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Francine Hardaway Headshot

AIG, OMG

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This poor dude Liddy, who retired from Allstate and came back to run AIG and be a hero for his country. I bet he's really sorry now.

I'm listening to him valiantly testify before Congress, admitting that he felt it necessary to give hundreds of millions of dollars in bonuses to the people in AIG's financial products group who were, in some cases, the same people who took risks that took down not only AIG, but also the world economy. And who have, in other cases, already left the company.

He's sitting there in front of all the snarling Congressmen, and has been for most of the day. It has come out that he and his family have received physical threats. It has also come out that he works for $1.00 a year. And that he has asked the people who received the bonuses consider giving back at least half the money.

I'm telling you, it can't be fun to work at AIG anymore, unless perhaps you are one of the bonus babies. A good friend of our family works in HR for AIG, has worked there for her entire career, knew absolutely nothing about the financial products group, was forced to take a significant part of her compensation in AIG stock, and has lost her retirement, her pride, and her career. Not to mention what it must be like these days to be in human relations at AIG with everybody either mad at everybody else and pointing fingers or ready to jump out a window.

Eventually, AIG will fail in one way or another. At the very least, it will be dismantled and its assets sold to pay the taxpayers back as much of the bailout money as it can. It will certainly never be the place Hank Greenberg built and took pride in, or the place that employed 116,000 Americans.

Will the government get paid back? Not unless AIG can sell its assets, including the insurance businesses that had nothing to do with the CDS (credit default swaps) people. The longer these hearings go on, the more people lose faith in the other parts of AIG, the less likely those sales become. The good people will go down with the bad ones.

The taxpayers, although they don't understand the intricacies of any of this, are furious. Thus, Congress is posturing to make sure it can get re-elected. The Fed and the SEC, on whose watch all this happened, are now led by people who weren't the ones who did all this. President Obama says he has been left with, in technical terms, "a big mess." The responsible parties have taken their big checks to the bank, or offshore.

C-Span serves a good function here, and a bad one. Although it makes the process of these hearings more transparent, it also makes necessary a lot more posturing and a lot less need to compromise and get on with it.

What's the use of hammering Liddy? It just has to be done, because the cameras are rolling, and angry people with voting rights are watching. People really want a scapegoat, and right now they can't find the right one to blame for the chaos in their lives.

It's all a matter of "counterparties," which seem to be the human equivalent of sliced up mortgages -- the chain goes on so long that it can't be traced. AIG has to put money in escrow for Deutschebank, one of its counterparties, to guarantee the risk of Deutschebank's counterparties, who are hedge funds. And who are the counterparties of the hedge funds? It reminds me of the old song "There was an old lady who swallowed a fly." Perhaps she'll die.

People who blame this on government interference and think like Ayn Rand appear to be wrong IMHO. I'm a capitalist, but I am also a realist. Government intervention wasn't the problem here. Lack of government intervention earlier was the problem. Too many people in the in-crowd who lunch together and party together and regulate each other together.

We now have a two-tiered society, and everyone must remember that the lower tier is larger.