Wednesday, March 18, 2009

A - I - G - revisited

By Carol Gee

An irate Congress is taking aim at AIG, according to CQ Politics, now 80% owned by taxpayers. Mr. Liddy, put in place as the caretaker C.E.O. was grilled by a House committee today. Probably the most interesting thing that emerged was that the Federal Reserve knew about, and evidently approved the employee bonuses all the time. Monday, 79 House members wrote to President Obama asking him to take action against AIG. The executive bonuses paid out of bailout monies from the U.S. treasury have so upset congressional Democrats that they might introduce legislation aimed at the company, namely taxes that could return a large portion to the treasury, Senator Dodd's idea, also adopted by Rep. Gary Peters of Michigan. Another idea, put forth by Rep. Barney Frank would be for the government to assert itself as an owner.

The AIG uproar is helping Representative Frank and his House Financial Services Committee to speed House efforts on new regulations, according to Tuesday's Politico article by Mike Allen and Victoria McGrane. The most likely method could be an enhanced role for the Federal Reserve with purview over the entire financial system, not just the banks. Rep. Franks will begin with legislation to set up a systemic risk regulator (likely the Fed), and then move on to consumer protection regs. Senator Dodd plans a single regulatory bill by the summer, supported by the Senate leadership's desire to move quickly.

AIG recently made its annual financial filing with the Securities and Exchange Commission, ProPublica reports. The company stands to loose another $11 billion because of what its London operation did. If the company's credit rating is lowered, counterparties (pdf list-6p.) could claim anywhere from $8 to $11 billion, depending on how much it is dropped. It seems that all that is stopping the rating agencies is the bailout. AIG has shipped billions of the bailout money abroad to some of the largest foreign banks, Politico reported on Monday.

Regulatory reform -- Firedoglake offers a way that we can take action with Congress. It is a petition to sign: "No More Dough Till We Know Where It Goes." And Craig Crawford's CQ Politics-Trailmix 3/16 post urges President Obama to "Man Up Against AIG, Mr. President." Conservatives at the Becker Posner Blog are skeptical about the idea that more regulation is needed, claiming that regulators failed to exercise authority they already had.

In conclusion, I have had an intensely personal interest in the AIG story. This entire episode has felt so very strange to me. Until just a few days ago, AIG is where my retirement funds were lodged. Thanks to the generosity of Treasury and the taxpayers, I now have my AIG/TDA deposited in my local community bank, no worse for the wear of a plummeting stock market and profligate managers. That was because of the diversification of my portfolio into a very conservative set of retiree "funds." I do not credit that to my own skill, however, but to "blind-a**" luck and a savvy account rep that set it up that way for me at work when I started the fund in the mid 1990s. Whew!

(Cross-posted at South by Southwest.)

Labels: , ,

Bookmark and Share


Post a Comment

<< Home