White House calls AIG spa trip despicable

JD The Jazz Doctor · Grand Poobah

Here They Are. In China, They'd Just Shoot Them

JD The Jazz Doctor · Grand Poobah

Fannie Mae fueled the housing bubble by guaranteeing more and more risky loans and purchasing too much subprime debt. Things got so bad that the government stepped in and took control of Fannie in September. Shareholders got wiped out, and CEO Daniel Mudd was denied a golden parachute worth $9.8 million, by one estimate. But he still took home $11.6 million during the boom years of 2005-07, according to Equilar, including $8.3 million in bonus pay. Experts trace the history of many of Fannie's problems to predecessor Franklin Raines, who left in an accounting scandal and later agreed to pay $24.7 million to settle civil charges. But Mudd was at the wheel when the ship went down.

Brush: Will feds rein in finance CEOs' pay?

Special coverage: Financial-crisis survival guide

JD The Jazz Doctor · Grand Poobah

Like Fannie Mae, Freddie Mac fed the frenzy by backing too many risky loans. It was also taken over by the government after conditions worsened this summer. Freddie Mac shareholders got wiped out, and the fiasco contributed to fears that bad mortgage debt would take down the economy. But former Freddie Mac CEO Richard Syron did just fine. He took home $12.9 million from 2005-07, according to Equilar, including $8 million in bonuses. But regulators did snag his golden parachute, worth an estimated $9.8 million.

JD The Jazz Doctor · Grand Poobah

Bear Stearns was the first Wall Street giant to hit the skids. It was about to collapse last March when the Fed guaranteed up to $29 billion in bad mortgage-related assets. JPMorgan Chase could then stomach a takeover. CEO James Cayne, who left in January, lost millions on Bear stock during the plunge. But he had also cashed out millions in stock before the fall. He took home $42.3 million in his final three years on the job, 2005-07, Equilar says, including $29.8 million in bonus pay for accomplishments that included leading Bear Stearns into the arena of mortgage-backed securities.

JD The Jazz Doctor · Grand Poobah

Lehman Bros. filed for bankruptcy protection in early September after it was unable to secure the kind of government backing for a corporate buyout mustered by Bear Stearns. The chief obstacle was concern about a $30 billion portfolio of shaky commercial-real-estate assets compiled under the watch of CEO Richard Fuld. Lehman filed for bankruptcy, investors were wiped out, and employees lost their jobs. But Fuld walked away with $186.5 million in earnings from the prior three years, Equilar says. Fuld, who defended his compensation while testifying before a congressional panel on Oct. 6, got most of that by cashing out options. But he also took home $36.8 million in bonus and incentive pay.

JD The Jazz Doctor · Grand Poobah

Under the leadership of CEO Martin Sullivan, giant insurer American International Group got itself in deep trouble through the use of exotic financial products known as credit default swaps. As the housing sector unraveled this year, AIG reported a string of surprise losses. By September, the insurer needed an $85 billion bailout from the Federal Reserve to avoid bankruptcy. AIG shareholders were virtually wiped out in the deal. But Sullivan, who got the boot in June, came out of it a multimillionaire. He raked in $25.4 million in take-home pay over three years, according to Equilar.

JD The Jazz Doctor · Grand Poobah

Under Stan O'Neal, Merrill Lynch was one of the most industrious of the Wall Street toxic-debt machines, churning out the types of securities that the government now says it must buy to save the economy. Merrill Lynch took more than $10 billion in write-downs on bad debt in the second quarter. Fears about much more to come forced Merrill to accept a buyout from Bank of America to avoid disaster. O'Neal left Merrill a year ago with $66 million in earnings under his belt for 2005-07. That included $32.6 million in bonuses, Equilar says.

JD The Jazz Doctor · Grand Poobah

Under the leadership of Kerry Killinger, Washington Mutual plunged headfirst into the kinds of adjustable-rate mortgages and home-equity loans that were destined to go bad when homeowners could not refinance. The largest U.S. savings and loan faced losses from residential mortgages of as much as $19 billion through 2011 when regulators seized it on Sept. 25. But Killinger, who got bounced in September, should have plenty of cash. He took home $36 million in 2005-07, according to Equilar. That included $11 million in bonus pay for his performance.

JD The Jazz Doctor · Grand Poobah

Bad loans piled up too high at Wachovia; in the second quarter of 2008 alone, the bank reported an $8.9 billion loss. The chief culprit: "pick-a-pay" loans that came in the door when Wachovia bought California thrift Golden West Financial in 2006. Golden West specialized in those risky mortgages. Finally, on Sept. 29., months of speculation ended with news Citigroup will acquire Wachovia in a deal arranged by the Federal Deposit Insurance Corp. CEO G. Kennedy Thompson, who left in June, did well during his tenure. He took home $16 million during 2005-07, including $10 million in bonus pay, Equilar says.

JD The Jazz Doctor · Grand Poobah

Citigroup was another of the toxic-debt machines during the housing boom. Now its shareholders are paying the price. Citigroup has taken more than $57 billion in write-downs and losses since the crunch hit, and analysts expect much more. Citigroup has been forced to cut its dividend and raise more than $30 billion. The man at the helm while the mess developed was CEO Charles Prince, who has since left the company. He earned $35.6 million in bonus pay during the boom years of 2005-07 and took home a total of $41.5 million.

Jeremy Riggs · 2011 Super Bowl Champions!

JD The Jazz Doctor wrote:

If the home-mortgage mess has a ground zero, it's Countrywide Financial. Under the leadership of Angelo Mozilo, Countrywide helped fuel the housing bubble by writing thousands of questionable subprime mortgages -- the kind used to create the toxic mortgage-backed securities that taxpayers are now being asked to clean up. A spike in bad loans hammered Countrywide in 2007, and in January it agreed to be purchased by Bank of America. Mozilo's total take-home pay for 2005-07 was $361.7 million, most of it from gains on options, according to Equilar.

But Countrywide is on my side

Jeremy Riggs · 2011 Super Bowl Champions!

By the way, in case anyone is wondering, it's threads like THESE that get JD to 34,000 posts

confuzzed · Permanent State of Confusion

Like there was ever any doubt.

The other person really good at having a conversation with himself is Dylan.

JD The Jazz Doctor · Grand Poobah

each one of these is important enough to warrent their own post and your very deep read and discernment.

confuzzed · Permanent State of Confusion

Ah, you know that we are just picking on you. Well, I am anyway. I am not sure if the same can be said for JR.

JD The Jazz Doctor · Grand Poobah

oh I know.

most of my conversations here ARE to me. smile

But all are welcome. smile

JD The Jazz Doctor · Grand Poobah

White House calls AIG spa trip despicable

Executives went to resort days after government bailed company out

WASHINGTON - The White House said on Wednesday it was "despicable" that American International Group Inc. executives spent hundreds of thousands of dollars on a posh California retreat just days after getting a federal bailout.

Lawmakers investigating the meltdown of AIG said the retreat didn't include anyone from the financial products division that nearly drove the company under, but they were still enraged that executives of AIG's main U.S. life insurance subsidiary spent $440,000 on the retreat, complete with spa treatments, banquets and golf outings.

"It's pretty despicable," White House press secretary Dana Perino said.

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government that it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

"The president did not want to move forward on this rescue package to help anybody in the top positions on Wall Street," Perino said. "He was concerned about everyday people like you and me. ... He didn't do that to help top executives and certainly not to help executives go to a spa."

The Federal Reserve agreed Wednesday to provide the insurance giant with a loan of up to $37.8 billion, on top of one made to the troubled company last month. Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed income securities from AIG in return for cash collateral. These securities were previously lent by AIGs insurance company subsidiaries to third parties.

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," House Oversight Committee Chairman Henry Waxman, D-Calif., scolded the company during a lengthy opening statement investigating the company Tuesday. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released Tuesday by a congressional panel examining the chain of events that forced the government to bail out the conglomerate.

The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.

"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."

AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.

Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.

For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, Pricewaterhouse Coopers confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.

Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.

JD The Jazz Doctor · Grand Poobah

AIG hits up Fed for more money

Three weeks after an $85 billion bailout, AIG is turning to the New York Fed for additional funding.

NEW YORK (CNNMoney.com) -- The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash.

In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back.

The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.

The lending program is a way for AIG to get funding for its businesses, said a New York Fed spokesman. The system is similar to lending facilities the Fed provides to banks, which can also exchange collateral for cash.

The latest announcement does not jeopardize the government's ability to recoup its loan to AIG, experts said.

"AIG will repay the loan," said Stewart Johnson, portfolio manager at Philo Smith, an investment bank specializing in insurance. "It's just a matter of how much of themselves they will have to sell."

Paying back a big debt

On Sept. 16, the Federal Reserve Board agreed to lend AIG $85 billion, using the company's assets as collateral. The loan is expected to be repaid from the proceeds of the asset sales. Interest on the line of credit is steep, and the government took a 79.9% stake in the company.

Last week, AIG said it planned to hold onto its property-and-casualty insurance businesses, while selling off the rest of the company to pay the massive debt.

Those other business lines include its aircraft leasing unit; asset-management division; retirement services; and U.S. life insurance operations.

AIG chief executive Edward Liddy, who was installed by the Federal Reserve last month after the bailout, on a conference call with investors last Friday was optimistic about the potential for the asset sales.

"We fully expect to emerge from this with a capital structure that's fit to fight," he said. "Our insurance businesses...are strong and well-capitalized."

But some analysts are more skeptical. "The current disruption in the credit markets could make it difficult to sell businesses at attractive valuations," ratings agency Standard and Poor's said.

CreditSights valued the units AIG planned to sell at $32.9 billion and the divisions it will keep at $86 billion. These figures do not include the sale of a minority stake in its foreign life insurance operations, valued at $133.1 billion.

First to hit the market will likely be units tied to airline leasing and consumer lending, both of which require funding from the debt markets, which is hard to come by these days. International Lease Finance Corp. could command more than $7 billion and American General Finance Corp. will likely bring in about $2 billion, according to CreditSights.

Once AIG sells its assets, it faces many hurdles in stabilizing its property and casualty insurance divisions. Customers are already fleeing and rivals are swooping in, experts said.

ghostdancer · Ghost In The Machine

Glad to see you posted the latest AIG fiasco!! Think all of us here on the forum can pony up enough money to hire a hit on the execs that went to the spa on our dime????

squonk · RetroMan

Get out while you can JD. The market is always f'd. We live today. All the plans for tomorrow, I could die on the way to work. (super easy on 41)

Mad Mema · Bad Biker Granny

ghostdancer wrote:
Glad to see you posted the latest AIG fiasco!! Think all of us here on the forum can pony up enough money to hire a hit on the execs that went to the spa on our dime????

I'm IN!! That whole spa deal is flat out repugnant. Those people should be forced to pay that $440K back out of their own pockets, then they should be sent to China... on their own dime as well.

Mad Mema · Bad Biker Granny

UnbeFRICKINlieveable!!

AIG just got $85 BILLION dollars in bailout money last month... of which they threw the now infamous $440K spa retreat party. Those bastages are already asking for another $37.8 BILLION... AND they seem to have another retreat planned at Ritz-Carlton's Half Moon Bay Resort! How many times are we gonna get

by these people?!?!?!

JD The Jazz Doctor · Grand Poobah