Oct 07 2008
After Bailout, AIG Execs Head to California Resort
First I’m blogging about this. Then I’m going to write AIG a letter.
According to this story on ABC News:
Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today.
“Rooms at this resort can cost over $1,000 a night,” Congressman Henry Waxman (D-CA) said this morning as his committee continued its investigation of Wall Street and its CEOs.
AIG documents obtained by Waxman’s investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges.
“They’re getting their pedicures and their manicures and the American people are paying for that,” said Cong. Elijah Cummings (D-MD).
“This unbridled greed,” said Cong. Mark Souder (R-IN), “it’s an insensitivity to how people are spending our dollars.”
Appearing before the committee, Martin Sullivan, the AIG CEO until June, said the company was overwhelmed by a “financial global tsunami,” and that “no simple or single cause” was to blame.
I am completely unable to wrap my head around this absolutely disgusting behavior. It’s plain to me that a company with executives at its helm capable of this kind of outrageous, reckless greed, this clueless irresponsibility do not deserve my support. I may not be able to yank my hard-earned tax dollars out of their filthy fingers, but I most surely do not have to hand it over to them voluntarily. When my two auto insurance policies with AIG are next up for renewal, I’m taking my business elsewhere.
11 responses so far
Grant, first let me say that I completely understand your frustration. Second, let me offer a perspective that may lend some balance to the picture of AIG that the media is portraying. My dad has worked for AIG for nearly 25 years. Don’t worry…he was NOT one of those nasty execs at the spa! Here are the facts as I understand them from inside the company, as well as my suggestion about how not to fix the problem and how to fix it.
The government allotted $85 billion for AIG to use if it needs it. In other words, the government did not merely pull out 85 billion one-dollar bills and hand them over to AIG with a card that read, “Here you go!” The company can draw UP TO $85 billion if it needs it. In addition, that money has to be re-paid, with interest, in 2 years. This is not a handout, but a very short loan. AIG has to sell off assets and repay that loan pronto.
So, why AIG? Consider this: As the world’s largest insurance company, AIG’s failure would have meant the failure and collapse of an absolutely astounding number of institutions. I’m not sure anyone really wraps their minds around THAT. When those institutions collapse, regular people like you and me suffer tremendously. For example, many major theme parks are insured by AIG. If the company goes under, the theme parks close until they can fork out millions of new dollars under a newly negotiated contract with a different company. And in our economy, that may not happen fast. Now, theme park closures don’t seem like a big deal, but it would have a big impact on certain parts of the economy. Extend that concept to financial institutions run by AIG, airlines insured by AIG (by the way, that would be MOST of the world’s jets!), rental car companies insured by AIG, hotels insured by AIG, etc. There would be no flying, driving, hotel-staying, theme-park going, or a host of other economically important activities. You can see that AIG has their hands in so many places that if they did fail, it would cripple the world economy in ways the would hurt not just Wall Street, but you and me as well. That doesn’t mean I like the $85 billion loan, but it does help put it in perspective a bit. As some people put it, if any firm was too big to fail, it was AIG. (Read more here: http://bigpicture.typepad.com/comments/2008/09/aig-bailout-85b.html.)
Finally, remember that people like my dad make up the majority of the workforce of AIG. Hard workers who are doing their best, even during this tough time, to make sure you can get your car repaired if someone runs a red light and hits you. People like my dad, with his particular line of work at AIG, are making sure that people aren’t filing fraudulent claims, thereby causing your premiums to go up unnecessarily.
So, the solution that won’t work: Cut off funds to AIG and tell them to fix it on their own. Sorry, but as much as we would like for that to be the case, it just isn’t a real solution.
The solution that will work: Now that the government effectively owns AIG, fire the executives, and get some people with great business sense (i.e., NOT politicians!) to find replacements. Cap their salaries, and tell them that if they are ever caught going to lavish resorts in the middle of financial disaster, they will be tarred and feathered…in public. You said, “It’s plain to me that a company with executives at its helm capable of this kind of outrageous, reckless greed, this clueless irresponsibility do not deserve my support.” I would probably tweak that just a little bit. It may not be right to say that the “company” should not have our support, but it would definitely be right to say that these greedy executives should not have our support. For the sake of the world, let’s not destroy the whole company because of the greedy execs. Let’s fix the problem, fire the execs, and put a long-term plan in place to break the company up if necessary so this problem doesn’t come again. Maybe.
You’re certainly welcome to take your insurance wherever you want, but keep the whole situation in perspective. We all want to respond rather emotionally and drastically right now (hence your category, “Rant”), but we’ve got to have a complete picture of the situation we’re dealing with and keep a long-term perspective. Otherwise, we’ll do things that we’ll regret in the future.
The reputation of an instituion rests on its constituency. Is it fair for AIG employees to shoulder the responsibility of executives’ blatant disregard for propriety? Probably not. I certainly understand that not everyone in AIG’s employ are evil, money-grubbing fiends. But in our capitalist society (and evidently for these executives), the form of communication that speaks most clearly is money. The executives at AIG — both those that are currently in office and those who will take the helm in the future — need to understand the import of this moment, and they must conduct themselves with circumspection and gravity. Flitting off to have your nails done at some lavish resort after sticking your hand in America’s collective pocket clearly demonstrates that these people have no grip on reality. No wonder they drove the company into the ground.
My dollars won’t count for a hill of beans in the larger equation. But I’m going to speak with the voice that I have by taking my business elsewhere.
I certainly understand, Grant. I feel the same way about several big companies that I currently do business with. I wish there really was some way that our piddly little dollars would matter in the larger equation.
I’m certainly no economist, but it seems like we ought to able to punish the execs without killing the company that’s helping millions of people, whether it’s AIG or some other company.
I’m not looking to kill AIG. I’m just going to spend my dollar at another insurance company.
Sheesh! What jerks! If you could use a laugh right about now, here’s a funny song about the bailout: http://www.youtube.com/watch?v=uZUXXSxZPhw
On the news last night, they just said that congress agreed to award AIG another 32 billion. I don’t understand. If they haven’t used all of the 85 billion, why do they need more?
I’m for revoking the bailout!
Good grief… Now there’s this: AIG executives spent thousands during hunting trip.
These people have no shame.
“Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week.”
via ABC News
This will go out in tomorrow’s mail:
Unreal. Via Bloomberg: