The American Insurance Group, A.I.G., offers an excellent example of why the American financial sector is in such terrible shape.
The American Insurance Group, A.I.G., offers an excellent example of why the American financial sector is in such terrible shape. They engaged in the creation and sale of “creative” debt securities which ultimately undermined our entire banking system.
The fallout from A.I.G., which has been the recipient of cash infusions from the U.S. Treasury totaling $180 billion, is still sending shock waves through our economy today.
So I was even angrier with A.I.G. than ever before when I opened up the newspaper last week to see the company was giving $165 million in bonuses to its executives while the company remains smack in the middle of a taxpayer-funded bailout.
Having mismanaged their clients’ accounts and squandered stockholders’ investments in the process of pushing their company to the brink of collapse, A.I.G. is now in the process of wasting taxpayer dollars by rewarding these misdeeds.
Greed is not good, but don’t try telling that to the folks at A.I.G. who, having been caught with their hands in the cookie jar a hundred times before, are grabbing at it again.
Part of the problem with government-funded rescues is that the problem is potentially so great and affects so many Americans that solving it necessarily takes some wrongdoers off the hook. In the case of A.I.G., however, wrongdoing is actually being rewarded, and instead of being fired and prosecuted (which is what would happen to you or me if we recklessly ran a public company into the ground) these wrongdoers are actually benefitting. They are soaking taxpayers just like they soaked their shareholders.
Federal government cannot allow this nonchalant waste. If A.I.G. has proven anything in the last several months, it is that the company cannot be counted on to change its management structure or to cooperate in good faith with federal efforts to prevent its collapse.
But legislation allowing bonuses in companies which take large amounts of government funds was rushed through Congress nevertheless. Now congressional leaders are trying to put the toothpaste back in the tube.
I have demanded that the federal government turn over all its documentation of its financial relationship and negotiations with A.I.G. to the U.S. House of Representatives Committee on Financial Services. Immediately after A.I.G. reported a $61 billion loss earlier this year, it was the recipient of another $30 billion loan from the federal Treasury.
This relationship is a direct one with the administration; it bypasses Congress entirely. Clearly, there is a need and a role for strong congressional oversight.
(Jo Ann Emerson is a U.S. Rep. from Missouri’s 8th District.)