Wednesday, February 3, 2010

AIG Just Doesn't Get It

Everyone give a standing applause to AIG for continuously taking the award for one of America's most unethical corporations. As Americans, it seems like every year their actions just make us want to vomit and in 2010 our nausea won't be going away.

This year, in the middle of a financial crisis, AIG will be giving out over $100 million dollars in bonuses to members of its financial division. To understand why Americans are really upset over this, please allow us to walk you through part of AIG's recent financial history.

On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its credit rating. After a 52-week high of $70.13, AIG's share prices had fallen over 95% to just $1.25. The company reported over $13.2 billion in losses in the first six months of the year.

In what was the largest government bailout of a private company, that evening the Federal Reserve Bank's Board of Governors announced that the Federal Reserve Bank of New York had been authorized to create a 24-month credit-liquidity facility from which AIG could draw up to $85 billion. AIG drew down US$ 28 billion of the credit-liquidity facility on September 17, 2008. On September 22, 2008, AIG was removed from the Dow Jones Industrial Average. An additional $37.8 billion credit facility was established in October. As of October 24, AIG had drawn a total of $90.3 billion from the emergency loan, of a total $122.8 billion.

The following week, AIG employees and distributors participated in a California retreat which cost $444,000 and featured spa treatments, banquets, and golf outings.

It was reported that the trip was a reward for top-performing life-insurance agents planned before the bailout. Less than 24 hours after the news of the party was first reported by the media, it was reported that the Federal Reserve had agreed to give AIG an additional loan of up to $37.8 billion.

AP reported on October 17 that AIG executives spent $86,000 on a previously scheduled English hunting trip. News of the lavish spending came just days after AIG received an additional $37.8 billion loan from the Federal Reserve, on top of a previous $85 billion emergency loan granted the month before. Regarding the hunting trip, the company responded, "We regret that this event was not canceled."

An October 30, 2008 article from CNBC reported that AIG had already drawn upon $90 billion of the $123 billion allocated for loans. On November 10, 2008, just a few days before renegotiating another bailout with the US Government for $40 billion, ABC News reported that AIG spent $343,000 on a trip to a lavish resort in Phoenix, Arizona.

By March of 2009 AIG had already received over 150 billion dollars in bailout money but yet the spending spree was just getting started.

In the exact same month, AIG announced that they were going to pay out $165 million in executive bonuses and that total bonuses for just the financial unit could reach $450 million while bonuses for the entire company could reach $1.2 billion. Let's not also forget that before getting fired Joe Casson, former President of AIG, was earning $280 million in cash with about another $40 million in bonuses.

Other points to watch out for is the end of AIG's sponsorship contract with the global soccer powerhouse Manchester United. While AON Corporation seems to be the principal sponsor of the team, AIG's could make a move to sponsor this club again costing the company another 100 million dollars.

And yet, today the company has again announced over $100 million dollars in bonuses--again allow us to remind you that this is just for the financial division of the company.

What was that George W. Bush quote "Fool me once. Fool me twice..rrrruh rurrughblah"?--err something like that.

While paraphrased instead of a direct quote, that one still doesn't apply to this situation. Why not you ask?

Simple. Because it's time someone from AIG goes to jail.

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