Why’s Everyone Picking On AIG?

Over the weekend, it seemed like everyone from Timothy Geithner (Secretary of the Treasury), Christina Romer (chair of the White House Council of Economic Advisers), Barney Frank (Democrat House Representive and chairman of the Financial Services Committee) to Mitch McConnell (Senate Republican Leader) has expressed their disdain over AIG Insurance (NYSE:AIG) paying $165 million in bonuses (only about 0.10% of the $173 billion the company received in U.S. government bailout funds so far) to the units responsible, in part, for the current financial debacle we are facing.

For some inexpiable reason, management of AIG seems to continue to get immunity from being voted off the island.

We believe that AIG should pay what it agreed to pay to its employees. However, while there should be cash bonuses to employees below a certain pay or responsibility level, those employees that are at or above that level should only received the paper they created. This way they the responsible parties have a vested interest in resolving their company’s issues. But we would also include that they would not receive any payment until the issues are resolved.

Following pressure from lawmakers, AIG released yesterday that from September 16 through December 31, 2008 the company paid more than $90.0 billion to various banks. These include European banks such as (but not limited to) Societe Generale (GLE), Deutsche Bank (NYSE:DB), UBS (NYSE:UBS), Calyon and Deutsche Zentral-Genossenschaftsbank, as well as U.S. entities such as Goldman Sachs (NYSE:GS) [no wonder they gave back their TARP funds], and used $12.1 billion of those funds to make payments on Guaranteed Investment Agreements held by cities across the country to include but not limited to California municipalities ($1.02 billion), Virginia cities ($1.0 billion) and New York state cities ($210 million). This leads us to question, “What has been paid out over the past two and half months?”

Considering it was a busy weekend for upper management of AIG and with pending appearances in DC this week, we are left to wonder - Which spa will management visit this time around in order to unwind?

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