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AIG – Get a Rope!

It’s impossible to talk about AIG (American International Group) without being accused of piling on.  But sometimes temptation is just too much to resist.  Here’s my penny’s worth; given the state of the economy, I’ll resist the urge to put in two cent’s worth.  Who can afford it?  (Except maybe the guys getting the $165,000,000 in bonuses.)

There haven’t been this many fingers pointed in one direction since the Hindenburg disaster.  Everyone’s got their favorite villain.  Some of the more popular include . . .

SUSPECT #1:  AIG executives by definition ran the company into the ground.  They enriched themselves while they kept their heads in the clouds.  With a phenomenal amount of analytical talent in-house (at least based on the amounts and stated purpose of the bonuses, i.e., “retention” of their talent), they failed to see the collapse looming.  They failed to analyze the market properly.  They were asleep at the switch.  They were fat, dumb and lazy.  Company leadership or lack of it brought about its collapse.  The verdict:  GUILTY as charged.

SUSPECT #2:  Our government caused the crash by not giving heed to the dangerous buildup of shaky financial instruments, also known as “schemes”.  Lack of oversight, lack of regulation, lack of sound policy, they all contributed to the collapse.  The rare voices of reason were overwhelmed by the pompous posturing and voices of power, ego and tribute.  Republicans in particular gorged themselves at the trough while gullible Americans put their faith and futures in the hands of blind hogs.  Senate leaders (and presidential candidates) proclaimed, “I don’t know as much about the economy as I should.”  Based on some of his most recent remarks, he doesn’t know a damn bit more now than he did then.  And he is not alone in the halls of congress.  The verdict:  GUILTY as charged.

SUSPECT #3:  The citizens of the United States brought about their own demise by slowly morphing from the frugal, conservative financial managers of their grandparents’ era into the gluttonous, undisciplined consumers we have become.  Everyone had to have it all and had to have it now.  That type of behavior stirred the markets into a froth of consumption that defied explanation even to the analysts at the likes of AIG.  Excess consumption became an opiate that clouded the judgment of many at the AIGs of the financial world.  Americans binged.  Now they can enjoy the hangover.  The verdict:  GUILTY as charged.

SUSPECT #4:  Our economic system, capitalism, is treated with the reverence of a universal religion.  In this country, “capitalism” is always good.  Anything else, e.g. socialism, is always bad.  If capitalism is always deemed as good by the likes of the de facto chairman of the Republican Party and its windbag-in-chief, Rush Limbaugh, and his flock of vacuous intellectual simpletons, then common sense regulation is bound to go AWOL.  You simply cannot have a civilization without some form of government.  You cannot have a government without some regulation.  A system of unregulated, unrestrained capitalism is a flawed concept and (obviously) cannot work.  The verdict:  GUILTY as charged.

I’m sure there are others we can add to the list of suspects, but as long as the lynch mob is roaming the streets looking for victims, I’d like to nominate one more.

SUSPECT #5:  The AIG Board of Directors.  These are the people that were supposed to be looking out for the stockholders of AIG.  They were legally and morally bound to do what was best for the stockholders.  I really don’t believe any rational person can make a case for the argument that the present state of AIG is the best position its stockholders could have hoped for.  In June of 2007 AIG stock was trading at $73 per share.  At times, it has been more than $100 per share.  Earlier this month, it was trading at 35¢ per share.  A share of this fine stock has lost 99.7% of its value.  The Board of Directors was in charge of the ship, the captain and the crew.  Good job!

For a number of years, my wife served as a director on the board for a substantial bank.  (Things were healthy when she left – honest!)  She was legally and morally obliged to act in the best interests of the stockholders at all times.  If she didn’t, she was open to legal proceedings.  She had to be on her toes.  I’m sure the same guidelines apply to the members of the AIG Board of Directors.

The nation is up in arms over the payment of $165,000,000 in “performance bonuses” to AIG employees.  How in the world does someone get a contract that rewards him or her for the catastrophic destruction of the 18th largest company in the world?  This is unconscionable.  In all my years in the “corporate” world, I came to believe a “performance” bonus implicitly implied “good performance”.  I’ve never known of any competent, honest, civilized business person creating a bonus system that incents someone for lousy performance.  These guys are either dishonest and/or stupid and/or completely without moral conscience.

So to my friends in the mob roaming the streets looking for a rope, a tree and a villain, look no further than Edward M. Liddy, Chairman of the Board of AIG.  If you find Stephen Bollenback, Martin Feldstein, George Miles, Morris Offit, Michael Sutton, Fred Langhammer, Virginia Rometty, James Orr, Edmund Tse, or Suzanne Nora Johnson, you’ll know you’ve found the gang.  These are the people that let it happen.  Form a posse.  Get a rope.

My wife is actually related to some of key members of the Butch Cassidy and the Sundance Kid gang.  But believe me when I say the “Hole in the Wall Gang” had nothing on these AIG bandits.  String’um up.

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