Tag: AIG

AIG Freezes CEO Pay

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.

When the chickens get privatized,

it’s vultures that come home to roost.

The subprime mortgage crisis isn’t over. Neither is the global credit freeze it sparked. The stock market crash that followed hasn’t hit bottom yet either. But the main thing to worry about now, and for a long time to come, is the depression we are rolling and tumbling into.

The media has started reporting on one increasingly visible aspect of the depression: the budget crunch facing states and municipalities, and the resulting cutbacks in public services. News stories have detailed the end of the shuttle program Phoenix, AZ ran to take seniors grocery shopping, Mayor Daley’s elimination of 2250 Chicago city jobs–900 by layoffs, warnings of unsalted roads in rural Wisconsin this winter, and on and on. And it’s early days yet.

The service cuts I want to highlight today are a little different. Let me direct your attention briefly to the Los Angeles County Metropolitan Transportation Authority, which serves 1.5 million rail and bus passengers every day. Yep, even in auto-centric L.A., a lot of folks, especially poor folks, can’t make it without public transportation.

Intro

Terry Matsamuto, the MTA’s chief financial officer is predicting massive service cuts soon. It seems that like many local governments around the country, L.A. County went for the okey-doke. They sold much of their system to private investors in “lease-back” deals. Companies like Wells Fargo and Philip Morris bought the rail system, 1000 buses and parking and maintenance facilities. The Tranist Authority gets a one shot injection of needed cash, the financiers get a steady annual cash flow bled out of the system.

The rail cars and locomotives of the Metrolink commuter rail system were also sold, and guess who financed and insured these deals?

American International Group.

Yep, AIG. And when AIG started going into cardiac arrest, their credit ratings were revised downwards before the Fed even applied the paddles.

The lower credit ratings triggered a clause in the lease-back agreements that require the MTA to either find a new firm to guarantee the deals or reimburse investors for their down payments and lost tax benefits, a scenario that could cost the transit agency between $100 million and $300 million.

For one thing, forget about finding a replacement lender–credit is still frozen, static. Second, once other clauses in the deal kick in, the MTA could be on the hook for $1.8 billion this year, more than half its total annual budget.

All those investors have to be made good somehow. So the service cuts commence.

I can’t wait to see what L.A.’s Bus Riders Union does about this…



Cross-posted from Fire on The Mountain.

Capitalism in Hospice Care

The patient is terminal.  Second and third opinions from specialists all confirmed that any effort to prolong its life even past November 3 would be in vain.

Key members of the family gathered last night privately (very, very privately) to make the hard choices.  Ben Bernanke and Hank Paulson had been making all of the key decisions about the patient’s care up until now, but for this last step, they felt it was appropriate to have everyone on the record:

Attending the meeting on the Capitol Hill were Democratic Senate leaders that included Charles E. Schumer of New York, Richard J. Durbin of Illinois, Christopher J. Dodd of Connecticut and Kent Conrad of North Dakota A contingent of Republicans was led by Mitch McConnell of Kentucky, the minority leader, and included Richard C. Shelby of Alabama, Jon Kyl of Arizona and Judd Gregg of New Hampshire.

House leaders included John Boehner of Ohio, the Republican leader; Spencer Bachus, Republican of Alabama; and Barney Frank, Democrat of Massachusetts. Members of the leaders’ staffs were asked to leave the meeting shortly after it began.

The Tumbrils Roll at Dawn

Original article by Mike Whitney, subtitled Lehman Gone; Merrill Lynch Swallowed Up; AIG Going… Who’s Next for Madam Defarge?, via counterpunch.com:

Bank of America is buying Merrill Lynch for $45 billion, AIG needs an emergency $40 billion bail-out from Uncle Sam to stay afloat, and Lehman Bros is kaput. Whew! The financial world has been turned upside-down overnight. It’ll be a rough day of trading ahead.”

Too Failed To Bail

I don’t have time to even begin giving this a real analysis right now, but you need to be aware of what is happening today:

In one the most extraordinary days in Wall Street’s history, Merrill Lynch is near an 11th-hour deal with Bank of America to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.

The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week.

Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.

This is simply staggering.  In less than one year, Bear Stearns, Merrill Lynch, and Lehman Brothers will have simply disappeared.  To put that in some perspective, all three of these banks were founded before and survived the Great Depression.  The GSE nationalization is the largest nationalization since at least the Depression, and possibly in all of American history.  Another of Wall Street’s most venerable partnerships, Arthur Andersen, one of the five largest accounting firms in America also disappeared during the last eight years.

Someone ought to be making an attack ad right now – if this is how Republicans have governed with regards to the fortunes of Americas biggest financial firms, how can anyone in any small town or city in America believe that they will be able to make a living if they continue to govern in the future?

Anarchism and the Fire Department

In my last post in my “Quotes for Discussion” series, I posted quotes from both 19th Century and current anarchists.  In response, both andgarden and Meteor Blades brought up the issues of private firefighters and private police forces.

While I didn’t mention it at the time, of course there are many private police forces.  And not simply mercenaries like Blackwater; anyone visiting a bank, a shopping mall, or a gated community is familiar with private security guards.  But I didn’t think there were private firefighters out there.  Naturally, I was wrong

“What we’re trying to do here is provide our policyholders an additional level of protection,” said Stan Rivera, director of wildfire protection for AIG Private Client Group. The average home insured by the unit is valued at $1.7 million.

AIG this year expanded its Wildfire Protection Unit to 150 ZIP codes in California and Colorado, up from 14 when it was formed in 2005. The unit has had the busiest week since its inception as fires burned at least 719 square miles (1,861 square kilometers) from Santa Barbara to San Diego, destroying 1,342 homes and 34 businesses and causing at least seven deaths.

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