You can follow this blog: on 
Prez didn’t push for bailout so execs could get facials
October 8th, 2008, 1:55 pm · 30 Comments · posted by Teri Sforza, Register staff writer
Our friends at Bloomberg report today that American International Group Inc. - castigated by lawmakers for hosting a $443,334 conference at the St. Regis Monarch Beach days after an $85 billion federal bailout - plans to hold another posh gathering at the Ritz-Carlton in Half Moon Bay next week.
The event is meant to ”motivate and educate” 150 independent agents who sell AIG insurance to high-end clients. “These sorts of sales meetings are an essential function,” spokesman Nicholas Ashooh told Bloomberg. “We have them around the world all the time.”
Today, White House spokeswoman Dana Perino called the St. Regis expenses - which included $23,380 for spa treatments - ”despicable.” President George W. Bush didn’t push for the $700 billion bailout “to help top executives go to a spa,” Perino said at the daily White House briefing.
And today, wouldn’t you know, the fed loaned AIG another $37.8 billion.
Read the rest of Bloomberg’s story here.
More Watchdog:
- AIG subsidiary parties in style in OC, two weeks after bailout
- AIG’s St. Regis blowout bill: $443,344
- Obama on AIG’s $400,000 party: ‘Fire the scoundrels!’
- Prez didn’t push for bailout so execs could get facials
- Behind the AIG party: A look at the St. Regis
October 8th, 2008 at 4:29 pm
Disgusting! This is a bi-partisan issue that needs to be dealt with quickly. There is so much corporate greed and selfishness inherit in these big firms. There is a reason for the book, “The Greatest Generation” and it most certainly isn’t the baby boomers and the generations after them. No one knows the meaning of sacrifice now. If we went into WWII with the attitudes Americans have now, we would have failed miserably.
October 8th, 2008 at 4:32 pm
I live near the St. Regis and have only been the lobby area to see what it was like. Never considered spending the money to stay there or to get a facial and enjoy the spa, felt was it a little extravagant.
AIG went on my dollars from my tax money and a bailout. All of these people involved should be relieved of there jobs and start enjoying less . Nothing wrong with a good deli sandwich and a massage for $50.00.
SHAME ON ALL OF YOU
October 8th, 2008 at 4:48 pm
Man-oh-man ~ not more of the same?!?!?!? Cancel, dammit! Buy the salespeople a cake and let them go home early!
October 8th, 2008 at 4:55 pm
Enough…and that is enough !!!! If those executives felt that it wasn’t enough then our government should do something to stop these crooks. …..
Please someone do some thing…..
October 8th, 2008 at 5:03 pm
We want our money back. Take away the CEO retirement and bonus’ Don’t bail out AIG.
October 8th, 2008 at 5:11 pm
The impropriety of this is simply mind boggling and astounding. I don’t know if any of you have read the email circulating, but AIG was the lynch pin to the melt down. If anyone is interested, I can post it.
October 8th, 2008 at 5:12 pm
So what is the PREZ going to do about this?
October 8th, 2008 at 5:15 pm
Paulson sent AIG another check today for $37 Billion today
What the hick is going on? At least put a show on for us showing the return of the cost of the party.
http://biz.yahoo.com/ap/081008/fed_aig.html?.v=5
October 8th, 2008 at 5:24 pm
Are you kidding me. We the taxpayers help bail out a group of idoits that can’t handle the money the had to begin with and now they get a bail out and spend money they didn’t have to to give a performance bonus to a guy who help run them into the ground and give a party to a bunch of idiots that don’t deserve anything. We want our money back. Give it to the American people to use as they need and not to the bid wigs that can’t even balance their own check books. Give the money back. AIG is everthing that is wrong with the bailout.
Lisa…post the email…lets get it going!
October 8th, 2008 at 5:37 pm
Chimpy is just peeved that the excellent management of AIG didn’t invite him and Darth…He’s clueless…AND stpuid…
October 8th, 2008 at 5:47 pm
Yes, Lisa - do post it.
October 8th, 2008 at 5:48 pm
WELL JUST GO TO SHOW U THE MONEY STILL RUNS THIS COUNTRY ….
THERE IS NO MORE MIDDLE CLASS U EITHER HAVE IT OR U DONT
SPEND AWAY HAVE FUN BECAUSE U STEAL 50 MILLION U GIVE BACK 35 MILLION WHO CARES
ALL U PISS ANTS THAT DONT LIKE IT GET A REAL JOB AT AIG. MAYBE THAN U MIGHT FEEL BETTER I DO
October 8th, 2008 at 5:58 pm
So what did Bush, Bernanke and the money printing republicans do after AIG was exposed, they gave them another 37 billion in tax dollars.
http://calculatedrisk.blogspot.com/2008/10/fed-expands-loans-to-aig.html
October 8th, 2008 at 6:08 pm
WELL IT LOOKS LIKE AIG GETS ANOTHER 37.8 BILLION DOLLARS BECAUSE UR LAST RETREAT WASNT ENOUGHT TO HAVE FUN
U HAVE TO BE KIDDING ME MY LIVER IS SUCKED DRY FROM ALL THE DRINKS I WAS GIVEN AND NOW I HAVE TO GO BACK AGAIN BECAUSE I AM SO GOOD…..
WHAT A COUNTRY COUNT ME IN I LOVE THIS BAIL OUT…
I DRINK PARTY DO WHATEVER I WANT AND THE TAX PAYERS PAY FOR IT OR I MEAN AIG
COME ON U PEOPLE …..U MUST LIKE IT….. U VOTED THESE PEOPLE IN TO OFFICE….LOLLLLLLLLLLL
October 8th, 2008 at 6:13 pm
Ok, I warn you, it is long, but here it is:
How AIG’s Collapse Began a Global Run on the Banks
By Porter Stansberry
October 4, 2008
Something very strange is happening in the financial markets. And I can show you what it is and what it means…
If September didn’t give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they’ll get much worse.
They’ll get worse for the obvious reason: because more people will default on their mortgages. But they’ll also remain depressed for far longer than anyone expects, for a reason most people will never understand.
What follows is one of the real secrets to September’s stock market collapse. Once you understand what really happened last month, the events to come will be much clearer to you…
Every great bull market has similar characteristics. The speculation must – at the beginning – start with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats.
Some of these limitations are obvious to any intelligent observer… like the need for a substantial down payment, the verification of income, an independent appraisal, etc. But human nature dictates that, given enough time and the right incentives, any endeavor will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. You already know all the stories of how this happened in the housing market, where loans were eventually given without fixed rates, without income verification, without down payments, and without legitimate appraisals.
As bad as these practices were, they would not have created a global financial panic without the second, more critical element. For things to get really out of control, the farce must evolve further… into fraud.
And this is where AIG comes into the story.
Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank’s loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.
Here’s how it worked: Say you’re a major European bank… You have a surplus of deposits, because in Europe people actually still bother to save money. You’re looking for something to maximize the spread between what you must pay for deposits and what you’re able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding subprime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.
So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year.
“What would it cost me to insure this subprime security?” you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, “Not too much.” After all, the historical loss rates on American mortgages is close to zilch.
Using incredibly sophisticated computer models, he agrees to guarantee the subprime security you’re buying against default for five years for say, 2% of face value.
Although AIG’s credit default swaps were really insurance contracts, they weren’t regulated. That meant AIG didn’t have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what’s called “mark-to-market” accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.
Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year – long before the actual profit on the contract was made.
With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime “toxic waste.” The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in “profit” each year, without having to pony up billions in collateral.
It was a fraud. AIG never any capital to back up the insurance it sold. And the profits it booked never materialized. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.
Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralize the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.
On September 15, all of the major credit-rating agencies downgraded AIG – the world’s largest insurance company. At issue were the soaring losses in its credit default swaps. The first big writeoff came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came, AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn’t have the money. The world’s largest insurance company was bankrupt.
The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company’s equity.
Most people never understood how AIG was the linchpin to the entire system. And there’s one more secret yet to come out…
AIG’s largest trading partner wasn’t a nameless European bank. It was Goldman Sachs.
I’d wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company’s exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.
The collapse of the credit default swap market also meant the investment banks – all of them – had no way to borrow money, because no one would insure their obligations.
To fund their daily operations, they’ve become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have borrowed $348 billion from the Federal Reserve – nearly all of this lending took place following AIG’s failure. Things are so bad at the investment banks, the Fed had to change the rules to allow Merrill, Morgan Stanley, and Goldman the ability to use equities as collateral for these loans, an unprecedented step.
The mainstream press hasn’t reported this either: A provision in the $700 billion bailout bill permits the Fed to pay interest on the collateral it’s holding, which is simply a way to funnel taxpayer dollars directly into the investment banks.
Why do you need to know all of these details? First, you must understand that without the government’s actions, the collapse of AIG could have caused every major bank in the world to fail.
Second, without the credit default swap market, there’s no way banks can report the true state of their assets – they’d all be in default of Basel II. That’s why the government will push through a measure that requires the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can’t cover for them anymore.
And third, and most importantly, without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG’s sale of credit default swaps without collateral. That was the barn door. And it was left open for nearly a decade.
There’s no way to replace this massive credit-building machine, which makes me very skeptical of the government’s bailout plan. Quite simply, we can’t replace the credit that existed in the world before September 15 because it didn’t deserve to be there in the first place. While the government can, and certainly will, paper over the gaping holes left by this enormous credit collapse, it can’t actually replace the trust and credit that existed… because it was a fraud.
And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.
You might find this strange… but this is great news for those who understand what’s going on. Knowing why the economy is shrinking and knowing it’s not going to rebound quickly gives you a huge advantage over most investors, who don’t understand what’s happening and can’t plan to take advantage of it.
How can you take advantage? First, make sure you have at least 10% of your net worth in precious metals. I prefer gold bullion. World governments’ gigantic liabilities will vastly decrease the value of paper currencies.
Second, I can tell you we’re either at or approaching a moment of maximum pessimism in the markets. These kinds of panics give you the chance to buy world-class businesses incredibly cheaply. A few worth mentioning are ExxonMobil, Intel, and Microsoft. I have several stocks like these in the portfolio of my Investment Advisory.
Third, if you’re comfortable short selling stocks (betting they’ll fall in price), now is the time to be doing it… simply as a hedge against further declines.
Keep the fraud of AIG in mind when you form your investment plan for the coming years. By following these three strategies, you’ll survive and prosper while most investors sit back and wonder what the hell is going on.
October 8th, 2008 at 6:21 pm
LISA
WOW BY THE TIME I READ WHAT U POSTED I SPENT A MILLION DOLLARS OF UR BAILOUT MONEY… WHEWWWWWW
COUNT ME IN U ARE ANOTHER BLOW HARD THAT DOESNT SEE WHEN U HAVE LOST THE GAME……..
I AM ON TOP OF THE LIST OF LIVER TRANSPLANT WHY BECAUSE AIG PUT ME THER
FIRST CAUSE IM GOOD AT WHAT I DO AND THEY LOVE TO PARTY
THATS WHY MY LIVER IS SHOT AN U TAXPAYERS ARE GOING TO PAY
FIRST BECAUSE THESE PEOPLE AT AIG GOT ME SO DRUNK SO MANY TIMES
AND NOW U TAX PAYERS ARE GOING TO PAY FOR MY LIVER NOW TO RE PLACE
SO I JUST WANT TO SAY THANK YOU TO ALL OF YOU I HAVE HAD FUN . JUST NOT SURE WHO TO THANK
AIG OR THE TAXPAYER
BUT I WILL SAY I DID HAVE FUN AND EFF ALL OF YOU WHO DONT LIKE IT IT WAS FUN FOR ME
LISA WAS THAT LONG ENUFF FOR YOU…..LOLLL
October 8th, 2008 at 8:21 pm
Less than a month after receiving an emergency $85 billion federal loan, crippled insurance titan American International Group (AIG) may borrow up to $37.8 billion more from the Federal Reserve.
=================================================
so let me get this straight. Be irresponsible and get a $85 Billion taxpayer bailout. AIG is elated and,
throws a $400,000 party, everyone gets their toenails painted. Government likes the reaction from AIG so gives them $37 billion more of taxpayers money. Maybe next party they only get manicures.
October 8th, 2008 at 8:24 pm
The ONLY OC congressional delegates to back the neoconservative bailout package were John Campbell and Gary Miller.
Please let them know what you think by voting against them in four weeks.
October 8th, 2008 at 8:38 pm
I WILL vote against John Campbell. He is a communist.
I did vote for him the first time but that is because he lied and said he was pro-taxpayer, pro-small government, pro-capitalsim and pro-America. I now realize he is a communist who takes from those that work and gives to those that contribute to his campaigns.
October 8th, 2008 at 9:07 pm
I hope they can motivate their staff enough to make some big comebacks in the next year. It is tough to keep people focus with the financial markets on everyone minds.
October 8th, 2008 at 9:53 pm
YOU GUYS KEEP CRYING I LOVE WORKING FOR AIG…..
I HAVE MY BACK MASSAGED MY BELLY FILLED WITH LOTS OF VODKA AND THEY PAY FOR HOOKERS…
WHY IS ANYONE COMPLAINING FOR!!!!!!
October 8th, 2008 at 10:27 pm
You all can relax…AIG is in the process of selling American General Life (their strongest, most solid company–and by the way, American General Life is regulated and has oversight in all 50 states–always has and still does)–the event at St. Regis was a compensation one for agents (not CEOs) and no taxpayer money was used. No, not a cent of your money.
But American General Life will be sold, dismantled and sucked into another insurance company. ..Where the same kind of events as argued over here will be held and we taxpayers won’t pay a thing for those events either.
Now AIG-FC….that’s a whole other story…and AIG-FC caused the fall (even of a strong company they owned like American General Life.) A lot of people in that company (regular people) will lose their jobs and healthcare. Perhaps it makes most of you happy to consider that. And I said regular people…cause they’re like me. I’m no CEO, nor am I wealthy, but I do know the insurance business of which I’m for the moment a part of.
October 9th, 2008 at 3:10 am
Christ, when are you Yanks going to wake up and smell the coffee. 20% of your population doesn’t have health care now, when the economy collapses and jobs disappear that’ll probably jump to 40%, and those lucky ones who still have some form of insurance will be so hedged about by exclusions that they’ll probably still face bankruptcy if they get seriously ill. The wealthiest (well, so far anyway) nation in the world can’t provide healthcare for over 20% of it’s population? That’s ridiculous and not a sign of a sick economy but a sick society, but you can’t have have “gummint” provided healthcare like the rest of the civilized world because…. that would be (take a deep breath) SOCIALISM! Oh the horror! Most of the indoctrinated parrots who repeat that line won’t earn as much in their lifetimes as the fatcats at the top of their “health care” industry earn in a month, like the AIG exec who’s taken $280 million out of AIG in the last five years while creating this mess. Never mind, just keep parrotting the line while your puppet masters laugh all the way to the bank (if they can find one they’ve still left in business).
October 9th, 2008 at 5:47 am
Americans Are Just Dumbs.There Taxes are spent like this.They spent 100 of Billions of dollars to earn hatared all over the world.Common American are now feeling Job security problems.
Stupid Country
October 9th, 2008 at 7:36 am
Fred shot up and go back to Mexico or whatever 3ed world country your from. Our country is still the greatest in the world.
October 9th, 2008 at 10:55 am
The reality is that Bush could probably care less. As the President of the United States, he is easily within his right to bring the hammer down on AIG but he won’t…why? Because he really doesn’t care. If he did, he would do something….simple as that.
He throws a quote out to the news that he’s disgusted, but the reality is that words without action are meaningless…as this President has shown us over and over again.
Besides, he’s too busy lining up book deals and speaking tours for when he’s out of office.
McCain is another politician (in the worst sense of the word)…just blathering generalities, playing on dumb folks’ inability to really think thru problems….tossing out one-liner “solutions” like their Snickers bars for the dumb to chew on.
October 9th, 2008 at 4:33 pm
@caseclosed (mindclosed?)
Just a little English lesson for you:
shot = shut
3ed = 3rd
your = you’re
Here’s a good idea for you. Why don’t you go back to school and see if you can progress beyond sixth grade, then you could be qualified to actually write comments on the web without embarrassing yourself by displaying your lack of education and proofreading skills. Once that’s accomplished you could then start on acquiring some other rather basic knowledge such as logic, history, geography. I was going to add philosophy and debating skills, but I get the impression that’s probably beyond your capabilities, even though most schoolchildren in my first world country have studied it rather extensively by the time they graduate. Of course most of them don’t leave school functionally illiterate either, but then they don’t live in “the greatest country in the world”.
October 10th, 2008 at 8:19 am
Picture is of an other resort.
Why?
Does the author not know which is which?
OC Register has no one else who saw this too?
October 11th, 2008 at 4:23 pm
Kevin - the photo is of the Ritz Carlton in Half Moon Bay, where AIG plans to hold their next blowout bash next week, as cited in this post.
October 13th, 2008 at 8:28 pm
AIG did cancel a similar event planned in Half Moon Bay.
AIG website has the following statement related to the last event:
“The event, mischaracterized as an “Executive Retreat,” was held by one of AIG’s insurance subsidiaries for independent life insurance agents, not for AIG employees.”
So Obama was incorrect in his statement to fire the executives. What he really meant to say was fire the self-employed … and demand the money back.
Nice going Obama! Every small business owner supports your efforts to help our Country.