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AIG burns through bulk of bailout billions

January 1st, 2009, 6:30 am · 13 Comments · posted by Teri Sforza, Register staff writer

The Fed threw beleagured insurer American International Group a $150 billion lifeline - and, in just a little more than three months, the company has burned through $127.7 billion of it, according to Federal Reserve figures.

That’s, er, 85 percent or so of the total.

AIG has five years to repay, and has begun selling off some assets to fulfill its obligations. It’s getting fire-sale prices, however, and some doubt AIG will be able to repay its debts to Uncle Sam. (Seee Bloomberg and CNN Money for detail.)

Here in Orange County, on the day after Christmas, more than 200 people who worked for AIG-related businesses lost jobs. That’s 112 people who worked for AIG Marketing Inc. in Brea, and 106 at AIGM and 21st Century Insurance Co. in Brea, according to the California Employment Development Department’s Worker Adjustment and Retraining Notification Act Notices.

If you’re curious about how the golden giant fell off the cliff and into the abyss, The Washington Post has done a fabulous series on the collapse of AIG, which makes for fascinating, if disturbing, reading.

Meantime, as controversy over AIG’s lavish retreats for agents and luxurious perks for execs became a national outrage, the company appears to have found some religion:

  • It rescinded an award of restricted shares to its former CEO Robert Willumstad, who was ousted before he could turn around the uber insurer. Willumstad agreed to forgo about 1.05 million shares, according to a letter in a regulatory filing, Bloomberg reports. 
  • Willumstad also declined severance pay of $22.5 million, saying he was unable to stem losses. “I prefer not to receive severance payments while shareholders and employees have lost considerable value in their AIG shares,” Willumstad wrote.
  • Chief Executive Edward Liddy agreed to slash his salary to $1 a year as part of a series of voluntary pay restrictions by top executives.
  • Many executive bonuses and pay increases will be eliminated as well.

But, of course, some will not. It’s necessary to compensate the top brass to keep them working and motivated, Liddy has said.

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Posted in: AIG • Federal spending • Financial meltdown • Money • Taxes
 
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