TheAgitator.com
AIG, Wiping Mouth: More Please
Thursday, October 9th, 2008So just a few days after they were given $85 billion in taxpayer funding for a bailout, AIG execs partied up a $440,000 tab at a California resort. Five days later, AIG’s back at the trough, asking for another $37.8 billion. Yeah, they’d still be begging again even if they hadn’t swanked it up. But it’s the symbolism, you know? Cancel your fucking party, you losers.
Of course, the feds are the company’s principal investor, now. Paulson, Bernanke & Co. put their butts on the line. They have an interest in keeping the company alive. Which means AIG can probably fail a dozen times over. The feds will keep pumping in more cash.
Welcome to the federal bureaucracy, AIG. Nobody under-performs, here. You’re just under-funded.
You subsidize something, you get more of it. Just like if you promise to buy up bad mortgages, you tell homeowners to stop paying their mortgages.
‘The Federal Reserve said that AIG “as expected” had already spent all of the $85.0 billion bailout money it received as part of its Sept. 16 bailout.’
On one hand, you’ve got to be glad they’re not sitting on it earning interest…
“Under the Railroad Unification Plan, a local railroad had gone bankrupt in North Dakota, abandoning the region to the fate of a blighted area, the local banker had committed suicide, first killing his wife and children — a freight train had been taken off the schedule in Tennessee, leaving a local factory without transportation at a day’s notice, the factory owner’s son had quit college and was now in jail, awaiting execution for a murder with a gang of raiders — a way station had been closed in Kansas, and the station agent, who had wanted to be a scientist, had given up his studies and become a dishwasher — that he, James Taggart, might sit in a private barroom and pay for the alcohol pouring down Orren Boyle’s throat, for the waiter who sponged Boyle’s garments when he spilled his drink over his chest, for the carpet burned by the cigarettes of an ex-pimp from Chile who did not want to take the trouble of reaching for an ashtray across a distance of three feet.”
(“Atlas Shrugged”, Part III — “A is A”, chapter IV — “Anti-Life”, p. 867)
[...] a distance of three feet.” (Ayn Rand, 1957: “Atlas Shrugged”, Part III — “A is A”, chapter IV — “Anti-Life”, p. 867) That is what principles can do for you, ladies and gentlemen: you can actually see the [...]
“Under the Railroad Unification Plan, a local railroad had gone bankrupt in North Dakota, abandoning the region to the fate of a blighted area, the local banker had committed suicide, first killing his wife and children — a freight train had been taken off the schedule in Tennessee, leaving a local factory without transportation at a day’s notice, the factory owner’s son had quit college and was now in jail, awaiting execution for a murder with a gang of raiders — a way station had been closed in Kansas, and the station agent, who had wanted to be a scientist, had given up his studies and become a dishwasher — that he, James Taggart, might sit in a private barroom and pay for the alcohol pouring down Orren Boyle’s throat, for the waiter who sponged Boyle’s garments when he spilled his drink over his chest, for the carpet burned by the cigarettes of an ex-pimp from Chile who did not want to take the trouble of reaching for an ashtray across a distance of three feet.”
As though the opening sentences of “Paul Clifford” and “Tale of Two Cities” weren’t bad enough.
Re: #1 – the homeowners still lose their houses. The subsidization will instead tell the banks to keep writing bad loans then kicking people out of the houses that they can’t afford.
I just took out a $100,000 loan (and got great rates). Credit seems available…and the sun came up in the East this morning.
This crisis is a bunch of whoey–might go down as the biggest boondoggle of all time if anyone ever gets to do an autopsy. Let these firms fail and any economic dip will be temporary and get rid of some of the stupid leadership in Washington and in NYC.
How do you break that news to Congress and why wasn’t the Treasury even concerned they might get laughed out of the building? Even more suspicious is that Congress didn’t even blink. Instead, they just worked together to get it passed right away. My Austrian School nose is smelling a con job.
I wish Milton Friedman and von Mises were alive–not that they had any ability to change politics. Add “Capitalist” to “Land of the Free” as qualities that Americans can no longer claim.
I hope someone starts a site listing all the excuses politicians (and Fed agencies) use to explain why THEY aren’t to blame. And, the real cost of this will probably be double the original $700 Billion (let’s see what they include in next year’s budget).
It’s only a matter of time until you get to keep your house and have your principle lowered if the government buys your mortgage.
I fully realize that it will cause more problems, but that’s what is going to happen.
My father has a close friend who owns a prosperous dental practice in California. He is trying to refinance the loan on the building the practice owns right now. he is looking at four proposals from major banks (BofA, WFC, and two others). The BofA banker told him “We are excited about this loan, the building is owner occupied, the business has a long and solid operating history and the LTV looks good”.
There is no shortage of capital for creditworthy borrowers. The capital that is drying up is for lower rated credit risks and for certain financial institutions who speculated heavily in lending to less creditworthy borrowers.
All of the current attempts by the government to “get banks lending again” is really an attempt to push capital out to the already overcapitalized housing sector and to get financial institutions to trust each other again, which is completely against the natural and proper response of not lending when one institution does not trust another.
You might want to take another look at the story. Last night I was rating it as one of the worse reported stories in a couple of days. Of course, the original story came from a member of Congress, but the press has just repeated it over and over again, without actually trying to confirm anything, or dig into anything.
1) AIG is claiming it wasn’t an executive retreat:
http://ir.aigcorporate.com/phoenix.zhtml?c=76115&p=irol-newsArticle&ID=1206974&highlight=
” 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. These agents were top business producers for the company, and of the more than 100 attendees, only 10 were employees of the AIG subsidiary who were there to represent their company. No AIG executives from headquarters attended. The meeting was planned months before the Federal Reserve Bank of New York’s loan to AIG.”
Think about this. This appears to be some kind of reward for independent agents who sold a lot for AIG. You’re having problems. So the last thing you want to do is screw the people who keep your revenue flowing. In general good salespeople can make a lateral shift before you can blink.
Plus, it wasn’t even AIG directly. It’s one of the subsidiaries. One of the things I’ve been reading about in the last few weeks are how the individual state insurance companies are heavily regulated, and presumably semi-independent of the main company. Could headquarters have stopped this even if they wanted to? It could of been an area for one telling the story to research. But the point was never facts, it was emotional response.
2) Read the bill: http://www.thesmokinggun.com/archive/years/2008/1007083aig2.html
Subtotal 442,115.50
Deposit (402,701.04)
Total Amount Due: 40,642.67
So, they paid most of it as a deposit. I don’t know the details, but I’m guessing a) The deposit was paid months ago, and b) The hotel isn’t going to just let you take your money back and leave them stuck with 100 unsold rooms. So, it’s possible that the money was mostly sunk cost. Some calls to the hotel on their deposit policy or to AIG might illuminate this.
Of course, you’re correct that it’s horrible horrible symbolism. They should of at least closed the spa. But it’s one of those things that certain politicians and press have oversimplified.
The government is now giving away the treasury to banks in the hope that they will have more to lend the borrower. That is a great way to stimulate the economy as long as the banks make all of the potential borrowers eligible for a big fat loan. The only problem is that the banks will go bust again when most of the big fat loans are not repaid. But the problem will be solved when Uncle Sam comes to the rescue and bails out the banks for a second time. There must have been an economic genuis that devised this theory to keep us all happy. It is deserving of a Nobel Prize.
I work in the convention services industry. Clients of hotels sign contracts weeks, months, even years in advance of large conventions.
Legally binding contracts.
This non-story is a fine example of the putrid state of “journalism” in America in the 21st century, not that it was any better in the past.