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Archive for the 'AIG' Category

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Mess up, get paid! Firms that nearly sunk global economy get billions from Uncle Sam to fix it

August 26th, 2009, 9:26 am by Teri Sforza, Register staff writer

center-pub-integrityOh, boy, this is going to get folks mad.

“Firms that fed off the subprime lending frenzy that devastated the banking system are lining up to collect more than $21 billion in taxpayer funds meant to help bail out borrowers now in trouble on their loans,” reports the Center for Public Integrity - a nonprofit dedicated to producing “original investigative journalism about significant public issues.”

In ”You Broke It, You Fix It?  Subprime Players Get Tax Money To Fix Subprime Mess,” John Dunbar writes:

“The funds come from the federal government’s Home Affordable Modification Program (HAMP), begun in February by the Obama administration to coax lenders into modifying mortgages that might otherwise result in foreclosure. According to a Center for Public Integrity analysis of public records, of the 25 top participants in the program, at least 21were heavily involved in the subprime lending industry. Most specialized in servicing subprime loans, but several both serviced and originated the loans.”

The folks who nearly sunk the global economy, but who will chow down more taxpayer pie: a subsidiary of beloved American International Group Inc. Read the rest of this entry »

Posted in: AIG • Financial meltdown • watchdog roundup | 6 Comments »

AIG’s hard-partying aircraft unit tanks on the auction block

April 27th, 2009, 10:31 am by Teri Sforza, Register staff writer

iflcinvite11Can you say “fire sale?”

American International Group’s fat-and-happy aircraft-leasing unit was supposed to help the ailing insurer repay Uncle Sam that $180 billion, er, loan.

Uh oh.

International Lease Finance Corp. has a book value upping $8 billion - but offers are coming in at less than $5 billion, Reuters UK is reporting.

iflc-invite-1-b1Tough market, hard to line up financing, that sort of thing.

You may recall that ILFC threw a grand soiree for 820 people just days after the bailout in September - at the  Smithsonian National Air and Space Museum outside Washington, D.C.

We are still waiting for the total cost of this bash from the  Committee on Oversight and Government Reform… the winner of our “how-much-did-that-party-cost?!” contest will get an OC Watchdog mug!

Guesses range from $281,000 to $7.8 million. We suspect the actual number will land somewhere between the two. Make your guess here.

More Watchdog:

Posted in: AIG • Federal spending • Financial meltdown | Post a Comment »

AIG bailout doesn’t seem to be working, report says

March 18th, 2009, 1:17 pm by Teri Sforza, Register staff writer

As American International Group executives are being grilled about paying $165 million in bonuses to the very people who nearly caused a global collapse of the financial system, the federal Government Accountability Office has released a report with this disturbing (though early) conclusion:

This AIG bailout thing doesn’t seem to be working well, and the company may have a great deal of trouble repaying government loans.

Yes, it’s frustrating that We The People own 80 percent of AIG but can’t do much to stop these bonus payments. (After today’s grilling, AIG’s chief says he’ll ask the execs to give back half their bonuses;  feel their pain.)

Yes, it’s frustrating that much of the $170 billion in taxpayer dollars funneled to AIG have gone to satisfy collateral calls by other faltering firms, and have done little to nothing to ease the credit crisis.

But the GAO’s sober assessment could be characterized as downright scary. “Although the ongoing federal assistance has prevented further downgrades in AIG’s credit rating, AIG has had mixed success in fulfilling its other restructuring plans, such as terminating its securities lending program, selling assets, and unwinding its AIG Financial Products portfolio,” the report says.

“For example, AIG has made efforts at selling certain business units and has begun an overall restructuring, but market and other conditions have prevented significant asset sales, and most restructuring efforts are still under way. AIG faces ongoing challenges from the continued overall economic deterioration and tight credit markets. AIG’s ability to repay its obligations to the federal government has also been impaired by its deteriorating operations, inability to sell its assets and further declines in its assets. All of these issues will continue to adversely impact AIG’s ability to repay its government assistance.”

AIG’s competitors in the insurance business are complaining that the federal assistance has allowed AIG to offer coverage at discounted rates, which don’t adequately reflect the risk involved - and which they can’t compete with. 

State insurance regulators and others said AIG’s pricing may be more aggressive than in the past, but they didn’t think the pricing was out of line.

It may take years to determine if premiums charged were adequate for the related losses, the GAO says.

Read The Wall Street Journal’s take on the real AIG outrage. And weep.

More Watchdog:

Posted in: AIG • Federal spending • Financial meltdown • Money • Taxes | 15 Comments »

‘So you nearly destroyed the global economy? Here’s your bonus!’

March 16th, 2009, 11:08 am by Teri Sforza, Register staff writer

Really, American International Group’s hands are tied.

It simply must pay $165 million “retention pay” to executives in its financial products division - yes, the very division that sold the insane investments that caused its near collapse and required a $170 billion lifeline from the federal government.

Why? Because AIG promised to pay those bonuses about a year ago, before Financial Armageddon hit, and it is now contractually obligated to shell out the money, The Washington Post reported yesterday.

Performance, obviously, has nothing to do with said bonuses. AIG reported losses of nearly $62 billion last quarter. Oops!

An outraged President Obama is trying to find a way to block the payments. AIG’s problems stem from ”recklessness and greed,” the president said. “It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay.”

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Posted in: AIG • Federal spending • Financial meltdown | 6 Comments »

An (AIG) rose by any other name…still smells

March 2nd, 2009, 3:00 am by Teri Sforza, Register staff writer

In the Lord Voldemort/he-whose-name-cannot-be-mentioned department:

Customers of 21st Century Insurance were just getting used to writing checks to American International Group, which swallowed up their car insurance company in 2007, when - what do you know! - letters recently arrived in their mailboxes on, well, 21st Century Insurance letterhead.

“A respected name returns - with a commitment to California drivers that has never been stronger,” says the letter to policyholders. “For over 50 years, 21st Century Insurance has meant low rates, personal service, unique features - and one of the most respected names in the business….

“Now we’re proud to reclaim that great name as we strive to make our company even more in tune with the way Californians live today, in the 21st century.”

The name AIG, of course, has become something of a liability in the marketplace. Today, markets are reeling on the news that AIG posted the largest quarterly loss of any company, ever, in U.S. history - losing nearly $62 billion in the last three months of 2008, despite that $150 billion lifeline thrown to the company by the federal government. And yet, AIG spent more than $1 billion on “employee retention pay” nonetheless. Wouldn’t want those financial wizards who got AIG where it is to leave the company, now, would we?

And things get worse. U. S. taxpayers are throwing the ailing insurance giant another $30 billion, significantly upping the risk that we’ll never see that money again. AIG is just too big to fail, say the powers-that-be. Taxpayers own about 80 percent of the company.

It’s certainly not the first time AIG has tried to go a bit underground:

More Watchdog: 

Posted in: AIG • Financial meltdown | 31 Comments »

AIG “employee retention” pay reaches $1 billion

January 29th, 2009, 3:00 am by Teri Sforza, Register staff writer

American International Group offered $450 million “retention pay” to employees who lost billions on credit-default swaps.

That averages out to about $1 million-and-change per worker, for the 400 or so workers in the financial products unit.

Those are the very folks responsible for some $34 billion in write-downs since 2007, as market value of the swaps plunged amid the sub-prime mortgage market collapsed, Bloomberg reports.

That brings the grand total of AIG’s “employee retention payments” to more than $1 billion. The money is meant to keep workers from bailing - as if there were any place they could go.

AIG, of course, is the insurance giant alive thanks to a $150 billion lifeline from the federal government. Taxpayers now own 80 percent of the company.

LOCK THE SCOUNDRELS UP!

In other AIG news this week, a former vice president  was sentenced to four years in prison for defrauding shareholders - a relief for him, as he could have gotten a life term.

Christian Milton (left), 61, was convicted last year (along with four former execs of General Reinsurance Corp.) of using a sham transaction to help AIG improve its balance sheet. The fraud cost AIG shareholders as much as $597 million, Bloomberg reports.

U.S. District Judge Christopher Droney also imposed a $200,000 fine and two years of supervised release after Milton’s term ends.

 More Watchdog:

Posted in: AIG • Federal spending • Financial meltdown • Money • Taxes | 16 Comments »

Ousted AIG chief laments, ‘What are you guys DOING?!’

January 6th, 2009, 10:01 am by Teri Sforza, Register staff writer

Can American International Group ever hope to repay Uncle Sam that $150 billion if it keeps casting its pearls before swine?

Many naysayers fear taxpayers will never see that money again - and one might add former AIG executive Maurice “Hank” Greenberg to the list. In a cranky letter to AIG’s board of directors - which he copied to the Securities and Exchange Commission - Greenberg complains that the recent sale of a profitable AIG subsidiary at pond scum prices dooms the insurance empire he so painstakingly helped build.

“The press has reported, and AIG management has confirmed, that AIG intends to sell HSB to Munich Re for approximately $742 million,” Greenberg writes. “This can only be viewed as a distressed sale price. Indeed, Joerg Schneider, the Chief Financial Officer of Munich Re, has been quoted as stating: ‘The sales price is, considering the profitability of the acquired company, very low.’”

And here’s the kicker for you and me, who now own 80 percent of AIG: “Certainly, selling major assets at fire sale prices is not a viable strategy for reviving the company or even repaying the government.”

So, $742 million down; $149.3 billion or so to go. Not that we’re counting or anything.

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Posted in: AIG • Federal spending • Financial meltdown • Money • Taxes | 2 Comments »

OC Watchdog contest update: Guess what this AIG junket cost!

January 2nd, 2009, 6:30 am by Teri Sforza, Register staff writer

Last month, we at The Watchdog were thrilled to launch our first contest, asking you to guess how much American International Group’s aircraft-leasing subsidiary spent on a fantabulous party for 820 people in Washington, D.C., at the Smithsonian Air and Space Museum.

To date, there have been 78 guesses, ranging from a very low $281,000 to a rather high $7.8 million. We suspect the actual number will land somewhere between the two.

(Enter by adding your guess in the comments section here! The prize, by the way, is a priceless OC Watchdog coffee mug! Don’t say we never gave you anything.)

Anyway, we have received quite a few emails from folks eager to claim the prize, so we thought this would be a good time to bring you up to speed on…the lack of speed with which a Congressional investigation proceeds.

The Committee on Oversight and Government Reform has subpoenad thousands of pages of documents from AIG - including:

  • A list of all conferences, events or retreats paid for by AIG, its subsidiaries, or affiliates from Jan. 1, 2008 to the present;
  • Documents showing how much each event cost, including lodging, transportation, food, drink and other charges;
  • A list of any similar conferences, events or retreats planned for the next six months;
  • And much, much more.

The paperwork arrived about six weeks ago, and the committee’s spokeswoman tells us the investigation continues and the committee is combing through reams of paperwork. When they unearth the bills for this extravaganza and tell us, we’ll tell you.

Happy New Year!

Posted in: AIG • Contests • Federal spending • Financial meltdown • Money • Taxes | 1 Comment »

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