“AIG continues to make good on its commitment to pay the American people back,” the one-time insurance giant and current liquidation special’s CEO said today. Its customers may be a different story.
AIG announced that it has reduced its debt to the federal government by $25 billion–it now owes slightly less than $100 billion–giving the New York Fed big preferred stakes in a pair of subsidiaries it plans to sell off in the not-too-distant future. Another piece of AIG is also set to go, with a bid on its way for the insurer’s aviation-leasing business, International Lease Finance Corp.
Peachy. Too bad things are not going as well as planned at the firm’s flagship insurance business, renamed Chartis to help eliminate that awful Hank Greenberg smell. Seems it may be looking at a $12 billion shortfall, which makes AIG’s proclamations of the soundness of its insurance business sound, to this untrained ear, rather like a lie.
AIG
Timothy Geithner honed his spinelessness chops long before he got to the Treasury Dept., according to a new report.
Well, not that long before. It came a year ago, when Timmy headed the New York Fed and gave AIG’s counterparties a $25 billion bailout. So says a report from the special inspector general for the Troubled Asset Relief Program, who works for none other than Tim Geithner.
It seems Tim doesn’t have the stomach for hard-nosed negotiation. According to the report, his New York Fed gave the counterparties to AIG’s credit-default swaps just about everything they wanted without much of a fight. When Goldman Sachs, Merrill Lynch and the French banking regulator–on behalf of Société Générale and Calyon–refused to even consider accepting a discount on the trades, Tim and friends raised the white flag and agreed to fund AIG’s repurchase of the CDS–at par, despite the fact that many of the mortgages underlying the securities had gone into default.
Update: Fuck the below and headline above: CNBC reports that Bob has sent a memo to employees promising he’ll never leave them.
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Obviously it goes without saying that we sincerely hope Bobby B’s threat to walk out of AIG and never come back was just that. Hopefully the board will coax him down from the ledge and Ken Feinberg, understanding that no one else has the panache to get the job, will lift these silly compensation restrictions, and give ‘Mosche the room to work. We need Bobby AIG if only so that he can taunt Andrew Cuomo into a fistfight, and tell us how he really feels about the “crazies in Washington.” Yes, he could do all this from one of his finely appointed bathrooms in Croatia, but a slightly loftier perch would be nice. But: it’s possible he might actually have been serious when he said he’s “had enough of this” and so we must prepare ourselves. Deal Journal reports that the following AIG board members are possibilities:
- Douglas Steenland, the former Northwest Airlines Corp. chief executive
- Robert “Steve” Miller, the former CEO of Delphi Corp,
- Arthur Martinez, the former CEO of Sears, Roebuck & Co.
- Harvey Golub, the former CEO of American Express Co.
But they might not care for the gig. So, let’s add a few more names to the short list. Ken Lewis will need work soon but I think they stopped letting AIG employees booze on the job a few months ago. Hank Greenberg? I’m thinking he’d love that and it would spare him the effort of making AIG: The Sequel. Who else?
AIG’s Benmosche Is A Drama Queen [The Deal]
Former AIG CEO Hank Greenberg must be feeling a lot like Colonel Jessep. AIG sued Greenberg for his role in canceling a deferred compensation plan for executives and running away with millions of AIG shares which were then sold over time for close to $4.3 billion. After a testy day on the stand yesterday, AIG’s attorney turned up the heat today looking for Greenberg to admit he ordered the code red and broke his fiduciary duty to the executives.
In a convincing victory for justice, the former CEO of a Gen Re subsidiary was sentenced to the equivalent of a mild warning from a substitute teacher for his part in defrauding AIG investors of $597 million. John Houldsworth pleaded guilty in 2005 to conspiracy to commit securities fraud and then testified on the government’s behalf to help convict 5 other executives involved in the fraud. In light of his “truly extraordinary” cooperation and heartfelt apology, Houldsworth’s sentence was a crushing 2 years probation, $5,000 fine and 400 hours of community service.
Gen Re’s Houldsworth Avoids Prison in AIG Fraud Case [Bloomberg]
No stranger to bailouts themselves, AIG is not going to bail out people who suffered losses or minor injuries from the US Airways flight that went down in the Hudson River. For those who were looking for a nice payday out of the accident, you can blame the plane’s captain, Chesley Sullenberger, for dashing those hopes. Because the captain did everything he could to (successfully) save everybody on board, there was no negligence on the airline’s part and therefore no obligation on AIG’s part to pay. As you might guess, not dying was not enough of a reward for some on board.
A.I.G. Balks at Claims From Jet Ditching in Hudson [NYT]
Turnabout is fair play. Remember when we laughed at the Japanese for the real-estate deals they took a bath on at the top of the market? Those birds have, it seems, come home to roost as a number of American firms shed Japanese real-estate at distressed prices. To wit:
American International Group Inc. is close to selling its Tokyo headquarters building to Nippon Life Insurance Co., Japan’s largest life insurer, for about $1 billion, a person familiar with the situation said.
An agreement for the 15-story tower in central Tokyo’s Marunouchi district may be announced as early as next week, the person said. Negotiations are continuing, said the person, who declined to be identified because the talks are private.
The property is in the most expensive office district in Japan, next to the Imperial Palace, making a potential sale a benchmark for commercial real estate prices. AIG, based in New York, is selling property and businesses after being bailed out four times by the U.S. government. The company has tapped about $45.5 billion from a U.S. credit line as of last week.
Ouch. That hurts.
AIG Said to Be Near $1 Billion Sale of Tokyo Tower to Nippon [Bloomberg]
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