Tuesday
Oct072008
Taxpayers flip bill for AIG
“The problem is not that we threw money at the economic crisis but instead that we threw money to financial institutes and looked like we have walked away afterwards,” Rep. John Mica (R-Fl) said during The House Committee on Oversight and Government Reform hearing on “The Causes and Effects of the AIG Bailout.” Chairman Henry Waxman (D-Calif) said that because of employees receiving bonus’s larger then that of the CEO’s yearly income.
Two former CEO’s of AIG, Martin Sullivan and Robert Willumstad, testified on behalf of AIG, placing blame on accountants and marked to market rules for the reason why AIG went bankrupt. “AIG never suffered one dollar of realized lost, it was the accountants that did not let the bonds mature to their potential value,” Sullivan said while trying to explain why AIG had problems.
Waxman criticized AIG on the way bonuses were given out to their employees. One employee, Joe Cassano, was terminated after his division had imploded but was still allowed to keep up to $34 million in unvested bonuses and AIG had put him on a $one million a month retainer. “ It boggles my mind that Cassano not only received over $280 million in his eight years of employment but that he is still receiving money after he was terminated.” Waxman said about Cassano.
The committee also criticized AIG’s week-long retreat for company executives at a exclusive resort a week after the federal bailout occurred. AIG reported to have paid the resort over $440,000, including nearly $200,000 for rooms, over $150,000 for meals, and $23,000 in spa charges. “I can’t understand how executives thought it would be a good idea to take all their employees, even those that were at fault for this whole mess, to a swanky resort to relax while the American taxpayers payed the bill,” Rep. Elijah Cummings (D-MD) said criticizing Sullivan for agreeing with AIG executives for the retreat.
The House Committee on Oversight and Government Reform are planning more hearings in the following weeks. The next hearings will be with shareholders, hedge funds and Fannie Mae and Freddie Mac. The committee is hoping that the following hearings will help them find out “where to place the much needed blame.”
Two former CEO’s of AIG, Martin Sullivan and Robert Willumstad, testified on behalf of AIG, placing blame on accountants and marked to market rules for the reason why AIG went bankrupt. “AIG never suffered one dollar of realized lost, it was the accountants that did not let the bonds mature to their potential value,” Sullivan said while trying to explain why AIG had problems.
Waxman criticized AIG on the way bonuses were given out to their employees. One employee, Joe Cassano, was terminated after his division had imploded but was still allowed to keep up to $34 million in unvested bonuses and AIG had put him on a $one million a month retainer. “ It boggles my mind that Cassano not only received over $280 million in his eight years of employment but that he is still receiving money after he was terminated.” Waxman said about Cassano.
The committee also criticized AIG’s week-long retreat for company executives at a exclusive resort a week after the federal bailout occurred. AIG reported to have paid the resort over $440,000, including nearly $200,000 for rooms, over $150,000 for meals, and $23,000 in spa charges. “I can’t understand how executives thought it would be a good idea to take all their employees, even those that were at fault for this whole mess, to a swanky resort to relax while the American taxpayers payed the bill,” Rep. Elijah Cummings (D-MD) said criticizing Sullivan for agreeing with AIG executives for the retreat.
The House Committee on Oversight and Government Reform are planning more hearings in the following weeks. The next hearings will be with shareholders, hedge funds and Fannie Mae and Freddie Mac. The committee is hoping that the following hearings will help them find out “where to place the much needed blame.”
tagged 
AIG, bailout in Congress, News/Commentary
AIG, bailout in Congress, News/Commentary
Reader Comments (3)
THE MOST IMPORTANT LETTER ALL CEO’s SHOULD RECEIVE
A NEEDED FIX IN ALL BOARD ROOMS
Isn't it time the system went in for some much needed repair?
Due diligence and oversight long ago slid out the window. No one was watching.
Time to do something about it.
Here's a huge one they all missed.... The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of "disconnect" by most Americans.
"WE THE SHAREHOLDERS OF YOUR COMPANIES......
http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html
[...] Taxpayers flip bill for AIG [...]
Earlier today, AIG announced an important policy change - one that we wanted to be sure you knew about.
A short time ago, our Chairman and CEO Ed Liddy said that he has ordered the immediate cancellation of all outside meetings, conferences, and recognition events across AIG, except those that are required by law or that are deemed absolutely critical to sustain our ongoing business needs.
Given AIG's commitment to our customers, business partners, regulators, and American taxpayers, coupled with the new and very different challenges our company now faces, we take these responsibilities extremely seriously. Their trust is critical to our success. We recognize the need to be sensitive about all company expenditures.
As we move forward, we will continue to focus our efforts to pay back the $85 billion loan from the Federal Reserve Bank of New York as quickly as possible.