AIG after-bailout party

[nittanyalum]

Originally Posted by Kevin

In other news, while violence is never the answer, on some level, this seems like a little bit of justice:

http://consumerist.com/5060063/lehma...ed-in-the-face

Lehman Brothers CEO Got Punched In The Face


Dick "It Wasn't My Fault" Fuld, the CEO of bankrupt investment bank Lehman Brothers, (seen here being heckled after testifying on Capitol Hill) was apparently punched in the face while working out in Lehman gym on the Sunday following the bankruptcy, according to CNBC's Vicki Ward.

I know it's not very mature, but OH, how that made me LOL. That guy deserves a good pounding.

[KSig RC]

Originally Posted by srmom

Crackerbarrel, that's exactly what happened at Enron too, and trust me, Jeff Skilling is now not only a pariah, he's also in prison. It's unfortunate for his family, they are great, but he steered the ship straight into the rocks with the - front end bonuses paid for risky ventures scheme, which caused all the traders to leap before they looked!!! It is a corporate mentality that comes as edicts from the top - produce and get bonuses, doesn't matter if the end product is junk, just make the deal...

Well, to be fair, Skilling and Lay took active steps to approve bookkeeping, accounting and stock actions that ranged from specious (mark to market) to blatantly fraudulent (dumping shares just before the collapse). While the iBanking douche bag CEOs certainly made a killing, the corporate accountability issue is more that they're getting paid for failure, rather than getting paid for fraud.

I guess the comparison is valid to the extent that both Enron and iBanking wanted to show short-term gains without regard for the long-term consequences of their actions, but I think the comparison kind of ends there - it seems like the matter of degree is wildly different. Enron knew (or should have known) that its (non-existent) balance sheets were full of crap (after all, it had no assets), whereas the majority of the investment community thought that mortgage-backed securities were a worthwhile leveraged investment strategy.

You can't connect the dots from the Lehman CEO directly to the current problem - this was endemic and institutional failure. Enron's top executives were complicit and drove the fraud themselves.

[srmom]

That's true, but I will tell you that to this day, Jeff Skilling and his family think that he was innocent of the charges brought against him. He and his family strongly feel that the deals and dealings that drove Enron off the cliff were legal and that he will one day be exonerated.

Here's an interesting quote from a book written about this:

The implications of the Enron debacle were so vast that even years in hindsight, they are still coming into view. It set off what became a cascading collapse in public confidence, sealing the final days of an era of giddy markets and seemingly painless, riskless wealth. Soon Enron appeared to be just the first symptom of a disease that had somehow swept undetected through corporate America, felling giants in its wake from WorldCom to Tyco, from Adelphia to Global Crossing. What emerged was a scandal of scandals, all seemingly interlinked in some mindless spree of corporate greed.

As investors fled the marketplace, terrified of where the next eruption might emerge, trillions of dollars in stock values vanished, translating into untold numbers of second jobs, postponed retirements, lost homes, suspended educations, and shattered dreams.

But nothing was quite what it appeared. The Enron scandal did not burst out, fully grown, from the corporate landscape in a matter of days. Across corporate America, widespread corner cutting, steadily falling standards, and compromised financial discipline had been festering for close to a decade. Warnings about funny numbers, about unrealistic expectations, about the coming pain of economic reality, went unheeded as investors celebrated corporations pursuing reckless or incomprehensible business strategies that helped their stock prices defy the laws of gravity.

And:

Shocking incompetence, unjustified arrogance, compromised ethics, and an utter contempt for the market’s judgment all played decisive roles. Ultimately, it was Enron’s tragedy to be filled with people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place.

No single person bore responsibility for the debacle; no single person possibly could. Instead, the shortcomings of a handful of executives—along with a community of bankers, lawyers, and accountants eager to win the company’s fees; a government willing to abide absurdly lax rules; and an investor class more interested in quick wealth than long-term rewards—merged to create an enterprise destined to fail. But in the end, for all the mind-numbing accounting ploys and financial maneuvers that came to light in Enron’s wake, the underlying cause of the collapse was fairly simple: the company spent much of its money on lousy businesses. And the market exacted its revenge.

Sound familiar??

[texas*princess]

CNN article

NEW YORK (CNNMoney.com) -- The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash.

In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back.

The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.

[KSig RC]

Originally Posted by srmom

That's true, but I will tell you that to this day, Jeff Skilling and his family think that he was innocent of the charges brought against him. He and his family strongly feel that the deals and dealings that drove Enron off the cliff were legal and that he will one day be exonerated.

That's fair - and again, I'll agree with the limited comparison (as sort of noted in your last excerpt). That said, I'd be stunned if his insider trading count is ever reversed - I mean, seriously, it was quite bad.

[Munchkin03]

Originally Posted by srmom

That's true, but I will tell you that to this day, Jeff Skilling and his family think that he was innocent of the charges brought against him. He and his family strongly feel that the deals and dealings that drove Enron off the cliff were legal and that he will one day be exonerated.

Don't a lot of those who are charged with a crime (and their family members) profess that they're innocent and they "will one day be exonerated"?

[srmom]

He's not ever going to get it reversed! He is delusional and stubborn. I do feel sorry for his family though, they really are nice people (especially the kids and his exwife Sue), but of course, they will defend him until his dying day. What else would one expect?

My point is, that I bet if they dig into the books of many of these investment houses and banks that are either failing or getting bailed out, there will be some malfeasance, of the indictable kind. That is what I was trying to get across with the excerpt.

What usually follows this type of "deal making" is compromised ethics and arrogance regarding the rules of accounting and laws of this country. Much of the mortgage crises stems from unscrupulous lending practices and bending of the rules. The lenders just thought the bubble would never burst, just as the Enron folks thought they could keep juggling the books.

In the end it bit investors in the butt back in 2001 and it's happening again to us now! The question is, will we (and the investment class) ever learn from the mistakes that have occurred time and time again?

[madmax]

I think the article is distorted. It makes it sound like AIG took the bailout money and had a big party. According to another article I read, the trip was planned in advance for independent insurance agents that met performance based quotas.

It doesn't look good but I don't have a problem with it.

[exlurker]

AIG - Madison Square Garden luxury, assorted other planned events

Sure, the actual dollar amount is still puny compared to the bailout totals so far, but the PR consequences are a different matter.

It's instructive, though, to be reminded of the perks and goodies that exist out there for some people.

http://abcnews.go.com/Blotter/WallSt...6052261&page=1

[KSig RC]

Originally Posted by exlurker

AIG - Madison Square Garden luxury, assorted other planned events

Sure, the actual dollar amount is still puny compared to the bailout totals so far, but the PR consequences are a different matter.

It's instructive, though, to be reminded of the perks and goodies that exist out there for some people.

http://abcnews.go.com/Blotter/WallSt...6052261&page=1

I'm stunned that rich, smart people who are viewed (rightly or wrongly) as successful would be given perks that others don't enjoy. Holy crap, thanks for expanding my mind.