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AIG retreat. Unreal.


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AIG execs' retreat after bailout angers lawmakers

 

By ANDREW TAYLOR, Associated Press Writer Tue Oct 7, 11:15 PM ET

 

WASHINGTON - Days after it got a federal bailout, American International Group Inc. spent $440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings, according to lawmakers investigating the company's meltdown.

 

 

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

 

The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers still were enraged over thousands of dollars spent on outing for executives of AIG's main U.S. life insurance subsidiary.

 

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," the committee's chairman, Rep. Henry Waxman, D-Calif., scolded the company during a lengthy opening statement at a hearing Tuesday. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

 

Former AIG CEO Robert Willumstad, who lost his job a day after the Federal Reserve put up the $85 billion on Sept. 16, said he was not familiar with the conference and would not have gone along with it.

 

"It seems very inappropriate," Willumstad said in response to questioning from Rep. Elijah Cummings, D-Md.

 

"Those executives should be fired," Democratic presidential candidate Sen. Barack Obama said at a debate with Sen. John McCain on Tuesday, referring to the retreat participants. Obama also said AIG should give the Treasury $440,000 to cover the costs of the retreat.

 

But Eric Dinallo, superintendent of the New York State Insurance Department, said he could see the value of such a retreat under the circumstances.

 

"Having been at large global companies and knowing what condition AIG was in ... the absolute worst thing that could have happened" would have been for employees and underwriters in its life insurance subsidiary to flee the company.

 

"I do agree there is some profligate spending there, but the concept of bringing all the major employees together ... to ensure that the $85 billion could be as greatly as possible paid back would have been not a crazy corporate decision," Dinallo told the House committee.

 

The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released by the committee, which is examining the chain of events that forced the government to bail out the conglomerate.

 

The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.

 

"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."

 

AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.

 

Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.

 

For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, PricewaterhouseCoopers confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.

 

Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.

 

Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg ? who ran AIG for 38 years until 2005 ? canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Willumstad.

 

"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."

 

Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.

 

Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 ? even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.

 

http://news.yahoo.com/s/ap/20081008/ap_on_bi_ge/meltdown_aig

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We don't know anything about this. If it is a retreat, with an agenda, then it is a corporate meeting. If it could boost morale and keep the profit generating people around, then there is a benefit to the prospect of paying off the government loan.

 

See in my opinion, it's "corporate meetings" like this that are what makes these companies less cost-effective. These nutjobs get into their fat cat jobs and spend money on things like this that are loosely related to their jobs. If this was a corporate meeting, ok, but why is it necessary for all this money to be spent?

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Obama laid the smackdown on AIG last night for this.

Good thing he voted for the bailout.

The AIG deal was separate from the recent bailout.

I'm well aware.

 

I'm merely echoing the thoughts of Tee Ball. It is very difficult to treat the motivations of Obama and McCain with sincerity.

It was pretty much a lose-lose situation for everyone involved. If Obama voted for the proposal, as he did, then he would be attacked as a socialist. However, if he didn't vote for it, I'm sure he would have been criticized for inaction. While I wish he had voted against it, I can understand why he did.

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Obama laid the smackdown on AIG last night for this.

 

Yeah, he made cheap political points at the expense of coming off as an imbecile by demanding the $400k get paid back and by calling for the firing of the employees. I guess Obama is not aware the $80 billion was a loan and that loans are paid back and I guess he's not aware that raiding a corporation of it's top performers is NOT a good thing especially when the corporation owes you $80 billion.

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I disagree.

 

I don't hear anyone but libertarians breaking out the socialist accusations. Honestly, they aren't listened to on the mass media scale anyway.

 

I believe a lot of citizens are upset with the bailout but mainly because they have some inkling that the bill will do little to benefit them. However, I find it dubious that they are even aware of the exact mechanism at play here or that it is in actuality an act of socialism. They are probably even more unaware that it was an act of socialism that led us here to begin with.

 

For the record I called this socialism the minute I heard about it and stand by it.

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We don't know anything about this. If it is a retreat, with an agenda, then it is a corporate meeting. If it could boost morale and keep the profit generating people around, then there is a benefit to the prospect of paying off the government loan.

 

See in my opinion, it's "corporate meetings" like this that are what makes these companies less cost-effective. These nutjobs get into their fat cat jobs and spend money on things like this that are loosely related to their jobs. If this was a corporate meeting, ok, but why is it necessary for all this money to be spent?

 

Do you know how many people were on this retreat? My small company just held a retreat for a weekend to get away from all other influences and we spend a fair amount on 5 people and we did it on the cheap relative to this.

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As a country we are somewhere between fascism and socialism with very few remnants of free market principles left.

 

I love how the free-market is blamed for the 'crisis.' The free market had nothing to do with it. The Fed made money freely available, and that made higher principal loans in reach of people's budgets, which drove up costs. Combined with government dictates that loans be made to certain groups of people regardless of credit worthiness demand was artificially increased and when the bubble burst, liquidity was inadequate.

 

I have much less of an issue with the AIG loan than I do with that f***ed up bailout. Supposedly AIG is going to pay it back with interest, but the bailout is a black hole that our money is going to be tossed into. People that cannot pay will be kept in their properties and we will eat the cost. Many of these people lied to get the loan, and other shouldn't have even been considered for the loan, all in the name of 'affordable housing.'

 

I am completely disgusted.

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Right - if these companies were in that position in the first place, I have little to no faith that they will ever be in the position to pay back these loans with interest.

 

It is comparable to a person with several maxed out credit cards, yet they still maintain their previous standard of living and do not appear interested whatsoever in cutting their personal costs on frivolous things to pay them back.

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We don't know anything about this. If it is a retreat, with an agenda, then it is a corporate meeting. If it could boost morale and keep the profit generating people around, then there is a benefit to the prospect of paying off the government loan.

 

 

Wow!

 

We have corporate meetings every 2 weeks and we have to bring our own water.

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We don't know anything about this. If it is a retreat, with an agenda, then it is a corporate meeting. If it could boost morale and keep the profit generating people around, then there is a benefit to the prospect of paying off the government loan.

 

 

Wow!

 

We have corporate meetings every 2 weeks and we have to bring our own water.

 

This is part of the point I'm making - the businessperson ego has to go. Companies throw money at their middle management to get them to fly to their company HQ (or elsewhere) for a pointless meeting, and stay at a fancy hotel. I wish there were numbers on how much companies spent on such meetings compared to their profits after such meetings.

They are a waste of time, and money lost for the companies, but since these people are in power they see no reason not to waste all this money on themselves and their colleagues while the upstarts working for them are making 6.25/hr, can only pay to fill their gas tanks and their bellies, while their credit goes to hell.

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Not that my opinion matters to you, but you certainly deserve more credit than most people do if that is the case in what you believe.

 

We need to divorce ourselves from this false notion that supporting financial institutions through government intervention is a conservative free market principle. Unfortunately the common American equates free-marketism with government sponsored corruption of wealthy entities that exploit the have-nots.

 

As a country we are somewhere between fascism and socialism with very few remnants of free market principles left.

 

The free market has certainly been corrupted by a few factors. I am in favor of the free market, so long as you have fair rules and maximum transparency. I really believe the free market will guide itself if we have maximum transparency. Asymetry of information leads to bad results.

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If a company wants to spend their own profits to fly up people to some posh hotel and wine them and dine them on their own dime then thats fine and dandy.

 

 

But when said company is on the verge of collapse, needs billions from the government just to ensure that they do not collapse and THEN go on said retreat is a load of crap.

 

 

They need to get their priorities straight and fast. Isnt this AIG's 3rd CEO this year they are on currently as well?

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This was a producer conference for the clients of American General insurance.

 

Less than 10% of the attendees were AIG employees and none of them came from the parent company home office.

 

Unfortunately we live in a soundbyte society where panic, fear and anger run supreme. Thankfully there are level headed people like Eric & Paola here who just don't run for the bridge.

 

American General is a very profitable and stable member company of the holding company AIG. The holding company has zero access to the assets of the member companies to pay debts of other member companies.

 

Obviously it's important for the profitable portions of the company to get in front of their clients, continue to do business and stay profitable.

 

Not a dime of the loan was spent on this nor was any of this money eligible to go to the impacted member companies.

 

However, all the bad press has led to a suspension of other producer conferences making it even harder for the good assets to just do business in a profitable, market leading way. If the member companies can't run like a normal business it makes them impacted and hurts their value. After all, it's the member companies that are going to be sold off to pay back the loan.

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