Tuesday, October 7, 2008

These jerks just don't get it

I have mostly stayed away from writing about the implosion of the markets and the economy, both because every day there is more detail and more pain, and because there is so much of it to go around -- but this is one story that leaves me incredulous.

A week after the insurance giant, the American International Group, received an $85 billion federal bailout, executives at its life insurance subsidiary, AIG General, held a weeklong retreat at the exclusive St. Regis Resort in Monarch Beach, Calif. Expenses for the week, lawmakers were told, totaled $442,000, including $200,000 for hotel rooms, $150,000 for food and $23,000 in spa charges.

That is simply being blind to what normal people are facing, and is pure arrogance. It is beyond greed.

In addition, the former A.I.G. executive who led the London-based division whose implosion is largely blamed for the insurance giant’s downfall, Joseph J. Cassano, continues to receive $1 million a month from the company, on top of the $280 million he received in the last eight years.

And even after A.I.G. reported $5 billion in losses in the final quarter of 2007, its chief executive at the time, Robert B. Willumstad, argued before a compensation committee that executives should receive performance bonuses. He received $5 million. Mr. Willumstad left after A.I.G. received federal assistance. The current chief is Edward M. Liddy.

A million a month even now? And Willumstad argued for more money? WHere are those directors now? I wish they'd explain why they agreed to more compensation.

“Looking back at my time as C.E.O., I don’t believe A.I.G. could have done anything differently,” Mr. Willumstad said. “The crisis that required A.I.G. to seek assistance from the Federal Reserve is not limited to A.I.G. It is a marketwide crisis of confidence that has affected the entire financial industry and the American and global economy.” “A.I.G. was caught in a vicious circle,” Mr. Willumstad said.

Nothing could have been done differently? Nothing? Looking back, I know I could have done a few things differently, beginning with understanding how much risk I was taking and how exposed I was leaving my portfolio. Doesn't do me any good, but, hopefully, I have learned a lesson.

“A.I.G. is blaming its downfall on accounting rules which require it to disclose losses to its investors,” the specialist, Lynn E. Turner, the former chief accountant at the Securities and Exchange Commission, said. “That’s like blaming the thermometer, folks, for a fever.”

This next one is precious.

An accountant, Joseph St. Denis, who had been hired by A.I.G. to address accounting problems, was not given access to the very unit whose losses, mostly in toxic credit-default swaps, led to the bailout, lawmakers were told. Mr. Cassano told Mr. St. Denis, according to testimony, that he had been “deliberately excluded” from the evaluation of AIG Financial Products, to avoid polluting the process. Mr. St. Denis resigned in protest.

Polluting the process? He must mean covering their asses.

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