AIG Congressional Hearing: "They Were Getting Manicures... While American People Were Footing The Bill"

11/07/2008 05:12 am ET | Updated May 25, 2011
  • Dave Burdick Man about Boulder: dailycamera.com, biggreenboulder.com, fridayallweek.com

Today, the Committee on Oversight and Government Reform explores the causes and effects of the AIG bailout.

THE AIG LUXURY RETREAT

At one point, Rep. Elijah Cummings brought up a costly AIG executive retreat that occurred briefly after the government bailout. The costs, he said, totaled $443,343.71.

From Speaker.gov, here's Rep. Elijah Cummings (D-MD) on the AIG manicure, etc., expenditures:

Have you heard of anything more outrageous - a week after taxpayers commit $85 billion dollars to rescue AIG, the company's leading insurance executives spend hundreds of thousands of dollars at one of the most exclusive reports in the nation...Let me describe for some of you the charges that the shareholders, taxpayers, had to pay. AIG spent $200,000 dollars for hotel rooms. Almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting manicures, facials, pedicures and massages while American people were footing the bill. And they spent another $10,000 dollars for I don't know what this is, leisure dining. Bars?

WHY WAS AIG BAILED OUT IN THE FIRST PLACE?

Just after it happened, the New York Times had explained why an AIG bailout seemed so important:

What frightened Fed and Treasury officials was not simply the prospect of another giant corporate bankruptcy, but A.I.G.'s role as an enormous provider of esoteric financial insurance contracts to investors who bought complex debt securities. They effectively required A.I.G. to cover losses suffered by the buyers in the event the securities defaulted. It meant A.I.G. was potentially on the hook for billions of dollars' worth of risky securities that were once considered safe.

If A.I.G. had collapsed -- and been unable to pay all of its insurance claims -- institutional investors around the world would have been instantly forced to reappraise the value of those securities, and that in turn would have reduced their own capital and the value of their own debt. Small investors, including anyone who owned money market funds with A.I.G. securities, could have been hurt, too. And some insurance policy holders were worried, even though they have some protections.