again with their hand out asking for more money.
Even worse, the details of the trades seem to imply that AIG was not honest with the extent of its risk-taking actions when they made their appeal for help back in September.
“The soured trades and the amount lost on them haven’t been explicitly detailed before. In a recent quarterly filing, AIG does note exposure to speculative bets without going into detail. An AIG spokesman characterizes the trades not as speculative bets but as ‘credit protection instruments.’”
So let’s recap the extent of AIG’s attempts at bending the truth and wasting money:
- October 1st: Held weeklong retreat at luxurious $1,000 a night resort in Monarch Beach California.
- November 3rd: Held secret outing at resort in Arizona, hidden logos and signs.
- November 26th: Quietly announced they would be giving out ‘cash awards’ to 130 managers, including $3 million to retirement services chief Jay Wintrob.
And now
- December 10th: Realized they owe $10 billion because of risky investments that went bad, and weren’t discussed in their initial plea for government funds.
Time will tell what dishonest, money-wasting scheme they will come up with next.
AIG Backing Out On Its Word Of No Bonuses.
Photo by Barrybar
While I understand that managers, and especially money managers at big firms need to be paid, and paid based on performance, I’m sorry – but when your company, and your job, have basically been bought by the American tax payer, you’ve got a lot of accountability to stand up to. You’ve got to be very careful how you spend your money, and you’ve got to change your corporate culture to adhere to more prudent spending. And, above all, you’ve got to be honest with the people who “bought” your job. Unfortunately AIG has done none of this.
On Tuesday November 25th, AIG made an announcement that executives would not be receiving bonuses for 2008. They played a pretty song, claiming they would bypass bonuses because of the U.S. lead bailout.
“Chief Executive Edward Liddy will receive $1 in salary this year and next, and there will be no 2008 bonuses for the company’s seven most senior executives, the troubled insurance conglomerate said on Tuesday.” – reuters.
Interestingly enough, on the day before Thanksgiving, Bloomberg found that AIG reported it would in fact be giving “cash awards” to 130 of its managers.
American International Group Inc., the insurer that said yesterday it scrapped bonuses for top executives after a U.S. bailout, will still pay 130 managers ‘cash awards’ to stay with the firm, including $3 million to retirement services chief Jay Wintrob.
Wintrob, 51, will get the “retention” payment in two installments, the first in April 2009 and the rest a year later, New York-based AIG said today in a regulatory filing. The firm previously disclosed the program in a Sept. 26 filing and said today that Wintrob and Chief Financial Officer David Herzog elected to get the payments four months later than planned.
‘The expectation from the public and Congress was that they weren’t getting bonuses, not that they’d be pushed off by several months,’ said David Schmidt, a consultant at executive pay firm James F. Reda & Associates. ‘That clearly violates the spirit of AIG saying they’ll forgo their bonuses.’ – Bloomberg.
Now, AIG chose to announce this the day before Thanksgiving, the day before a 4 day weekend for most, markets closed Thanksgiving day, obviously hoping this announcement might fly under the radar.
For executives who are lucky to have their jobs in the first place, this is not what I might hope from a troubled insurance firm. First, just be honest and open about your spending and your pay cuts. People will find out, transparency is the only possible policy. Second – take a hint. This isn’t the late 90’s. People are losing their homes, portfolios have plummeted, and workers have lost their jobs. The economy is in a crisis, can you not afford to forgo some of your $3 million dollar bonuses to help those who are actually paying for that bonus?