AIG chairman says that you just don’t get it

| November 17, 2011 | 14 Comments

By deVos on Flickr

Steve Miller is the chairman of AIG. Between 2008 and 2009 AIG received $97.8 billion in loans from the Fed plus four bailouts totaling $69.8 billion in taxpayer money. This is what Steve had to say yesterday when asked by Bloomberg TV’s Betty Liu for his views on Occupy Wall Street. The emphasis is mine.

BL: Steve, before I let you go, I’ve got to ask you about Occupy Wall Street, because that was big news yesterday–it still is big news today, but you know, these guys that are down there–these men and women down on Occupy Wall Street–are complaining about the very companies, like yours, AIG, that needed the federal bailouts and they’re saying because of that, we don’t have a job any more.

SM: Well, unfortunately I would say the understanding of the Occupy Wall Street crowd of what makes our country work is probably fairly limited. It’s a very simplistic view of things. No one will ever know what would have happened to our country and our whole global financial system if AIG had  been allowed just to go down. All I know is that over a long weekend some very serious people in Washington, Hank Paulson and Tim Geithner and so on, made the decision to bail out AIG. They did it in a way that protected the interests of the taxpayers so that they would have the prospect of recovering all the money and that is our principal objective and we think we’ve got it in sight that we could make sure that every taxpayer got back every penny that went to AIG. And, so if it helped prevent a meltdown of the system, and you got your money back and a profit, hard to argue–

 BL: [interrupting] But that’s lost on them, though.

 SM: Of course it’s lost on them. They think, ‘You know, why are you bailing out Wall Street and not Main Street.’ And you have to have a view as to what would have happened if Wall Street had been allowed to just implode. I think it would have been devastating for our whole economy and that would have been far worse for Main Street than what did happen.

What can one say to this without resorting to profanity? A few things.

  • It’s been almost three years to the day since AIG was bailed out. And guess what? AIG stil owes taxpayers $49.4 51.1 BILLION! That’s more than half the budget of the Department of Education. What was that about taxpayers getting their money back, Steve?
  • A significant amount of the aid–$52.5 billion–was pumped into special purpose vehicles created by the Federal Reserve  Bank of New York to take dodgy mortgage bonds and other loan-backed securities off of AIG’s balance sheet and the balance sheets of its Too Big To Fail bank clients. Part of this constituted a back-door bailout of American and European banks. To get its money back the Fed will have to wait until these questionable securities mature, hoping that they don’t default in the interim, or sell them in the markets. The Fed tried to sell some earlier this year and, lo and behold, it didn’t go so well. It’s very difficult to say when and whether this money will be recouped.
  • What did U.S. taxpayers get for the rest of the money given to AIG? Unsecured interests. We now own about 77% of the company via preferred and common shares. This means that should AIG go bankrupt–and by the way, their latest numbers look horribletaxpayers will be among the last to be repaid. They’ll stand near the back of the line and watch as bondholders and other secured creditors get their money back first. How’s that for taxpayer protection?
  • Experts say that we need to sell the AIG shares for an average of $28.72 in order to break even. What’s the 200 day moving average of the stock? $23.02. And this is before the end of the slow motion train wreck known as Europe. As I mentioned yesterday, American financial institutions’ exposure to Europe could be as high as $767.5 billion. If things really jump off in Europe, we’ll be in for chaos in the U.S. stock markets. Even if things don’t collapse we cannot just dump 77% of the company on the market; we’d need to sell in smaller lots over time. Long story short, we won’t see this money back for quite some time, if ever.

Finally, intentionally or no, the rest of Steve’s comments imply that the crisis brought on in part by decisions made at AIG were not devastating to millions of Americans. And yet:

It’s not that we don’t “understand how this country works”, Steve. We understand it all too well–it works for you and your buddies on the AIG board. It’s not working out so well for the rest of us.

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Category: Occupy Wall Street

  • B9brodwicz

    Nicely done.

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  • http://alephblog.com David_Merkel

    “And, so if it helped prevent a meltdown of the system, and you got your money back and a profit, hard to argue–”

    What gores me is that AIG is producing a loss to the taxpayers, not a profit. Mark it to market, we are at a loss, and in my opinion, it will be a loss in the end.

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  • Anonymous

    speechless

    sharing this to my friends.

  • Eric Titus

    The problem isn’t necessarily the bailout–there are still solid arguments in favor and against–but the fact that so little has been done post-bailout to reduce excessive leveraging and risk-taking by finance firms.

  • Anonymous

    Well, no one that had anything to do with money creation until 2008 and looted 500k per year without any downside risk at the same time, should still be in any such position today but should have been made personally accountable for their criminal neglect of diligence when evaluating credit risks which is the core function of banking.

  • Roger Merritt

    I don’t believe he’s actually as un-self-aware as he sounds. At heart, like all tho other MOTUs he’s a used-car salesman. It was only driven on week-ends by a little old lady from Pasadena. Don’t believe me? Hey, have I ever lied to you before? Their skill is being able to tell outrageous lies while looking totally innocent and trustworthy. Of course their other skill is to assassinate the character of anybody who might undermine their position or bring unpleasant facts to light.

  • http://www.facebook.com/people/Jeff-Gerhard/1747518411 Jeff Gerhard

    Amazing. I have just opened my eyes. Thank you for bringing this to my attention!

    • http://www.financeaddict.com Finance Addict

      @Jeff Gerhard It can be quite discouraging when you start looking behind the curtain, but responses like yours are what keeps me going. Thank you.

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  • Wall-n-sons

    they forgot to mention that aig ceo got $32,401.03 per day / or $162,005.17 per week for 2010.

    • http://www.financeaddict.com Finance Addict

      mind-boggling. is there a source on that one? i’d love to see it.