U.S. Senator Seeks Details on AIG Exec’s Severance

By | January 19, 2010

  • January 19, 2010 at 8:11 am
    Hooray for Capitalism says:
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    One quick example would be Fannie and Freddie, congressionally chartered government sponsored enterprises, otherwise known as bottomless pits of wreckless lending. There are videos of certain members of congress, warning that the housing policies supported by the government would lead to collapse of those entities…..certain members of congress, one being Barney Frank, dismissed the concerns.

    Deregulation wasn’t as generous so as to give Fannie/Freddie unlimited authority, but inaction by CONGRESS effectively did.

    It’s amazing how two different people can hear a story evolve over a couple years, and reach different conclusions.

  • January 19, 2010 at 12:29 pm
    Allan says:
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    Grassley’s right. She quit. Why does she deserve a severance package?

  • January 19, 2010 at 12:41 pm
    Not created equal says:
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    Here is the problem with people elected to office. Iowa senator commenting about something of which he knows nothing. The time for debate is over – congress needs to stop getting in the way. AIG should have been let go and forced into a structured bankruptcy; and if that caused a worse financial meltdown, then so be it. We would have corrected and survived, and been better off for it. We will NEVER see any money paid back if congress keeps butting in. By the way, where does the gov’t. have the right to ask ANY of these questions (retrospectively). Either leave them alone or shut them down – but choose! This is a slippery path and a government taking over what a free american can earn is scary. Why not look at his own senate expenses and start cutting back – like the rest of us do…oh yeah, congress makes and follows a seperate rule book; so we are not created equal. Do I like that this person jumped with a golden parachute – NO; but the deeper the govt. goes, the worse we all will be. Why not do something constructive – stop health care reform and offer real solutions by reducing govt. interference.

  • January 19, 2010 at 12:53 pm
    Allan says:
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    I’m not so sure anymore. I used to think the same thing and just let them die off. But, after reading some articles and watching a few documentaries regarding this whole mess, systemic risk was a big factor and could have lead to our entire economy in complete collapse. I mean, we would have had NO economy what so ever and would have been trading cow’s and chicken’s as currency.

    Henry Paulson was the one who nationalized the banks. This coming from a former banker on Wall Street, big into free market capatilism and one who had a big deregulatory mind set. That kind of says something.

    That was part of AIG.

  • January 19, 2010 at 1:25 am
    Hooray for Capitalism!!! says:
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    Contracts are written agreements…..between two parties….evidently the employee had one with her employer, and they both agree on it’s interpretation. Paraphrasing the contract, it probably says something along the lines of “if the company screws you, and you opt to leave, you are entitled to x severance”…evidently they both agreed she was screwed by Feinberg, so …………..Sounds like a fair outcome to me.

    So, why does Grassley think he has ANYTHING to do with it.

  • January 19, 2010 at 1:52 am
    Allan says:
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    Well daaamn, that’s all they had to say to begin with.

    If there was a contract.

  • January 19, 2010 at 2:00 am
    nobody important says:
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    Hooray, when you take their money you wear their brand. (movie quote) I don’t think there are precedents for the actions taken. I think that Grassley is entitled to ask because there is a lot of our money involved. Seems pretty simple to me. Read contract, see provisions, make decision. But nothing in this mess is very simple. I agree with Allan, I don’t see how you could allow this company to collapse without a lot of collateral damage.

  • January 19, 2010 at 2:34 am
    Hooray for Capitalism!!! says:
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    Nobody, when the gov handed out the tarp, they had no strings attached, which MAY HAVE BEEN the government’s ERROR. Further, the government simply LOANED them money….just like you have a mortgage and a car payment, but your mortgage company and auto loan maker don’t “own your brand”…Neither the government nor AIG would have/could have expected the government to intercede in every corporate aspect of AIG, particularly contracts exected well in advance of any deal between AIG and the gov (such as this long time employee’s contract).

    So…..no, I don’t agree that the government should be controlling AIG just because they loaned them money…..The only reason the government is barking at AIG is because the government was TRULY THE CAUSE of the financial meltdown, and now is looking rather stupid, trying to blame others, in a game of distraction technique, in advance of all of them getting kicked out of Congress next year.

  • January 19, 2010 at 2:43 am
    Hooray for Capitalism!!! says:
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    Further,

    Most banks i.e. “lenders” when they loan a business money “under distressed financial conditions” (such as was AIG) there are very specific terms laid out IN ADVANCE AS PART OF THE LOAN…there are usually specific criteria that the borrower is required to meet, over a period of time, such as specific debt payments being made on X date, or specific revenue/expense/profitability guidelines, etc. Otherwise their agreement is no longer valid and the lender can come knocking for 100% to be paid back immediately. That’s of course, if their agreement was other than “here’s a few billion at 8%”

    This is a perfect argument for the fact that the goverment did not properly consider all of the ramifications BEFORE lending the money. That was their error, and they should simply learn from it.

  • January 19, 2010 at 2:56 am
    Allan says:
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    So, you are blambing the entire meltdown on the government?

    Just want to be clear on this.

  • January 19, 2010 at 3:13 am
    nobody important says:
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    Anyone who thinks they can take money under these circumstances without unintended consequences is naive at best. Contract law mean nothing to the feds at any level. It’s great to be the king. (another movie quote)

  • January 19, 2010 at 3:16 am
    Hooray for Capitalism!!! says:
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    No.

    Responsibility falls with many, most of whom are NOT TAKING RESPONSIBILITY, including the government. The government failed, specifically at the SEC, their oversight of Fannie and Freddie, possibly the Department of Insurance, the House Financial Services Committee, etc. etc. Generally, congress and regulators.

    Others with responsibility are private business that made bad business decisions, which happens every day. Bad business decisions sometimes lead to the collapse of companies, sometimes they survive and learn.

    Others were INDIVIDUALS, who overleveraged and overborrowed. If you refinanced and refinanced and refinanced to pull cash out of your house, but got into trouble when you owed more on your house than it was worth, and then couldn’t make payments because you made a bad decision to take out an ARM because it was cheaper than a fixed, you are responsible.

    Rating Agencies made errors when they had conflicts of interest.

    Eric Dinallo, head of the New York Insurance Department, who takes no responsiblity, claims AIG’s insurance arms were solvent, it was the parent company that was at risk. If the parent company is at risk, so are the subsidiaries, and their ability to pay claims!!! If your arm is healthy but you have bone cancer, you are at risk.

    The reason I focus on the governmenets failure to take responsility, is that they are yelling the loudest at everyone else. Private business doesn’t need that….they get it and they don’t want to go under, so they’ll modify behavior.

    Some individuals got it, some didn’t. Some blame someone else for “making them a bad loan” when they simply didn’t read it.

  • January 19, 2010 at 3:28 am
    Allan says:
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    I thought you said it was soley the governments fault for the meltdown.

    That’s a bit differnt from you just posted a while ago.

  • January 19, 2010 at 4:45 am
    Hooray for Capitalism!!! says:
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    I didn’t say the government was “solely responsible”, I said they were “truly the cause”……that’s a lot different.

    If Congress and Regulators had been doing their job, PERHAPS, some of what was going on, that LED to the collapse, would have been stopped.

    Read close, details are important, especially in any legislation written by today’s Dems.

  • January 19, 2010 at 5:00 am
    Allan says:
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    I’d like to pick your brain for a moment.

    What jobs Congress and Regulators should have been doing? I remember hearing/reading that it was a lot of deregulation that help to contribute to the crisis. True of false?

    You also mention in your previous post that there were other entities besides the government that had lead to the crisis as well.

  • January 20, 2010 at 12:44 pm
    Frustrated Ins Exec says:
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    All for the American way, however, when AIG was saved by the Government and the taxpayers, the Sr. Executives who made and supported the decisions that almost crushed the company should be the ones that take some of the pain. They sure are heavily rewarded in the good times. Ms. Kelly, you should be ashamed of yourself. Perhaps if you donated this to relief efforts in this country for those who are really struggling as a result of the economic fiasco, perhaps we’d all feel differently.

  • January 20, 2010 at 2:41 am
    Hooray for Capitalism!!! says:
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    Why should Ms. Kelly be ashamed of herself for earning a good salary???? That is ridiculous!

    As a reminder, AIG Financial Products in London, England, was the entity that caused the near collapse of AIG. Why should the HR Exec in the US feel guilty and ashamed and donate her paycheck to ANYONE???????

  • January 20, 2010 at 3:28 am
    Allan says:
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    But we’re talking about her walking severence. She quit! If she had a contract in place regarding this whole thing, then so be it. But, is there a contract? That hasn’t been reported or at least I haven’t heard or read about it.

  • January 20, 2010 at 6:23 am
    nobody important says:
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    There’s the real question, what is in the contract. Grassley may well just be one of those politicians who are using hearings as unpaid ads. Here I am being important, aren’t you impressed back home? I stopped being impressed with these hearings a long time ago. Too bad these folks are more interested in publicity than governing.

  • January 21, 2010 at 6:27 am
    Hooray for Capitalism!!! says:
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    Ok, obviously there’s a contract!!!!!!

    Secondly, obviously AIG, who stands to pay the money, agrees with her interpretation, otherwise they wouldn’t be paying her!

    Thirdly, it doesn’t really matter what the contract says! Because the government isn’t a party to the contract, and has no basis for interfering (tortiously I might add!)

    Fourth, even if you believe that AIG is “letting people slide” ie they are quietly saying “ok, severance applies, here it is”, in other words, making a loose interpretation, there is nothing anyone can do about it!

    Fifth, why would AIG just hand millions of dollars to people that they were not legally required to pay?? Last I checked their stock had gone from a buck to about $50. Now maybe it’s all a great conspiracy and coverup, and they’ll actually file for bankruptcy tomorrow and stiff the gov, but for god sake, please don’t be so naive!!!!!!! You can bet both sides are represented and they’re balls are to the wall!!!!!!!!!!

  • January 25, 2010 at 9:08 am
    Stckbyr says:
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    First of all; yes there was a contract. The provision for severance was put in place to grant the employee protection from arbitrary actions by the company. The employee got the protections because they were in demand by the company and presumably walked away from another well paying position to take the AIG job.

    Second, of course the person wanted to leave AIG when their salary and overall compensation level/form was cut or modified. After hearing Grassley’s comments do you blame them?

    Who in their right mind would want to work in a company where they perceive they have 535 fools as new directors, perceive all of those new directors believe they can question anything they like and all of those 535 think every question they think to ask warrants having a microphone when they ask it.

  • January 25, 2010 at 12:47 pm
    BB says:
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    Hooray for Cap… Apparently you don’t know or understand the details about this situation. Do you understand that in exchange for the $182 billion loan the Fed Gov recieved about 80% of the stock of AIG. That means they own enough of the company to be the majority owner and they can make some of the operating decisions if they want to put it to a stockholders vote.

    You also apear unaware that the AIG stock was split 1 for 20 so the equivalent stock really only went from $1.00 to $2.50.

    So if you are a true capitalist and the Feds bought the company, then you should have no problem with the Fed deciding how to run it.

    As far as contracts go, there are great number of lawyers gainfully employed in this country writing, breaking and arguing contractual agreements. Even the black and white, plain vanilla ones come under contention. If the AIG Financial Dept employees were under original high bonus contracts payable if they exceeded their business goals, then they are in breach of that contract because in the end results they did not produce profitable business.

    My guess is that Ms Kelly had an employment contract that provides a specific salary, bonus peramiters and severence agreement if the contract is broken. If the Fed reduced that specific salary then she would have cause for enacting the severance terms. If she quit because her salary was being reduced and she was not involved with approval or overseeing of the Financial Dept then she should be entitled to her severance.

    AIG was the golden cow for the high end execs. A lot of them left because they knew they could make more money elswhere if AIG was restricted. That’s capitalism. However, the execs and employees who were involved with the unprofitable credit swaps business should not receive bonuses because they did not do their job correctly. That’s capitalism too.

  • January 25, 2010 at 3:15 am
    Hooray for Capitalism!!! says:
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    BB, it’s amazing how YOU have decided who should not receive bonuses. Evidently you feel it’s everyone in the AIG FP division. So even the lowliest employees carrying out daily functions at the direction of upper management, who didn’t even know the complexity or risk, nor have control over it, shouldn’t earn bonus either? I disagree.

    As far as the government receiving stock in exchange, it’s my understanding that the government did not have voting power…….which was the problem…if the government had had voting power all along, what’s with all the nonsense? If they truly had control over the corporation, then why haven’t they controlled it???
    Getting outvoted? Hum.

    Let’s don’t forget the parallel story about Paulson and other officials knowing the bailout money was going to pay other wall street firms, and now, the government and AIG trying to consider AIG a National Security interest in order to avoid telling American taxpayers the truth??

    As to a stock split, no I didn’t pay attention..if the company is really worth effectively the same amt of money (if liquidated) as it was at the time AIG was handed the money, then SHAME ON SOMEONE, but I don’t know who. Do you??? If in real short order after they’ve paid themselves millions, they shut the doors, then I’d say shame on the US government for having allowed it.

    After all, true capitalism would never have handed them the money, and the corporation would have gone under and American taxpayers wouldn’t be at risk. That’s how it should have gone.

  • January 26, 2010 at 10:51 am
    Hooray for Capitalism!!! says:
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    Stockbuyer….I agree, I’d quit my job too if the government were dictating my compensation, particularly in this environment in which every politician wants to claim a victory to screw anyone associated with AIG. Remember the proposed 90% tax on their bonuses??? One of these employees whose severance is delayed by a politician, need to sue the politician. The government clearly doesn’t comprehend the value of avoiding mass exodus, and this is because most of these folks have never worked in private business. It reminds me of all the Democrats choosing not to run in the fall because they don’t want to work for Obama….in private industry that’s called turnover and that’s a poor reflection on the LEADERSHIP.

    Can you shed some light on BB’s comments about the government’s legal control over the company, given their receiving stock in exchange? Also on the stock split, and their “value” now as compared to “then”.



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