Skip to content

Here is another great headline!

May 9, 2012

AIG CEO: Taxpayers Will Get ‘$10 Billion’ Profit  

American International Group is selling assets and “cleaning up the volatility of the stock” so it can pay back the U.S. government “with a profit of at least $10 billion” whenever the US wants to sell its shares, CEO Robert Benmoshe told CNBC.

He spoke Thursday after AIG reported first-quarter earnings of $1.65 a share, beating expectations of $1.12. However, revenue came in at $8.69 billion, below expectations of $8.96 billion. Shares fell in late trading. 

The “fundamentals of the company are strong,” he told “Closing Bell.” “I’ve been saying that for five quarters. We’re emerging out of this crisis as an insurance company.”

AIG has been shedding assets ever since the Treasury Department took over the company during the 2008 financial meltdown.

Why does this story make me double over in laughter? Who could possibly forget AIG? They will go down in history as the huge insurance company that, in 2008, played the leading role in the financial meltdown that nearly destroyed the financial markets worldwide. Today, if we were still operating under free market capitalism, AIG would be selling the last of their assets to pay off one of the world’s largest bankruptcies and shuttering their doors.

For their CEO to be bragging about how the government/taxpayers will see a profit of $10 billion dollars for our bailout of his company is comical. When everyone began to figure out exactly what was behind the 2008 catastrophic meltdown in the financial markets around the world, and all attention turned to toxic mortgages and the derivative contracts (also known as credit default swaps) that were supposed to insure against losses if the mortgages went bad, there was one common question: Who could have possibly been issuing the insurance on the credit default swaps? In other words, who could have possibly been that stupid?  

As the smoke began to clear, it became obvious that AIG was the patsy of patsies. They had been played as the fool on a massive scale — they had hundreds of billions of dollars in derivative contracts they would not have even a fraction of the reserves to pay off. AIG didn’t have egg on their face; they had it all over their suit, their shoes and most notably, all over their portfolio. They were toast. There was not a chance they could survive and wouldn’t have if their creditors weren’t some of the biggest Wall Street banks (and political players) in the nation. You see, AIG couldn’t go under, because the Wall Street banks that had played them as a fool would have their scheme of selling massive amounts of toxic mortgages backfire on them if AIG were not around to pay off on the credit default swaps.

Is it possible to be so incompetent as to issue that much in credit default swaps on toxic mortgages? AIG proved the answer to be yes! However, the collateral damage to powerful Wall Street interests was going to be too great if AIG were left to the natural course of free markets. Instead, our federal government, the treasury and the Federal Reserve began to bail out AIG in the tune of hundreds of billions of taxpayer dollars.

Now, let’s fast forward to the AIG CEO’s recent announcement of the taxpayers possibly earning $10 billion as a result of our part-ownership in AIG. Seriously, does Mr. Benmoshe really want us to believe this was a great deal for the taxpayer? Seriously? Let’s look at just a couple of facts. AIG received somewhere between $134 billion to $180 billion in taxpayer and Federal Reserve bailouts since 2008. Depending on the total taxpayer money used, and assuming AIG buys back their stock from the government by the end of this year, we, the taxpayers, will see an annualized return of under 2 percent. Wow, what a great deal!

However, what is unclear is just how much of AIG’s “troubled assets” we ended up with. I would be willing to bet that the Feds bought tens of billions of dollars of troubled assets. Troubled assets is slang for crap or worthless assets. It would not surprise me at all if AIG pawned off $50 billion in worthless assets to the Fed. Shouldn’t we calculate that into the equation? So, we bail them out after they made the biggest financial blunder in history, we give them gobs of Fed interest-free money to allow them to conduct “carry trade,” and then we get stuck with many billions of dollars in worthless assets and we are supposed to believe that the taxpayer got a good deal!?!?!? I might also note that AIG made headlines for planning to pay huge bonuses to their executives in 2009 using the bailout funds (taxpayer dollars) to pay those bonuses! If nothing else, AIG has proved they are consistent in one area: they are clueless.

Comments are closed.

%d bloggers like this: