It’s time for someone in the Obama administration to read the riot act to Robert Benmosche, American International Group’s new $7 million chief executive.
Since getting the job, Benmosche has spent more time at his lavish Croatian villa on the Adriatic coast than at the troubled insurer’s corporate offices in New York.
And in the short term, Benmosche’s vacation strategy appears to be paying dividends.
This week, AIG’s shares surged 44 percent, to nearly $50, after Benmosche said that he intended to move slower than his predecessor in selling off AIG’s still viable divisions.
Maybe Benmosche should consider relocating AIG’s headquarters to Dubrovnik.
But the big run-up in AIG shares is merely a sideshow for momentum players, speculators and Hank Greenberg, the former AIG chieftain who controls about 11 percent of the company’s outstanding shares.
The reality is that AIG exists today only because of the $180 billion lifeline the insurer has received from the federal government. Even Benmosche acknowledges that, telling The Wall Street Journal: “If the U.S. government doesn’t continue to support AIG, we will fail.”
The trouble is that the government continues to act as if its support of AIG is unconditional, which is why Benmosche can feel free to set his own leisurely timetable for selling AIG’s assets. The former MetLife chief executive knows no one from the government is about to tell him what to do, even though American taxpayers effectively own 80 percent of the company.
But Treasury and the Federal Reserve need to be taking their cue from the Federal Deposit Insurance Corp in how to handle AIG.
Behind the scenes, Sheila Bair, the FDIC chairman, has been exerting a lot of pressure on her agency’s biggest ward–Citigroup–to make changes to its management and business strategies. Treasury and the Fed should do much the same with AIG.
There’s no reason for the federal government to be acting as a mere bystander in all this. After all, the government bailed out AIG chiefly to prevent a run on U.S. and European banks that had purchased hundreds of billions of dollars in guarantees on risky securities. In those scary days immediately following Lehman Brothers’ collapse, AIG was too big to fail.
But nearly a year later, that is no longer the case. If AIG were to fail now it would be painful but more manageable because of the steps the Fed has taken either to guarantee or remove the most troubling assets from its balance sheet.
Yet the government’s kowtowing to AIG leaves some scratching their heads.
“The controlling party here should be the government,” says Brad Golding, a hedge fund manager with Christofferson, Robb & Co, who frequently shorts financial stocks, including shares of AIG in the past. “When he was made CEO, (government officials) should have called him and said: ‘You are occupying this role at our whim.’”
There’s talk about the Obama administration using the one-year anniversary of the demise of Lehman Brothers to give new life to its flagging financial regulatory reform package.
That’s a fine idea and one that’s no doubt necessary in light of the way many on Wall Street are returning to business as usual.
But here’s something else Team Obama should do: Use the anniversary of the AIG bailout to set a hard-and-fast deadline for dismantling the insurer and getting the taxpayers’ money back.
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Yankee Doodle had a car,
Bought with US bank debt.
He hit a bear and lost a wheel,
And drove down an embankment.
Spun the wheels and now he’s stuck,
In bad sub prime molasses,
Shame that Fred and Frank are sunk,
They might have lent a hand.
Along the road came Goldman Sachs,
Who heard poor Yankee holler,
“I might just help” wise Goldman said,
“If you could lend a dollar”.
He took his wand and waved it round,
His biro made a clicking sound,
“Just call your car a house” he said,
“And then there’ll be no problem”
So Yankee set out on the road,
To get federal assistance,
But help from nearby Bernanke
Would take a bit of distance.
On coming back, the sun beat down
Upon poor Yankee’s beaten brow
And so he stopped along the way,
To drink at Wall Street Bar.
“Get out, you swine” The owner cried,
- Posted by Haha“You have not learned your lesson”
For Yankee’s tab was well and spent,
And he was in recession.
The moral of the tale was lost,
And Yankee’s car, alas, the cost.
He focused too much on his speed,
And not where he was headed.
THE UPPER CASE HYSTERIA: THIS IS ABOUT INSURANCE, WHY DON’T YOU CANCEL YOUR (CORPORATE)SHORT TERM AND LIFE INSURANCE AND SEE WHAT HAPPENS WHEN A 767 FLIES INTO YOUR IVORY TOWER. THESE EVIL EXECS BURN OUT AFTER 4 YEARS.
- Posted by ca[...] Time to get tough with AIG Share this [...]
- Posted by Time to get tough with AIG | my cheap life insuranceAs long as AIG keeps sponsoring MUFC (Man U) who cares? It’s all about football….
- Posted by kb richardJonathon’s comments are quite off the mark… He is correct that envy and greed are both sins (to paraphrase), but that does not make irrelevant the argument that the inflated salary being enjoyed in an exotic locale is poor stewardship of taxpayer dollars. And, others have commented wisely the gross disproportion that this represents. If we have to gradually slip into a 2 class society so that we can be thankful that we have such talent to give so much to, then perhaps it would be wise to learn a new language and search out a more stress free lifestyle…. Not my first choice.
- Posted by J JohnsonDear “INSIGHT”,
- Posted by GGREENWOOD4Boy is that a misnomer! Your a legend in your own mind! The economy is NOT RECOVERING! There are NO NEW JOBS, either for those that NEED them or as you put it DESERVE them. ALL AMERICAN CITIZENS DESERVE A JOB. What’s makes “YOU” and better? If your your not pissed off at what’s going on with our government YOU SHOULD BE! The so called recovery you seem to be basing your “Insight” on is BOGUS, $8,000 to new home buyers & $3,500 to $4,500 for Clunkers is only temporary. When the cash runs runs out for the home buyers as it already has with the cash for clunkers, the boom is ALL OVER! It will be back to way things were before these offers were available. Unemployment is at a record high & while income for thieving Executives is “UP 38%! So, if your basing the recovering economy on the overinflated wages of the “CRIMINAL Executives” your right the economy is recovering!
A “REAL BAILOUT” would have been to put a $50,000 check in hands of every AMERICAN CITIZEN over the age of 18! Now that would “STIMULATED” the American Economy! Not putting “Trillions of $$dollars$$” into the private pockets of the already “GREEDY, RICH CRIMINALS”! I would like to call all AMERICANS to SUPPORT a “BAN ON AMORTIZED LOANS” and have made LAW that ALL LOANS be”SIMPLE INTEREST”, Just like a CAR LOAN, with the interest rates as new car loans! In that way we could pay off a home in less than 10 years. The mortgage companies would have their money back in less time and would be able to turn the same amount of money over several times in the same 15-30 year period. And able to make a very good profit, without bankrupting AMERICA!
- Posted by ggreenwood4It’ time to make these CROOKS pay for their crimes against HUMANITY. Put them all out on the streets BROKE & HOMELESS like THEY are doing to”REAL AMERICANS”! Make the Government & President responsible for their misdeeds and wrong doings. It’s getting to the point that there is a GREAT possibility of a REAL REVOLUTION in this country! If the LAW ENFORCEMENT & GOVERNMENTS that were ELECTED. WILL NOT PREVENT these CROOKS from RAPING “AMERICA” and really protect us from them. Then WE as AMERICANS have the RIGHT to PROTECT OURSELVES!
- Posted by ggreenwoodHey SB:
- Posted by ggreenwoodHe was supposed to have been called out of retirement! But he has FORGOTTEN to show up for WORK! I it was you or I staying at home like that we’d have been fired a long time ago! He taking $7,000,000 a year of TAXPAYERS that make a five digit income per year to PLAY at his VILLA. Do you realize that IF the median income is $46,000 that would take the average American family over 152 years to EARN! While he “SITS ON HIS BUTT” and has only said he going to take his time at making things right. He feels free to set his own leisurely timetable for selling AIG’s assets. FIRE HIM TODAY. COME ON FED & TREASURY DEPT. WHAT ARE YOU WAITING FOR A REAL “REVOLUTION”???
You need a guy like Benmosche to lead AIG into a recovery. $7M is cheap for someone of his caliber. Remember, he didn’t cause the mess. The company he previously ran (Met Life) is fine and didn’t cause the mess. Do not start pointing fingers at him so early. Let him prove his worth and give him at least 2 years to see some results. You simply won’t get a guy like him to come out of retirement for a government salary (even a presidental salary) unless he feels a real calling.
- Posted by SBI would just like to comment on insights thought of “we need jobs”. First, EVERYONE needs a job as we all have mortgages, bills etc. Everyone deserves a job IF they are QUALIFIED. I think, perhaps, people are fed up with these companies who had profits in the millions or billions are being bailed out by the govt. or rather by the taxpayers who are losing their jobs and can’t afford their taxes or anything else as is. Meanwhile, these companies are bailed out and then continue to steal our money and get paid millions of dollars to have the attitude “what are you going to do about it”. People are fed up with this nonsense. If the financial industry wasn’t filled with greedy crooks and policed themselves appropriately, then the government would not have to intervene.
- Posted by jack[...] Time to get tough with AIG (Reuters) [...]
- Posted by Frontrunning: August 31 | Froogalizer.comThe plain fact is that we\’ve had demonstrated in the clearest, starkest possible terms in the last year or so that there is no meaningful distinction between finance and government. How one feels about this is a matter of personal philosophy more than anything else.
If the elites who govern in the name of democracy and capitalism were serving the broader and long term interests of the nation well, I personally could care less about feathered nests, villas, and hypocrisy.
It seems clear, though, that our elites are demonstrably incompetent, corrupted by their own failures, shortcomings, and the need to pander to what is worst in the electorate, all the while spinning away.
It isn\’t likely to end well, and I think that at some level that is broadly perceived. For the present, though, we\’re at an intermediate stage of grumbling and debate about villas, bonuses, health care and the like, the present structure propped up with baling wire and massive deficits.
It will come undone, in time, of course, and that\’s when it will likely become truly interesting.
So, at least, it seems to me.
- Posted by arctenebrousWhy would it matter if he is in NY if the job is getting done and he does it well? Sounds like the author is a little jealous. Millions of people work remotely and Matthew isn’t complaining about them…Is it because he makes more money than Matthew? Envy is equally as disgusting as greed. There seems to be a LOT of envy coming out of the population these days. Since we are at a point of telling other people how much we think they should earn, I think Matthew should make about $9 an hour…Any more money is just too much and he is being greedy.
- Posted by Jonathanyou guys all crack me up. you are all saying that the economy will recover, that the markets will come back to where they were before, and that AIG will not make any of the mistakes that they have clearly and repeatedly made before. looking at the facts and not at the crystal balls that you all seem to have makes me think that it is in the best fiduciary interest of the government for all of us to get the money back as soon as possible. anything else would be simply foolish.
- Posted by wolfSince AIG is majority owned by the US Govt., the execs should get government grade pay (the CEO can be a GS16!!), and the CEO should get his a.. into work! I don’t buy the argument that the market should dictate these outrageously inflated salaries!
Since it was worth bailing out, it should survive, but not simply to enrich the fat cats (perhaps “fat pigs” is a better moniker).
Of course, I realize my comments are just a repeat of the old refrain, but still relevant…..
- Posted by J Johnsonexcellent commentary,
- Posted by williamObama is media savy, hopefully your overview will kick him in gear as the Pope’s Jerusalem speach finally got him to acknowledge Palistinian statehood and the pulling back of illegal Israli settelments.
In my opinion, the outrage about the seven million dollar payroll at AIG is a symptom of the deeper cause of the recession, which, if you’ll pardon my play on words, seems to be receding. The facts are thus; the economy was failing, the government intervened, and now the economy is recovering.
So, the real question is do we want to have an economic system in which the government is required, from time to time, to step in and correct the faults? If I am not mistaken, that is the basis of Keynesian economic theory; that in a free market, the government is required to step in and control certain aspects of the economy when free market principles fail to regulate appropriately. I have personally heard discussions regarding a return to Keynesian economic principles. In my opinion, the discussion as to whether we want to return is moot. We already have returned to Keynesian theory. The question now is, do we want government regulation, and how much do we want? Do we want the government to back out now and risk an even greater recession? Or do we want they government to prop up the largest industries in our country?
One final note; the citizen in the featured picture of the article holding the sign that reads “WE NEED JOBS” is despicable. We do not offer jobs to people who need them. We offer jobs to people who deserve them.
- Posted by Insight