AIG spending at root of outrage

[Silk Smoov]

Did anyone else see this story? This is just crazy. I am outraged about this. Our tax dollars went to this company to do things like this. This is exactly why I say that we have to get more government control over this financial sector.


AIG spending at root of outrage

'They were getting facials, manicures, and massages, while the American people were footing the bill'

Reuters

October 8, 2008

WASHINGTON -- Lawmakers criticized American International Group Inc. yesterday for lavish spending and ignoring financial warnings as former top executives blamed the insurer's woes on accounting rules and short sellers.

AIG, rescued Sept. 16 by a two-year $85-billion (U.S.) loan from the Federal Reserve, was blasted at a congressional hearing for sending executives to a spa retreat less than a week later and for giving a $1-million-a-month consulting contract to an employee blamed by some lawmakers for AIG's risky activities.

House Oversight and Government Reform Committee chairman Henry Waxman revealed a letter from the Office of Thrift Supervision (OTS) and a warning by AIG's accountants about material weaknesses at AIG as part of a series of hearings into the financial crisis.

"We need to understand what makes a private company like AIG too big to fail and what drew such a large and venerable enterprise to the brink of failure," said Mr. Waxman, a California Democrat.

The OTS sent a letter to AIG in March warning of its lack of transparency and ability to oversee its financial products.

"A material weakness exists within corporate management's oversight of [the company's financial products unit] super senior Credit Default Swap [CDS] valuation process and financial reporting," said the March 10 letter to AIG's board from the OTS, a division of the Treasury Department.

But former AIG chief executive officers blamed the company's downfall on several factors, including mark-to-market accounting rules, which require companies to price their assets at current values even when there is no market.

The CEOs were Hank Greenberg, who left in 2005 after an accounting scandal for which he has denied wrongdoing; Robert Willumstad, who was brought in after wide mortgage losses in June 2008 until the bailout; and Martin Sullivan, who was CEO between Mr. Greenberg and Mr. Willumstad.

Mr. Greenberg submitted testimony to the oversight committee but did not appear at the hearing due to illness.

Lawmakers expressed outrage at perks AIG executives enjoyed less than a week after the Fed's bailout, including a spa retreat where they racked up bills for $200,000 for hotel rooms and $23,000 for spa services.

"They were getting facials, manicures, and massages, while the American people were footing the bill," said Elijah Cummings, a Maryland Democrat on the oversight panel.

The oversight committee examined thousands of pages of internal documents produced by AIG and former executives.

Minutes from a compensation committee meeting in March said Mr. Sullivan urged exclusion of the money-losing AIG Financial Products unit when calculating bonuses.

The committee approved the change, according to Mr. Waxman.

Mr. Sullivan told lawmakers he did it to retain key executives. "I was focusing on them more than me."

The congressional panel also found that AIG auditor Joseph St. Denis was excluded from a valuation review of credit swaps because then-financial products division executive Joseph Cassano worried he would "pollute" it. Mr. St. Denis, who later resigned in protest and lost his own bonus, expressed concern about AIG's valuation of financial product liabilities.

Mr. Cassano drew fire at the hearing for being kept on a $1-million-per-month consulting contract when he left AIG after several quarters of billion-dollar losses. "I wanted to retain the 20-year knowledge that Mr. Cassano had," Mr. Sullivan said.

But lawmakers were incredulous. "It appears to me that he single-handedly brought AIG to its knees and is the reason taxpayers had to step in," said John Sarbanes, a Maryland Democrat.

Lynn Turner, a former Securities and Exchange Commission chief accountant, said AIG had failed to be open about problems it was facing, even when it had hints of trouble. "I don't think the company was ever honest with the investors about the potential magnitude of these things," Mr. Turner testified.

[92bDad]

Yes, that is some pretty crazy stuff.

You would think that if a company has to go and ask for a hand-out from the U.S. Government that they would essentially fork over the books and to some level decision making to some government officials.

That is the only time that I see some type of oversight or regulations are needed.

If a company doesn't want the government to 'Regulate' how they do business, then they need to handle their own business and not have to go to the government for money.

AIG claims that they were doing this "Retreat" to retain certain senior executives...I would hope that these are executives who work for other divisions and have actually turned a significant company profit. If that is the case, then during tought times for AIG, they should be ready to forgo such a "Retreat" in order to better the company as a whole.

Of course there could be other factors...perhaps this "Retreat" was booked ahead of time and could not be cancelled...at which time they could have negotiated with the company who sold the retreat, or even tried to sell it or get the government involved. Services were NOT rendered and thus some type of cancellation fee could have taken place.

The funny part to me was hearing Obama use this in the debate last night. After all this is one of those smoking guns type of topics. Great headlines that insights emotion...sort of like ACORN, or his ties to Terrorism, or his ties to Islam...the list goes on and on...so Obama is stating through his actions that it's okay to use minor instances to discredit someone else.

Interesting to see his true character on display, yet very few of his supporters are willing to admit that maybe their is an issue here.

Back onto AIG...again, any company who goes to the government for money should be subject to full disclosure of past, present and future books. Until such time as that company has completely repaid the government.

With that in mind, I would like to know how we as citizens can have full disclosure to the Governments books. I am interested in reading about this overhead projector for Chicago from Obama. I am willing to bet that Silk and I could go in, review the governments spending and cut a ton of waste out of the budget...yes items that I am certain we would both agree to call waste!!!

By the way, another way to have avoided this for AIG, would have been to Freeze their spending until such time as the books have been reviewed...I believe McCain is offering to do that with the Government's budget...This is the same practice that my wife and I do from time to time in our family budget.

Freezing Spending is a great idea, then you make very difficult priority decisions by only allowing necessary spending to go out. (Mortgage, utilities, food, gas) then you sort through discretionary spending to determine what still fits in the budget. By the time your done, you have cut some aspects of discretionary spending.

I love this idea in terms of our National Budget/Spending...put a temporary freeze, handle up the necessary spending (Military, Government Employee Paychecks, SS, Medical, Welfare type assistance programs, Unemployment)...there maybe a couple of others, but for the most part you freeze everything else and review spending to determine what can stay in the budget and what needs cut.

Funny to hear Obama use this as a huge negative, when in fact this is a huge positive.

It's as if McCain thinks through and understands the process, while Obama just spouts off at the mouth and doesn't pay any attention to the consequences of what he is telling us.

When I hear Obama speak, I get the sense that he is trying to scare the American people, while he is encouraging our enemies.

There I go again, dang it...Obama just pisses me off more than any candidate in my voting history, even more than Clinton, who given the opportunity to meet the man, I turned it down because I didn't support the man.

Y'all have a great day.

[Big Boy Laroux]

Originally Posted by 92bDad

With that in mind, I would like to know how we as citizens can have full disclosure to the Governments books. I am interested in reading about this overhead projector for Chicago from Obama.

McCain made it sound like it was some overhead projector that high school math teachers use.

It;s a freakin' planetarium projector. How much do you think it should cost?

http://blog.wired.com/wiredscience/2...planetari.html


Also, the spending wasn't even passed (although I see it as worthwhile spending - it's freaking science center!).

[rabbitproof]

You're crazy, 92bdad. Who just proposed a home owner mortgage bailout?

[Rhylan]

This is why you don't give private companies public money.

Ne'er the twain shall meet.

Silk - we don't need government control. Do you know what it would cost to make sure companies never spend our money on stupid shit? The solution is to not give them our money in the first place. They clearly never deserved it. AIG should have been allowed to fail. They clearly deserved to fail.

[Arne]

Originally Posted by Rhylan

This is why you don't give private companies public money.

Ne'er the twain shall meet.

Silk - we don't need government control. Do you know what it would cost to make sure companies never spend our money on stupid shit? The solution is to not give them our money in the first place. They clearly never deserved it. AIG should have been allowed to fail. They clearly deserved to fail.

I read 30-35 billion of that AIG bailout already went to Hank Paulson's friends at Goldman Sachs. This stuff is financial dictatorship.

[92bDad]

I agree...don't give them money...at least no without PRE-conditions.

Look if someone doesn't want the government in their business then don't do anything that causes them to be in your business.

For years I have had an office out of my house...however I don't claim the Home Office Exemption...thus I have never been audited...not that they would find anything, but I simply don't want to give the government any cause to be in my stuff.

For years, my wife and I homeschooled our sons...until the day that they decided they wanted to attend school, which happened to be their Freshman year of HS. Now they are Seniors and ranked in the top 3% of their class. Our home established an excellent base foundation that they in turn have turned into a fairly strong education...all the while keeping the government out of our stuff.

I happen to know that my older son who just turned 18, has formed his opinion on this upcoming election. I am proud that he made sure to have himself registered in time to cast his first vote. I also know that he has thoroughly weighed through the issues and has formed his opiniong on which candidate to vote for. Funny, his in the minority for his age group and his fellow schoolmates...but he has made the stand and has tried to campaign for his candidate of choice.

Don't ask me...I'm chasing rabbits here...scatter shooting if you will.

Back on the business side...If I manage the finances of my business and I don't ask for government intervention, then I can do what I want within the context of the law and no questions are asked...if however, I ask for financial assitance, then I am turning over my financial books to the government and ultimately to the people...after all, it's the people's money.

Heck, if my kids want a grant, scholarship or some other type of resource to help with college, I as the parent have to open up my personal financial books. Why then would we NOT make that a pre-requisite for companies taking advantage of any type of government work-out program?

[Rhylan]

Originally Posted by 92bDad

I agree...don't give them money...at least no without PRE-conditions.

Problem is, you can't trust government to place and enforce conditions. They're inept. AIG's execs are second in ineptitude only to the government.

[92bDad]

Originally Posted by Rhylan

Problem is, you can't trust government to place and enforce conditions. They're inept. AIG's execs are second in ineptitude only to the government.

So if they're inept and you can't trust them...what the heck are we doing having a debate. Is the glass 90% empty or 10% full?

Surely we can find someone in the system who can be trusted, who actually has some positive character to stand on...who actually doesn't LIE!!!

Who that is, I can't say that I know...but I do believe that person or even a group of people exist and could be in a position to create effective change.

[Rhylan]

Originally Posted by 92bDad

So if they're inept and you can't trust them...what the heck are we doing having a debate. Is the glass 90% empty or 10% full?

Surely we can find someone in the system who can be trusted, who actually has some positive character to stand on...who actually doesn't LIE!!!

Who that is, I can't say that I know...but I do believe that person or even a group of people exist and could be in a position to create effective change.

No, you limit their responsibility so that it doesn't matter that you can't trust them with much of anything. You only entrust them with the most basic of duties, the ones that everyone can agree on no matter what. Life, liberty, the common defense. The Founding Fathers were just as suspicious of government as I am. Unfortunately something happened in the last 100 years and we got all touchy feely.

[92bDad]

Originally Posted by Rhylan

No, you limit their responsibility so that it doesn't matter that you can't trust them with much of anything. You only entrust them with the most basic of duties, the ones that everyone can agree on no matter what. Life, liberty, the common defense. The Founding Fathers were just as suspicious of government as I am. Unfortunately something happened in the last 100 years and we got all touchy feely.

You and I agree, in a limited government.

The ONLY way that I see any justification to giving any government a larger role is when an entity beit a company or an individual requests a hand from the government. Once that entity asks for help, then the government has every right to have access to all information. After all, the government is in theory we the people.

If someone asks for my help, I would like to know the details and I would like to know when the help will be repaid. What is the entity committing to do in terms of paying back that help and what are the consequences should they fail again. Let the one requesting it, build a business case to obtain the loan...if the lender is not satisfied with the terms, then the answer is no...if on the other hand the lender is satisfied and says yes, and the lendee violates the terms, then the consequences were written up by the lendee and they would have no grounds to whine.

If we as a people handle our own business and we don't go whinning for a bail out, then the government has no right being in our business...

At the same time, the government is not in business to be in business...they need to set up some very clear and hard lines so that companies who do turn to the government for help are first of all, on their very last breath...2nd, the people within the organization are going to have an opportunity to sale why they should not be gone...but for the most part, these people, executives and others in charge will be gone with no severance, no gold parachute...nothing, nada...get back to work like the rest of us.

Now the government has to get out of this business as quickly as possible...ensure that there is a transition for employees of these bailed out companies, but only for those employees willing to WORK through a transition...then sell off and get out of these companies.

It's obvious there are a ton of other issues within the issue...bottom line, I am for SMALL Government that stays out of our business, provided we don't go crying for help, entitlements, handouts or any other source of victim mentality towards the government. Speaking of which...I've got some work to tend to, so I'll have to check back in a bit later.

[mary]

[Kidd Karma]

Local school district in Northern CA, Board member attends "mandatory" conference in Paris spouse goes along and the district foots the bill. Sure it's not the only similar incident in this country, but it's rampant. You know why there's no government funds, the top is taking and taking and not doing much else.

Not too surprised that this happens with a private company like AIG. Those at the top will take as much as they can.....now it's exposed. Now who has the nuts to keep doing it.

[92bDad]

You know, when my kids come to me asking for money...I ask them what it's for? Then I ask them to take me through their spending budget.

Each time they have to tell me what they have taken in from work or gifts. Then they have to tell me what they are spening it on.

There have been times where one of my sons has spent money on Sonic over serveral days...when I add it up, it totals the $ amount that they are asking me for, and I tell them NO, that they can take it out of their Sonic budget.

Typically I have it and it's available, but giving them money just because I can will not help them learn to manage their money.

There have been other circumstances where they have done well with their budget and some type of want has come up, usually some type of School Extra-activity...and I write a check out to the School or the Teacher responsible for the activity.

Is this not the type of method that our current Bail-Outs can employ?

We should not be giving out blank checks, but rather line item veto work out programs.

To me the solution to all of this is rather simple, but the people who have mismanaged the money so far need to be told NO More...this includes certain people involved with the current candidates...anyone who was a part of the problem should be fired immidiately from any political campaigns. I tend to believe that there are people involved on both tickets that should be fired.

Is either candidate willing to call those people in their campaign to the carpet?

I know of the folks on the Obama side...unfortunately, I don't know who on the McCain side, but I believe that Both Candidates should list the people involved who are identifited within the campaigns and they should be given the opportunity to resign or be released.

I believe both candidates are being less than candid when they talk about fixing the problem, knowing that they have a part of the problem working for them.

Can someone help me out? Who are some of the key people involved in the McCain camp and Obama camp that have strong ties to the current financial crisis. I'm thinking of those guys from Freddie Mac and Fannie Mae and ACORN. Anyone associated with any of these three organizations should be off of the campaign...I just hope that neither candidate is actually tied directly to these groups...

[DirkFTW]

AIG is obviously new to this "spending taxpayer money thing." I bet Congress could have thrown a shin dig half as good for twice as much.

[Silk Smoov]

You maybe right, but there has to be some regulation in this industry. It just has to be. Look at where we are now. I know the war is costing us, but we have that private sector in that industry out of control that is just too big to ignore.

[Arne]

Originally Posted by Silk Smoov

You maybe right, but there has to be some regulation in this industry. It just has to be. Look at where we are now. I know the war is costing us, but we have that private sector in that industry out of control that is just too big to ignore.

We need to get government out of banking. That's what we need to do. And central banking is part of banking.

All these people who are trying to fix a broken system are simply socialists.

[DirkFTW]

Do we really have to choose when it's between suffocating in a pile of crap or drowning in a pool of piss?

[DirkFTW]

The great teat of the people is open for seconds!

AIG hits up Fed for more money
Three weeks after an $85 billion bailout, AIG is turning to the New York Fed for additional funding.

By Tami Luhby, CNNMoney.com senior writer
October 8, 2008: 5:52 PM ET

NEW YORK (CNNMoney.com) -- The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash.

In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back.

The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.

The lending program is a way for AIG to get funding for its businesses, said a New York Fed spokesman. The system is similar to lending facilities the Fed provides to banks, which can also exchange collateral for cash.

The latest announcement does not jeopardize the government's ability to recoup its loan to AIG, experts said.

"AIG will repay the loan," said Stewart Johnson, portfolio manager at Philo Smith, an investment bank specializing in insurance. "It's just a matter of how much of themselves they will have to sell."
Link

I'm in the wrong occupation. I should have studied to be a sh*tty executive officer.

[Silk Smoov]

Originally Posted by DirkFTW

The great teat of the people is open for seconds!


I'm in the wrong occupation. I should have studied to be a sh*tty executive officer.

The statement in red makes you qualified in the eyes of the people who hire these CEO's It is a shame that these guys get away with killing these shareholders. Only people left holding the bag on these shares are the regular job and the AIG workers who have a 401(K). This upcoming collapse by AIG is going to hit so many people and we will be hearing about another bailout again. Once AIG has tapped the government and New York, you can kiss that money goodbye. All AIG will do is sell the bad debt and sister companies to the government to bare and keep AIG American General here in the United States. I guarantee neither the government or the state of New York will get AIG American General from them no matter what AIG owes them.

[Silk Smoov]

I think I read somewhere that AIG had already spent about 65 billion of that money, and that the State of New York was about to give them some money as well. Is this true?

[DirkFTW]

Yea, the article I posted at #13 has that info.

[Silk Smoov]

Originally Posted by DirkFTW

Yea, the article I posted at #13 has that info.

You sure did. Well, at least we can see where some of it is going