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AIG GETS ANOTHER $30 BILLION: The Immorality of Rewarding Corporate Greed
The Obama administration agreed on March 2, 2009 to give another $30 billion in taxpayer money to further bail out AIG (American International Group), just one of the many corporations who are getting charity from U.S. citizens.
This time the excuse was that AIG had to be bailed out because they sustained a $61.7 billion loss, the biggest quarterly loss of a corporation in U.S. history. (See the New York Times article below: “A.I.G. Reports Loss of $61.7 Billion as U.S. Gives More Aid.”)
But WHY? Who says corporations EVER have to be bailed out? Is this supposed to be ‘honest leadership’ or ‘open government’ or the positive ‘change’ we were promised???
Everytime another banker or corporation is bailed out by the government, it is THE MILLIONS OF LITTLE PEOPLE who have to pay for those unconsciounable bailouts of the BIG PEOPLE. Who should innocent, hardworking taxpayer be expected to take on this additional when they can barely afford to feed their own household and pay their own taxes—especially when no one is bailing them out!.
Americans are growing increasingly frustrated with the level of corruption that is going unchecked among government leaders—especially in the area of the self-styled elitists playing ‘candyman’ with OUR MONEY to pay back their friends and campaign donars.
Conducting Talk Shows on this topic is David Armstrong, President and CEO of Armstrong International, a century old family business. During your interview David starts with four basic biblical principles that if adhered to would eliminate virtually all of America’s financial problems today.
1) If a man doesn’t work, he doesn’t eat. Unless a person is an invalid and incapable of working, he should not be rewarded for not working.
2) It is a sin to give charity to the rich. Don’t give charity to the rich (AIG, etc.)
3) A workman is worthy of his wages. Don’t rob citizens to pay the ‘elite’
4) Follow the Golden Rule: Do to others as you would have them to do to you.
David, whose own company is run on the principle of the Golden Rule and currently sustaining record revenue and profits, says that as a nation we need to turn from greed to embrace our roots of ethical culture - when ‘deals were sealed with a handshake instead of with a blind eye.’
“This financial mess didn’t just occur overnight,” says Armstrong. “Accountability is something that needs to be nurtured and encouraged.” Armstrong believes that to lead effectively and ethically, those leaders need to understand the experiences of those they’re leading—and not to ‘fleece the flock’ or bite the hands of taxpayers who are feeding them—and that feed, or pay, is to work for the TAXPAYERS, not to milk them as marks. “Otherwise, you develop a skewed and unhealthy view of reality,” he says, “and people are ultimately who feel the repercussions.”
It really is kind of obvious according to Armstrong. “When it comes to what’s going on with our political leadership these days, everywhere I go people are shaking their heads in disbelief. The flipside to that is how these political leaders must view things – differently than their constituents, which is why in order to practice the golden rule, you have to understand it.”
ABOUT DAVID ARMSTRONG…
David M. Armstrong heads up Armstrong International, a family company that is over one century old. But more than that, he is a storyteller.
Mr. Armstrong has evolved corporate storytelling into a whole new style of management—a style praised by Tom Peters as the leadership answer for tormented managers who need their people to champion initiative.
David Armstrong’s stock in trade is anecdotes—stories about urgency, bravery, wisdom, core values, change management, innovation and having fun in the workplace. Where does he find stories? In the same places he suggests you look for yours—in the eyes and on the faces of the customers, partners and employees who come through your doors every day.
“Every company has a rich heritage of stories,” says David. “I’m just putting my company’s treasure to work.” While it may be true that every company has stories, not every CEO has the vision to search them out and retell them with powerful and memorable morals. That’s what this site is all about—helping you to dig into, discover and use the stories that surround you.
Today Armstrong International is a safe haven in a business world grown confusing and complex. Doing business with Armstrong International is refreshingly simple and pleasant. In fact, today’s dream has become the vision of business as a series of enjoyable experiences.
ABOUT HANGING BY A THREAD
Can you be successful at business or even running a country without losing your soul? David Armstrong thinks you can! In his new book, Hanging By A Thread, David shares real life examples of people and companies that are successful by simply following “The Golden Rule” of: “Do unto others as you would have them do unto you.”
In Hanging By A Thread, you will learn about Armstrong International, which is a successful, profitable company that follows the golden rule in all of its decisions for over a century, and in the process, is flourishing in an otherwise turbulent economy.
The following article may be helpful with show prep:
THE NEW YORK TIMES/ March 3, 2009
A.I.G. Reports Loss of $61.7 Billion as U.S. Gives More Aid
By ANDREW ROSS SORKIN and MARY WILLIAMS WALSH
The federal government agreed Monday morning to provide an additional $30 billion in taxpayer money to the American International Group and loosen the terms of its huge loan to the insurer, even as the insurance giant reported a$61.7 billion loss, the biggest quarterly loss in history.
The loss of $22.95 a share compared with a fourth-quarter loss in the period a year ago of $5.3 billion or $2.08 a share. For the year, A.I.G. lost $99.3 billion or $37.84 a share, compared with a profit of $6.2 billion or $2.39 a share for 2007.
In the quarter, A.I.G. took a $21 billion charge related to taxes and wrote down $25.9 billion in assets, including mortgage-back securities and credit-default swaps.
The company’s general insurance business lost $2.8 billion compared with a profit of $2.1 billion in the quarter a year ago. Premiums dropped 16.3 percent to $9.2 billion and earnings from premiums fell 5.9 percent to $10.98 billion.
The government intervention would be the fourth time that the United States has had to step in to help A.I.G., the giant insurer, avert bankruptcy. The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.
In a conference call Monday, the chief executive, Edward Liddy, who joined A.I.G. in September, said the insurer had drawn down about $38 billion of the $60 billion credit line it received from the government last year.
Earlier, in an interview on the NBC News program “Today,” Mr. Liddy said A.I.G. “was in much worse condition than I thought.” In addition, he said: “The economy is worse. The financial markets are worse.”
Although he avoided offering a forecast on the first quarter, Mr. Liddy said A.I.G.’s outlook was “very much going to be influenced by what happens to the condition of the economy and the financial marketplace around the globe.”
But he tried to reassure policyholders, saying that insurance portion of the company was in good shape. “It’s all of the other ancillary businesses that are causing this,” Mr. Liddy said. “And it’s the decline in asset values around the globe.”
Federal officials, who worked feverishly over the weekend to complete the restructuring, said they thought they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system.
But the deal also presents more financial risks to taxpayers at a time when the public and Congress have been sharply questioning the wisdom of risking federal money to bail out private enterprises.
The government’s commitment to A.I.G. far eclipses its rescue of other financial companies, including Citigroup, which has received $50 billion in rescue financing, and Bank of America, with $45 billion.
Credit rating agencies like Moody’s, Fitch Ratings and Standard & Poor’s had been preparing to sharply downgrade A.I.G.’s credit ratings on Monday because of the record quarterly loss. That would have forced A.I.G. to default on its debt, threatening to set off shock waves throughout the financial system as banks holding A.I.G. derivatives contracts would probably demand cash collateral and other payments from A.I.G. during a time when it has little to spare.
The major credit-rating agencies were briefed on the pending deal between A.I.G. and the government, the people involved in the talks said, and they have committed not to downgrade the company’s debt as a result.
“The steps announced today provide tangible evidence of the U.S. government’s commitment to the orderly restructuring of A.I.G. over time in the face of continuing market dislocations and economic deterioration, the Treasury said in a statement.
Shortly after the announcement of the additional government assistance, the rating agency, Fitch, affirmed some A.I.G. ratings.
Under the deal, the government will commit $30 billion in cash to A.I.G. from the Troubled Asset Relief Program, should the company need it, the Treasury Department said in a statement. A.I.G. is not expected to draw down the money immediately, but the government’s commitment was enough to satisfy the rating agencies.
Another part of the deal would allow A.I.G. to exchange
$40 billion in preferred nonvoting shares, which paid a 10 percent dividend, for new preferred shares that do not require a dividend. That would save A.I.G. $4 billion annually.
To further ease A.I.G.’s debt burden, instead of paying back $38 billion in cash with interest that it has used from a federal credit line, government will convert that into equity in two of the insurer’s subsidiaries in Asia — American International Assurance and the American Life Insurance Company.
Both units are performing well. This would give the government direct ownership in those subsidiaries and provide saleable assets to American taxpayers even if the A.I.G. holding company were to default on its loans.
The government stake in American International Assurance will probably be controversial. The unit had been put up for sale recently, without success. That suggests that the government is giving A.I.G. better terms than private investors were willing to give, exposing the government to further accusations that it is providing a handout to A.I.G.
Also as part of the deal, the government would agree to lower the interest rate on all remaining A.I.G. debt to match the London Interbank Offered Rate, or Libor. That would replace the previous rate, which was three percentage points higher than Libor. That move would save A.I.G. $1 billion in interest payments.
The new cash commitment reached on Sunday represented the fourth time since September that the federal government has taken steps to keep A.I.G. from collapsing. The previous rescues were intended to stabilize A.I.G. and buy it time to restructure. But the rescues were insufficient, in part because A.I.G. has either invested in or insured so many assets that keep losing value as the economy sours.
In September, the Federal Reserve lent A.I.G. $85 billion when the company suddenly found itself unable to meet a round of cash calls. To secure the emergency loan, A.I.G. issued the Fed warrants for slightly less than 80 percent of the company’s shares.
Officials said at the time that they thought the loan would provide A.I.G. all the cash it could possibly need. The government brought in a Mr. Liddy to sell off some of A.I.G.’s operating units to raise money, since the rescue loan had to be paid back within two years. Mr. Liddy drew up a plan, saying he expected a smaller, well-capitalized version of A.I.G. to remain after the restructuring.
But in just weeks it became clear that A.I.G.’s problems were so grave the $85 billion would not be enough. It was using up that money alarmingly fast, thus burdening itself with higher than expected debt-servicing costs, because it had to pay the Fed a higher rate of interest on the part of the loan that it drew down.
In October, the government cut A.I.G. some slack by creating a new $38 billion facility to shore up its securities lending business, and gave the company access to a new commercial paper program, which had a much lower interest rate than the rescue loan.
But that was not enough either. In mid-November, the government restructured its loans to A.I.G., raising its total commitment to $150 billion. The new arrangement reduced the rescue loan to $60 billion and stretched out its term to five years instead of two.
At the same time, it injected $40 billion into A.I.G. in exchange for preferred shares. And it created two special-purpose entities to take the most toxic assets then plaguing A.I.G. out of play.
Those arrangements kept the government’s stake in A.I.G. at 77.9 percent. The government has not wanted to go above 80 percent, because it would then have to consolidate all of A.I.G.’s assets and liabilities into its own finances, putting taxpayers on the hook for the claims of roughly 76 million insurance policyholders around the world.
While November’s restructuring did buy A.I.G. more time, it was not able to sell the operating units that Mr. Liddy put up for sale — or, when assets were sold, the prices were shockingly low.
Copyright 2009 The New York Times Company
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