Did anyone catch this from the Congressional debates today? According to USAToday:
“After the bailout of AIG last month, the United States government effectively bought an 80% share in the company. That should have caused a fundamental change, you would think, in how the company was spending funds on compensation, bonuses and benefits.
But it doesn’t look like that’s what happened. The committee learned that shortly after the bailout went through, executives from AIG’s major U.S. life insurance subsidiary, AIG American General, held a week-long conference at an exclusive resort in California.
The resort is called the St. Regis Monarch Beach. … It’s very impressive. This is an exclusive resort. The rooms start, gentlemen, at $425 a night. Some are more than $1,200 a night.
… We contacted the resort where AIG held this week-long event, and we requested copies of AIG’s bills. We learned that AIG spent nearly $500,000 in a single week at the — at this hotel. Now, this was right after the bailout.
… Let me describe some of the — the charges that — that the shareholders who are now U.S. taxpayers had to pay. Check this out.
AIG spent $200,000 for hotel rooms, and almost $150,000 for catered banquets. AIG spent — listen to this one — $23,000 at the hotel spa and another $1,400 at the salon. They were getting their manicures, their facials, their pedicures and their massages while the American people were — were footing the bill.
And they spent another $10,000 for — I don’t know what this is — leisure dining.”
btw - leisure dining is drinking…
So if we’re stakeholders now, I say there needs to be some AIG executives fired…but that’s after they pay back from their own salaries the 1/2 million dollar vacation they had at the expense of American citizens.
Oh, and did you hear about the head of Lehman Brothers who said it was the media among others at fault for the economic crisis…
According to the New York Times, with protesters behind him, Lehman Brothers chief executive Richard S. Fuld Jr. arrived for Monday’s hearing. Testifying in front of Congress, he blamed the news media. He blamed the short-sellers. He blamed the government, as well as what he characterized as an “extraordinary run on the bank.” But the chief executive of Lehman Brothers Holdings, the bankrupt remnant of a once-great investment house, never really blamed himself.
Hmmm, had nothing to do with actions by highly paid, greedy Wall Street executives, or highly leveraged mortgage-backed securities they traded, or that those securities had insurance with no capital backing it up. Nope, had nothing to do with that…
You know what I’m wondering? What ever happened to President Bush’s crackdown on corporate fraud…remember back in 2002 after the collapse of Enron, President Bush established a corporate fraud task force to bring justice to unscrupulous executives. In a speech in September 2002, Mr. Bush said, “This broad effort is sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed and you will be punished. We will deter corporate crimes by enforcing tough penalties.”
And remember all of the C-level executives had to sign a paper that said they’d be in big trouble if they were caught in anything looking at all like unscrupulous shenanigans. What ever happened to that?
According to data compiled by Bloomberg, 61% of those sentenced spent no more than two years in jail, with 28% receiving no prison time at all.
Looks like we need to pull that corporate fraud “thingy” out, dust it off, and start taking down names!
Let me know what you think!
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Tags: AIG, lehman brothers, Scams, wall street bailout
October 9th, 2008 at 8:08 pm
That’s outrageous if AIG acted that irresponsibly right after being lent money from the government. NPR and the Economist are reporting that AIG will soon run through its $85 million credit line and need to borrow billions more. It seems like the recently-approved bail-out plan is buying, as the Economist puts it, “toxic assets.” In the same article, an economist for Citigroup was quoted as saying that, “It is unlikely that the actions of any one country can return financial conditions in that country to normal” and, thus (if our government hasn’t figured it out) this is a global issue.
Not only would I examine corporate fraud in American businesses, but I would cast an eye overseas as well.
The most terrifying statistic I have seen recently is in response to: how much capital will be needed to restore the solvency of American and European banks? The IMF has calculated that the banks need $675 billion of new capital, two-thirds of it in Europe. A more “conservative” estimate done by Citigroup estimates $400 billion.
We need help. From both private-equity firms and even our lame duck government. And we definitely need to crack down on such flagrant spending from the companies we’re supposed to be saving.
October 9th, 2008 at 11:29 pm
Disgusting and usual state of affairs.
October 10th, 2008 at 8:08 am
Great comments! It’s just more of the same bad behavior. How do we convey to these people that things must change. Taxpayers are not handing over their hard-earned money for these greedy executives to continue making the bad, self-serving decisions that have gotten us into this mess.
I’m not a financial expert and maybe it’s too late for this but rather than bailing out these fat cats who at least from AIG’s behavior are not intent on changing…why don’t we give this money to the American people who are defaulting on their loans? I’m not talking about a handout for people who shouldn’t have had mortgages in the first place. I’m talking about people who due to a job loss, an illness, a reset of interest rates that make their payment too big to afford, why don’t we give them the money (and at the same time reconfigure their loan)? I hear that these mortgage-backed derivatives are leveraged 40:1. So why wouldn’t it be smarter to work on the “1″ side vs. the “40″ side?
Maybe it’s a logistics impossibility. I don’t know. But I also don’t have much confidence in these Wall Street execs, that they’re going to do the right thing with our money. And I suspect other people feel the same way…that’s why the world financial markets continue to plummet. There is a lack of confidence. And why shouldn’t there be?
Note to Wall Street - if you want us to trust your decisions, descend from your ivory towers and communicate with the American people…tell us what you’re going to do (differently) with our hard-earned money. Put a face on the problem. We are a forgiving people. But own up to your mistakes, tell us how you’re going to act differently, then, and only then, might we regain the confidence that is so needed in this economic recovery.