Ex-AIG CEO says government support will have to continue

[Joanne98]

By Lilla Zuill

NEW YORK (Reuters) - Former American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) Chief Executive Maurice "Hank" Greenberg said on Tuesday the U.S. government support for the giant insurer will have to continue until the hobbled company is back on its feet.

A day after AIG posted what Greenberg called a "mind boggling" $24.5 billion quarterly loss and snagged a new lifeline from the government, the former CEO said the government's $150 billion investment means it has too much at stake, and will have to keep the lifeline open.

The government will likely have to spend much more to fix the overall economy, said Greenberg, who called the $700 billion financial rescue legislation "woefully inadequate."

AIG, a company that Greenberg ran for 38 years, will "be a long time in working out" its financial woes, he said at a conference held by Reactions, an industry publication.

He said fixing the company at all was going to be "pretty damn tough" because it requires the company to repay a $60 billion federal loan with the proceeds of asset sales.

Tough credit markets have thinned buyers, and the insurer has yet to ink any sales.

On Monday, AIG CEO Edward Liddy said he felt the company was in a better position now the government has stepped in to assume mortgage liabilities that had left the insurer deeply in the red over the past four quarters, but did not rule out the need for more federal cash.

"Never say never," Liddy told Reuters, saying it was possible AIG's $1 trillion investment portfolio could sustain more losses if financial markets remained volatile.

The company recorded $18.3 billion in losses on investments in the latest quarter.

Greenberg controlled about 11 percent of AIG's outstanding shares before the government stepped in September, and has said that accounted for the bulk of his personal wealth. Under the federal deal, the government gets a 79.9 percent stake, largely diluting shareholders before the deal.

EASIER TERMS

AIG was saved from bankruptcy by an $85 billion government loan on September 16, but it proved inadequate, and with interest and fees of about 14 percent, was too costly to be a permanent fix.

The U.S. Treasury and Federal Reserve on Monday agreed to invest a total of $150 billion -- $40 billion for preferred shares paying a 10 percent dividend, $60 billion under a five-year credit facility that carries a lower interest rate, and another $50 billion to buy toxic mortgage assets underlying AIG credit default swaps, allowing the insurer to eventually tear up those contracts.

AIG shares, which gained on Monday after the new federal rescue plan was announced, were down nearly 10 percent to $2.06 in early afternoon trading Tuesday on the New York Stock Exchange.

AIG ran into a severe cash crunch in September because of mounting collateral demands from counterparties of its credit default swaps and ratings downgrades. Continued...

http://www.reuters.com/article/ousiv/idUSTRE4AA5KD20081111


AIG executives may not be making better business decisions while they're asking the federal government for more money, but at least they're getting sneakier! An ABC News investigation has revealed that a conference last week at the Pointe Hilton Squaw Peak Resort in Phoenix was another chance for AIG executives to frolic (on the taxpayers' dime).

The conference was called the Asset Management Conference, and hotel personnel were ordered to not mention AIG either verbally or on signage. An AIG spokesperson told ABC News that there was no AIG signage because they wanted to lower the company's profile. As consumers, I think we're a little too smart to believe that. Something tells me that the company executives knew they'd get heat for another luxury trip.

There were 150 independent financial planners present at the conference, in addition to several top AIG executives. Yet hidden cameras caught top executives not attending sessions, and also captured images of limousines, fancy cocktail parties, and expensive dinners out.

US Financial Crises
When the stock markets first reopened after the 9/11 attacks, how many points did the Dow Jones fall?
584
684
784
In which year did Black Monday take place?
1982
1987
1991
The Dow dropped by what percentage on Black Monday?
Nearly 3 percent
Nearly 13 percent
Nearly 23 percent
How much did the U.S. government pay for the bailout during the savings and loan crisis of the 1980s and 1990s?
$125 billion
$325 billion
When did the Great Depression start?
1929
1933
1939
Many economists blame the Smoot-Hawley act for the severity of the Great Depression.
True
False
About how many years did the Depression last in the U.S.?
5 years
10 years


Probably the biggest financial faux pas was booking former NFL quarterback Terry Bradshaw to speak at the event, at a fee of $40,000. AIG says that a sponsor was paying the fee, but they canceled his appearance. In total, AIG has said that the conference was to cost $343,000, with $320,000 of that covered by sponsor fees.

I understand the sponsorship dollars, and the attendance of the independent agents (who aren't on AIG's payroll, but are independents who only get paid when they sell something), and the continuing education aspect (many professions required continuing education). I just can't help but feel that these events at expensive resorts are in poor taste... Especially as the federal money demanded by AIG has almost doubled since the original $85 billion plan was announced. The tab for AIG bailout dollars is now up to $150 billion.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Reader Comments (Page 1 of 1)

111-11-2008 @ 12:17PM

TERRY said...
IM REALLY TICKED OFF AT THIS COMPANY. I HAD MY INSURANCE HERE FOR 2 YEARS , 3MONTHS AGO THEY RAISED MY INSURANCE TO AN IMPOSSIBLE RATE. I WAS ONE DAY LATE AND THEY CANCELED ME.NOW THAT THE GOVERNMENT HAS PAID FOR ALL THEIR VACATIONS,THEY ARE DEMANDING PAYMENT FOR COVERAGE I DIDNT RECIEVE. IM NOT SO SURE THEY WOULD HAVE EVEN COVERED ME IN AN ACCIDENT.

Reply
211-11-2008 @ 12:25PM

Dodie Reade said...
ENOUGH already! Just how STUPID are those in charge at the asylum known as AIG? Worse yet, how stupid do they think the public is? It was bad enough when they launched their first 'get away' and now another one that they tried {in vain} to hide. What an insult to the execs and employees at Lehman Brothers who were NOT offered any assistance and the stockholders who went down with that ship. AIG gets help TWICE and BOTH times they celebrate at our expense. WHY are we giving them MORE money? Do they have another 'conference' at a spa booked already? The average taxpayer {you know ~ the ones paying the bills!} sits at home at night wondering how to make it to NEXT payday and hoping that there will actually BE one. These idiots have the incredible gall to PARTY while the rest of the world spins out of control. And, we give them MORE money to make it all possible. Now who is crazy? Since they so obviously are not going to reap the rewards of their selfish extravagance in THIS life, let us all hope there is a very special place reserved just for them, in the next one ~ and that it's a lot hotter than Phoenix!



Reply
311-11-2008 @ 1:41PM

p brown said...
If the Government gives away any more money, on us, to these thieves, we should all start yelling, loud and clear. First of all, they lied. they took money that did not belong to them for Partying. If it wasn't for their greedy, self-centered avaricious ways, we wouldn't be in this situation. I feel they should have to RETURN their big bonuses, and pay off the debt for the party they had. OR GO TO JAIL. anyone else, average joe's (and jills) like us, wouldn't get away with it. they have some nerve even asking for more. Someone better watch them. sneaky thieves. all of them.

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411-11-2008 @ 2:14PM

larry said...
SOMEONE IN THE GROUP THAT IS GIVING THEM MONEY IS GETTING A LARGE KICKBACK.>>>>> THINK ABOUT IT!!!

Reply
511-11-2008 @ 2:30PM

Daniel Lovejoy said...
Seriously, time for criminal charges.

Reply
611-11-2008 @ 2:37PM

David said...
Maybe the entire pulic shoud've shown up the resort and let them know how we feel,if they're going to party on the money then the government shoud take the money back since they dont know how to control themselfs with all our monies.so is the goverment going to send us a monthly check for all the interest the make off the money they were loaned?

Reply
711-11-2008 @ 2:38PM

Dan said...
The government is to blame for this mess. Thyey are the ones who bailed them out, and they are not doing anything about these vacations and get aways. Now the auto industry wants bailed out? The American auto industry did this to themselves. They have sat on their asses and watched the Japanese manufacture autos that get 40 mpg, and saw their auto sales skyrocket. Did we try to be competitive? Hell no!!! Don't bail them out, they had their chances.

Reply
811-11-2008 @ 3:39PM

Judith said...
WHAT IS THE MATTER WITH THESE PEOPLE. AND WHAT IS THE MATTER WITH THE GOVERNMENT THAT THEY'RE NOT SLAPPING SOMEBODY DOWN LIKE A BIG BAD DOG.

RALPH NADER.......WHERE ARE YOU???

http://www.walletpop.com/blog/2008/11/11/aig-party-watch-this-time-a-resort-in-phoenix/