After Bailout, AIG Execs Lounged At Resort

House Panel Probe Into Market Crisis Also Reveals Insurance Giant Hid Risky Practices

(CBS/ AP)  Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday.

The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.

The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers were still enraged over thousands of dollars spent on catered banquets, golf outings and visits to the resort's spa and salon for executives of AIG's main U.S. life insurance subsidiary.

"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. "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 also revealed 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 Cooper 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.

Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg - who ran AIG for 38 years until 2005 - canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Robert Willumstad.

"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."

Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.

Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 - even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.

Sullivan also came under fire for reassuring shareholders about the health of the company last December, just days after its auditor, Pricewaterhouse Cooper, warned of him that AIG was displaying "material weakness" in its huge exposure to potential losses from insuring mortgage-related securities.

AIG's problems did not come from its traditional insurance subsidiaries, which remain healthy, but instead from its financial services operations, primarily its insurance of mortgage-backed securities and other risky debt against default. Government officials feared a panic might occur if AIG couldn't make good on its promise to cover losses on the securities; investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.

AIG suffered huge losses when its credit rating was cut, thanks largely to complex financial transactions known as "credit default swaps." AIG was a major seller of the swaps, which are a form of insurance, though they are not regulated that way.

The swap contracts promise payment to investors in mortgage bonds in the event of a default. AIG has been forced to raise billions of dollars in collateral to back up those guarantees.

Sullivan said many of the firm's problems stemmed from "mark to market" accounting rules mandating that its positions guaranteeing troubled mortgage securities be carried as tens of billions of dollars in losses on its balance sheet.

This in turn, said former AIG chief executive Willumstad, who ran the company for just three months after Sullivan left, forced the firm to raise billions of dollars in capital. The federal rescue came after AIG suffered disastrous liquidity problems after its credit rating was lowered, forcing the company to come up with even more capital.

"AIG was caught in a vicious cycle," Willumstad said in the testimony.

Greenberg said that AIG "wrote as many credit default swaps ... in the nine months following my departure as it had written in the entire previous seven years combined. Moreover, "unlike what had been true during my tenure, the majority of the credit default swaps that AIGFP wrote in the nine months after I retired were reportedly exposed to subprime mortgages."

But Sullivan said the complex swaps had underlying value, even as the market for them froze, sending their book value plummeting and forcing AIG to scramble for collateral.

"When the credit markets seized up, like many other financial institutions, we were forced to mark our swap positions at fire-sale prices as if we owned the underlying bonds, even though we believed that our swap positions had value if held to maturity," Sullivan said.

The hearing is the second in two days into financial excesses and regulatory mistakes that have spooked stock and credit markets and heightened fears about a global recession.

The Fed rescued AIG on Sept. 16, one day after investment bank Lehman Brothers declared bankruptcy when the government wouldn't come to its aid. Lehman Brothers' chief executive officer testified Monday before the congressional oversight panel but didn't shed much light on how the mid-September events cascaded into a collapse of credit markets requiring a broad bailout.

Richard S. Fuld Jr., chief executive officer of Lehman Brothers, declared to the committee "I take full responsibility for the decisions that I made and for the actions that I took." He defended his actions as "prudent and appropriate" based on information he had at the time.

"I feel horrible about what happened," he said.

[observantx]

Richard Fuld gave all the classic cues during his testimony that he was lying: closing his eyes at the start of the answer, looking away from his questioner, etc.

Take off his Rolex and slap on the handcuffs.

[richzurb]

The ultimate goal of Bin laden was the financial collapse of the US economy. For this he and all his partners have been called terrorists (and rightfully so) however, these CEO%u2019s have succeeded where Osama failed yet they are able to keep millions of dollars of ill gotten gains. Why are they not domestic terrorists and sent to Gitmo where they belong.

[cariboubarbi]

Another Republican skirting personal responsibility.

[martin9p2]

I won''t defend a scumbag, but it wouln''t surprise me if Hank Greenberg were really ill. The affair is making me ill, so one of the crooks should be ill.

[aboz3]

beehive21

E.. S... & D..

[jamesetling4]

The three cowards are used to demanding explanations, not providing explanations. I''m not surprised at all that they would cower from facing the music.

[mytoosense]

Chicken Shiit!!

[tomanyt]

Why do they even have these so-called "Hearings". Its not like anything meaningful happens after the hearings. Its just a huge waste of tax paper money.

[pirmin3]

Skip the hearings and proceed directly to the gallows. Good heads up for future CEO''s.

[Keypinitreel1]

Time to recoup some compensation

[credibility2]

They all should be served with subpoenas. And don''t hold your breath thinking the government can go after these morons and force them to give back some of their booty. Unless it can be proved otherwise, the booty they got was legal and within the framework of the respective boards. In order to recoup unearned booty based on variable criteria and unless there were detailed clawback provisions, these morons can take the money and run. The only satisfaction is that the value of the stock they got severely lost its value like every other stockholder. Unfortunately, morality, ethics, honesty and integrity can''t be legislated in this instance.

[tmittelstaed]

For 40 years Hank Greenberg and people like him were held up by the Republicans as a shining example of how unregulated capitalistic markets worked better than anything else. Now, the Republicans are among the loudest opponents of the bailout, and are the biggest complainers about too much executive compensation and golden parachutes. The hipocracy is disgusting.
Ever since FDR the Democrats have attempted to spread the wealth and reduce the gap between rich and poor, but have been stymied time and again by empty Republican promises that if we let the economy alone, then maybe You Too might be lucky enough to be in the right place at the right time and get a 100 million dollars for doing the same thing that anyone else in the same position would have done.
This is trickle-down economics at work right in front of your eyes, folks.

[tomar0317]

Ill!! Knowing he and his cronies need to spend the rest of their criminal life in jail should make him ill!!!

[walt1944-2009]

It has been learned that Hank Greenberg of AIG has canceled his appearance before Congress to explain why AIG needed a government bailout.

It is rumored that Greenberg is looking to obtain the help of Alberto "The Great Gonzo" Gonzalez to advise him about what to say before Congress. Greenberg knows The Great Gonzo''s reputation and hopes to use his tactics of evasion, stupidity, and blank looks, to convince Congress that he is just as stupid as Gonzalez was!!!

SIG HEIL, WHAT COMPANY CAN WE BAIL OUT NEXT??, BUSH!!!
sig heil, KEATING WHO???, McBush!!!
sig heil, I WANT TO DEBATE TINA FEY ON SNL!!!, Palin!!!

[charmac08]

Since when did appearing before Congress become an event that can be cancelled? Republicans have no respect for laws/courts, their arrogance is above the law. Isn''t that why Sarah Palin''s hubbie declined to appear in their homestate regarding "TrouperGate"? On the advice of the McCain camp? Give me (and the American people) a break! AMERICANS WE NEED TO TURN THIS COUNTRY AROUND - VOTE OBAMA/BIDEN!!!!!

[fharlass]

Gee-I feel so bad this pooooor old guy is ill-suspect he has a terrible cold or a good case of greeeeeeditis like that jerk Fuld. They both are the epitomy of GREEEED!

[lastdance127]

This Was Purposely - Intentionally Planned and Intended
If You Think for one moment This HAS NOT been in the
Planning Stage for Years __ Your NUTS ! !

This is Nothing More than a Escalated REPEAT of the :
The Savings and Loan Scam which Occurred Under the :
Nazi Fascist : Reagan-Bush Crime Regime

Where the NAZI Fascist Bush Crime family made
Millions of Dollars from a : $100K
No Payback Loan (BRIBE)

No Criminal Complaints Then _ So Why Not
..... DO IT AGAIN ! ! ___ Only NOW ! - On a Larger Scale

This Time - AGAIN ! - No Criminal Complaints !
All of this Manufactured and Produced by :
APPOINTMENTS From The NAZI Fascist Bush Crime Regime
Criminal Corporate Nazi Fascist America
Can Commit any Crime they want ! !

The Political - Criminal FBI out of : Politically Motivated,
Gross Negligence will Protect and Enforce it ! !

WHERE ARE THE CRIMINAL COMPLAINTS ? ?

The Political - Criminal FBI needs to be ERADICATED
Rebuilt with a new Name __ With People :
Who have some : Morals - Ethics and American Constitutional
Patriotic Values As it stands now - The Criminal FBI
Has NONE of these Qualities

(Research : The Bush Family and The Savings and Loan Scandal
(copy and paste (Google)

[lastdance127]

Definition of TREASON :
1 : The betrayal of a trust : treachery
2 : The offense of attempting by Overt acts to overthrow the
government of the state to which the offender owes allegiance

ECONOMIC STRIFE
That is Being used as a Weapon to
ELIMINATE a DEMOCRACY and REPLACE IT
With The Totalitarian Dictatorship of

A NAZI FASCIST RULE

Against : The Populace of the United States

Any Corporation or POLITICAL INFLUENCE
That has Supported and Assisted in
The Achievement of : PURPOSELY and INTENTIONALLY
DESTROYING : The DEMOCRATIC INFRASTRUCTURE and
The ECONOMIC INFRASTRUCTURE of The United States
Is an : Act of TREASON

Treason : The Endorsement of Every Employee of :
The Political Criminal - FBI

TREASON is : A CRIMINAL ACT ! !

[lastdance127]

Censored From ABC.com
Topic : FBI, SEC, Federal Reserve ''Failed to Connect the Dots''
to Wall Street

FBI, ''Failed to Connect the Dots''
THAT IS NOT TRUE

Wells Fargo Bank - REFUSED to get into : Sub-Prime Loans.
Wells Fargo Bank. - REFUSED - to give Loans for homes that were : Overpriced
Wells Fargo Bank REFUSED to give loans for : New construction Homes
That were Overpriced

The Actions and the Behavior of Wells Fargo Bank.
Gives clear evidence that : The Entire Banking Industry and
The FBI had a clear knowledge that Massive Bank Fraud and
Massive Bank Embezzlement Was Taking Place.

Out of an act of Political Nepotism to :
The Bush NAZI Fascist Crime Regime.

For eight (8) Long years. The Political Criminal FBI Refused to
ACKNOWLEDGE or to ACCEPT any Complaints ! !

People were Complaining - But ......
Don''t just blame the : Banking Industry for this Mess
Blame also the Organization : The Political Criminal FBI.
Who''s Job it is- and - Is Paid a Wage Package to :
Protect Banking Consumers

But ... Purposely and Intentionally
REFUSED ! ! __ To do just that ! !

ABC.com - Is Censoring Comments in order to make it Appear
That The FBI, SEC, Federal Reserve
are Too Dumb and Stupid to Recognize that
Massive Bank Fraud and Massive Bank Embezzlement
Was Taking Place

Posted : CBS.com _ MSNBC.com _ Ruters ect ....

[genokabeno]

Is it not a coincidence that this "financial" crisis reared its head a month from the election, and nobody "saw" it earlier?

That is all BS

[thevicar1]

Since when did appearing before Congress become an event that can be cancelled? ------------------------------------------------------ Posted by CharMac08



Since it was determined to be a violation of due process!

[candy-apple]

These CEO''s should be in jail facing federal charges instead of sitting before Congress making excuses for themselves. More of our tax dollars being wasted with question and NO answer sessions!!

[bobnjersey]

[For four decades Greenberg oversaw AIG''s growth into a sprawling conglomerate with businesses in 130 countries. Also on deck is Robert B. Willumstad, the former CEO just ousted by Treasury Secretary Henry Paulson. ]

hank greenberg was on charlie rose a week or so ago ... maybe congress can watch that and imagine they are charlie asking the questions.

sounded like he lost a lot of money ... the market value of his holdings was worth billions before the fall ... now it sounds like it''s a few deca-millions.

[iowa0319]

LASTDANCE127 - YOU NEED TO CALM DOWN AND CHECK TOUR BLOOD PRESSURE. QUIT RANTING.

[lastdance127]

The FBI - Who everyone knows is a : FRAUDULENTLY DISGUISED and
GOP Politically Controlled Federal Law-enforcement Agency

Because The GOP has a Personal Vendetta against Obama _ So Now
The Political-Criminal FBI also has a Personal Vendetta Against Obama

The Political-Criminal FBI - Who Claims to be :
The Vanguards of Democracy - The Vanguards of Civil Rights

The same Organization That :
Allowed Massive Bank Fraud and Massive Bank Embezzlement
to Take place for Eight (8) Years

The Same Organization That :
Delivers Young Boys For S*E*X (Franklin Coverup)
The Same Organization That :
Allows Under-aged Congressional Pages to be
Sexually Stalked and Assaulted

The Same Organization That :
Assists in : "Rape - CHILD SODOMY
Torture and Murder of Prisoners (Guantanamo)

The Same Organization That Paid a Law Suit for the
Seven Year Chronic and Habitual Intimidation, Harassment and
Hounding of scientist Bruce Ivins. Until he committed suicide.

The Same Organization That :
Protects The Federal Drug Smuggling and The Federal Drug Money
Laundering Operations

The Same Organization That : Took Part in
The Child S*e*x Slave Operations, Child Sexual Molestation,
Child Sexual Assault, Child Sexual Torture, Child Torture and
Child Murder of : Incarcerated children. (The Monarch Project MKULTRA)

How in the Hell, can anyone believe they ever had any : "CIVIL RIGHTS"
Under the GOP POLITICALLY CONTROLLED : Criminal FBI Employee

[richtr1]

Nice that we are having all these hearings, it looks impressive.My question is what will we do with these thugs in suits?I think 50 years or so in prison and all the assets would be a fitting punishment.The thing is nothing will happen because they own congress.

[Keypinitreel1]

Aint nobody going to jail yet? No leins being put on anybody''s property yet?

Want to bring back faith in the Market? Show some rich people going to jail in handcuffs. Until then the whole establishment is a sham... Lawmakers, Judges and economic Czars.

[easeup-2009]

A year ago AIG stock was over $70--now it''s selling for $3.77. I''m surprised there isn''t a mob of shareholders waiting outside, with torches & pitchforks.

[bogusbones]

congress had better get it right. too many americans are tired of the chicanery and favoritism in the highest circles of business and government. all the while, the common man pays to cover their excesses. first, this administration was lax in enforcement of regulations. second, in a capitalist society, greed often takes over sound judgement. third, these people know if they get caught, they''ve got their money and the likelihood of prosectution is minimal, so what have i got to lose? change government from the top down and somehow make these white collar criminals pay for their blatant and selfish excesses.

[antoniof123]

Any one else tired of this mess we need to go to washington with tourches and pichforks and force these clowns to either fix it or go away.

[missingamerica]

"Business is inherent self-regulating." "Laissez-faire captalism is the true expression of democracy."

Uh huh.

Unless, of course, the human race is still afflicted with the types who see an MBA as the shortest path to a fast buck short of becoming a Republican politician.

[rmsdm4]

I hope they will investigate Fannie Mae and Freddie Mac. But considering the execs at both are now economic advisors to obama, it won''t happen. Hope in one hand...in the other. Which one gets filled first.

[staplesla]

rmsdm - Barney Frank partner is an exec at one as well. A Republican congressmen tried to get them to investigate Fannie and Freddie yesterday, but Representative Waxman, the head of the committee investigating Lehman stopped it.

[docadams3]

Accountability does not allow the perpetrators to walk away with nearly half a billion in compensation. Where''s the accountability in that? I''ll feel bad for only $250 million.

Do these crimes constitute crimes against humanity? Sounds to me like we''ve got another example of a crime so prevalent and widespread that it defies description. Fraud perhaps?

Is that what we''re paying for? Fraud?

[trillion1]

I was wondering. Why can''t the shareholders take these crooks to civil court?

[checkthepast]

Unless, of course, the human race is still afflicted with the types who see an MBA as the shortest path to a fast buck short of becoming a _________ politician.

Posted by ibsteve2u

period

[missingamerica]

I was wondering. Why can''t the shareholders take these crooks to civil court?

Posted by trillion1 at 01:48 PM : Oct 07, 2008

When you serve on each other''s boards - particularly on each other''s compensation review boards - and you hold large blocks of each other''s stocks...

Well, you can''t be setting a precedent like that!

[checkthepast]

I was wondering. Why can''''t the shareholders take these crooks to civil court?

Posted by trillion1

or at least take them on a hunting trip....

[missingamerica]

Unless, of course, the human race is still afflicted with the types who see an MBA as the shortest path to a fast buck short of becoming a _________ politician.

Posted by ibsteve2u

period

Posted by checkthepast at 01:53 PM : Oct 07, 2008

lollll...perhaps.

But we are stuck with politicians for the time being, and since Republicans are the worst ones both currently and historically...

[lastdance127]

RE : TheVicar1 __ If you like and enjoy :

Delivering Young Boys For S*E*X
Allowing Under-aged Congressional Pages to be
Sexually Stalked and Assaulted
CHILD SODOMY Torture and Murder of Prisoners
Taking part in Child S*e*x Slave Operations
Child Sexual Molestation,
Child Sexual Assault,
Child Sexual Torture,
Child Torture and Child Murder

You should be advertising somewhere else ! !

There are lots of : Perverted and Degenerate
People in the World _ If CHILD PERVERTED S*E*X
Is Your Thing - You should advertise Elsewhere

There are lots of People in the World
Just like You - Your Not the only one

But you should look elsewhere For
For your own Kind ! ! !

[missingamerica]

I was wondering. Why can''t the shareholders take these crooks to civil court?

Posted by trillion1

or at least take them on a hunting trip....

Posted by checkthepast at 01:54 PM : Oct 07, 2008

I think that possibility already occurred to the Republicans, at least.

That may be why they brought Palin in, as somebody who could shoot back at the offended taxpayers and actually hit someone.

[lochlan-2009]

Face it America, the corporations bribed the government into lpassing legislation that allowed them to scam this country into an economic collapse and the media, and your representatives were mute and some cases contributed to the fraud by lieing, misinforming, and allowing the events to take course.

The war has been fought, and Americans, you lost.

[checkthepast]

currently and historically...

Posted by ibsteve2u

If we disallow anyone from running for public office that has ever been to law school and return to a government ''for the people, by the people'' maybe we''d be on the right track. I believe that soccer dads and even hockey moms would be better for the interest of the people than slick tongue attorneys and professional politicians.

[far_point200]

"Maurice "Hank" Greenberg, the company''s largest individual shareholder - canceled his appearance before the committee."

Good job Hank! The hearings are just a pre-election political witch hunt to divert bailout blame from the Democrats'' legislaive failures such as the Community Reivestment Act, which created the unregulated sub-prime market.

[edthelight]

was wondering. Why can''''t the shareholders take these crooks to civil court?


Shareholders have limited options for suing these companies. Congress passed the Private Securities Litigation Reform Act in 1995 (PSLRA).

[amercanbiker]

This is the same old Republican scheme of internalizing profits and socializing losses.

It works well for them.

[kcblogger]

AIG got too big for its britches -

They were so big they held and abused power OVER oversight and regulatory procedures. So much so they had power to force a regulator to "resign" These folks should have handcuffs waiting for them as they leave the hearing. Period.

[billpl-2009]

"Right !!....and they were rewarded with $85 Billion.
Ain''''t it great?" -- Posted by snarkysnark

did you flunk 2nd grade math?
AIG when from $70 to $3 per share
they''re dead
stick a fork in them
the government bought what''s leftover for $85 billion
....peanuts

[neonink]

ooohhhhh.... don''t they look sad.

Of course that is just a look for the cameras. Behind the scenes they are patting each other on the backs.

[neonink]

To "hide" means to falsify.

Falsify means fraudulent.

Fraud should mean JAIL TIME, right?