Oct 22 2008

AIG Freezes CEO Pay

( – promoted by buhdydharma )

From Market Watch:

SAN FRANCISCO (MarketWatch) — New York Attorney General Andrew Cuomo said Wednesday that American International Group Inc. … agreed to freeze payments under its former chief executive’s contract. Cuomo sent a letter to current CEO Edward Liddy confirming that AIG will freeze any payments under ex-CEO Martin Sullivan’s $19 million contract, and will not make payments out of $600 million in compensation and bonus pools of AIG’s financial products subsidiary. Cuomo said that taxpayers should be repaid before any executives and that new executive pay structures should eliminate improper incentives

Not sure that freezing means the CEO will never get any money, and it is also unclear to me whether all of the executives at AIG will have their bonuses frozen as well.

Finally, I question what it means to say “taxpayers should be repaid” — at this point the bailout plan is so murky, the phrase seems meaningless to me.  Will our taxes go down?  Will we all get checks in the mail?

What a circus.  Send in the clowns.  Oh … don’t bother.  They’re here.

15 comments

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  1. … loves this story.

    But at this moment, I have little trust towards any of those who are trying to fix this problem.  Probably because I don’t fully understand the problem to begin with.

  2. … AP story.

  3. … may be retroactive (from the AP story):

    Cuomo said Wednesday that the next step for his office will be investigating how to recoup executive bonuses paid previously, saying a fraud law could apply depending on timing, circumstances and contracts. Handling AIG’s case should be regarded as a template for other companies that require government help, he said.

  4. This may also be of interest. From Propublica, After Earful From Senators, AIG Suspends Lobbying

    AIG, the insurance giant now mostly owned by taxpayers, has decided that perhaps it shouldn’t be lobbying the government after all. As we reported earlier this month, AIG had continued its lobbying despite a government bailout for the company totaling $120 billion so far.

    The Wall Street Journal reported last week that AIG’s continued lobbying included a push to relax new regulations against mortgage fraud. That prompted angry letters from senators to AIG.

    And lo-and-behold, AIG spokesman Nick Ashooh has now told the Journal: “We’re reviewing all of our expenses and activities. As part of that we have suspended lobbying activities.”

    In a follow-up story at Propublica, Sen. Diane Feinstein has announced a bill to prevent other rescued companies from using taxpayer dollars for lobbying.

  5. …I don’t even understand what the hell either Cuomo or AIG is saying here.

    BTW, there may be real (and major) fraud that was just exposed today which has contributed to this mess: the ratings agencies Standard & Poor’s and Moody’s may have been giving out fake ratings:

    Case in point: this instant message exchange between two unidentified Standard & Poor’s officials about a mortgage-backed security deal on 4/5/2007:

    Official #1: Btw (by the way) that deal is ridiculous.

    Official #2: I know right…model def (definitely) does not capture half the risk.

    Official #1: We should not be rating it.

    Official #2: We rate every deal. It could be structured by cows and we would rate it.

    A former executive of Moody’s says conflicts of interest got in the way of rating agencies properly valuing mortgage backed securities.

    Former Managing Director Jerome Fons, who worked at Moody’s until August of 2007, says Moody’s was focused on “maxmizing revenues,” leading it to make the firm more “issuer friendly.”

    This meets the standard of fraud, in my opinion.

  6. Alcatraz.

    • RUKind on October 23, 2008 at 05:43
    • #

    then we should make money on this bail-out. Flex your fingers and vocal chords for the next two years if you want things fixed.

    Satya.

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