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| Name: |
lotowner
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| Subject: |
AIG Needs
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Date:
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3/25/2009 9:11:30 AM
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I continue to read and hear about the drastic situation of AIG. As I understand, this is the largest insurance company in the world and supposedly different than a banking institution. Would someone on the forum help me to understand better the AIG situation.
1. In what areas did AIG incur its losses?
2. Why is AIG in such a terrible shape and State Farm, AllState, and Nationwide not in a similar condiion?
3. Was this a failure in corporate management?
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Surprising that this was found in the NYT. The other side of the bonus story.
URL: http://www.nytimes.com/2009/03/25/opinion/25desantis.html
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Hound, 2 weeks ago you wrote this after I commented that these AIG employees were due their bonus:
"don't see anything wrong with giving AIG h*ll for giving out those bonus. Yeah, those people had a "right" to a bonus -- when the company was making money, not taking a government bailout. I understand 11 of them got their bonus and quit. So much for having to pay bonus to make sure the "smart" people stuck around.
It shows poor, poor judgement on everyone's part that they were paid. Poor judgement on the part of AIG that it wasn't tied to the company profits; poor judgement on the part of the people being paid the bonus (but then, greed is the mantra isn't it?) and poor judgement on the part of Paulson/Bush/Congress and anybody else in the government who was involved in the AIG Bailout for not checking the contracts and not putting a limitation on bonus.
No different than their little executive excusion right after the bailout. They ought to be ashamed of themselves. "
Just curious, do you still feel the same way after reading the bonus recipient's story?
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| Name: |
GoneFishin
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| Subject: |
AIG Needs
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Date:
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3/25/2009 12:11:48 PM
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AIG has many varied divisions around the world. The insurance division that underwrites auto, homeowners, business insurance, and accident coverage continues to do fairly well. The problems associated with AIG are not impacted by the regular lines of insurance. Rather, a division was established a few years ago that provided insurance against a decline in credit quality in the form of credit defualt swaps.
When a company writes typical insurance coverages, they are regulated by 50 different state insurance departments that require the Company maintian a specific level of reserves for the rainy day should big losses incur. Reserves are investments set aside that cannot be paid out as dividends or used for expenses. Companies also buy reinsurance through other companies to share large losses. Reserves would be like the money you maintain in a money market or other investment if your lost your job and needed money to live on.
Well, the swaps were unregulated and the division was actually located in London as I understand. They wrote "insurance" and generated huge premiums and profits. Basically, you bought alot of coverage for small premiums and there were no regualations. The president of AIG Hank Greenberg was forced out a few years ago and he ran tha Company hands on. With his leaving the business was really too vast and complicated for the Board of Directors and the top officers.
When Companies asked for payments as credit deteriorated, AIG did not have the funds to pay. The bailout has given them the money to pay claims for the swaps.
The link is a good article to get a better understanding of AIG issues.
URL: http://www.npr.org/templates/story/story.php?storyId=94748529
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| Name: |
lakngulf
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| Subject: |
AIG Needs
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Date:
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3/25/2009 12:22:06 PM
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I don't have enough in my "reserves" to pay what I owe. Can I be bailed out? I hope the answer is HXLL NO, and that should have been the answer to AIG and others who ran companies in the ground, taking huge profits as they exited the sinking ship. I am fed up with all of this, and there is NOTHING I can do.
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| Name: |
lotowner
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| Subject: |
AIG Needs
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Date:
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3/25/2009 1:40:54 PM
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Thanks for the summary. This helps a lot.
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| Name: |
Talullahhound
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| Subject: |
I have changed my view
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Date:
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3/25/2009 3:17:16 PM
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Not just because of the article in the link but because I have learned so much more about AIG. I think what happened to the employees that were paid bonus was just appalling -- people riding past their homes, death threats, and public ridicule.
I don't know what Congress was thinking with the idea of a "special" income tax on just those bonus. And as the writer points out, they have been hung out by the company. It's really shameful.
As I understand it, just one unit, 400 people that I believe were located in London and dealt with derivatives are responsible for 95% of the fiasco. I don't think this has gotten very much media attention -- I think I saw it as a blip on one of the financial news reports.
Just goes to show how out of hand this whole thing has become.
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| Name: |
Council Roc Doc
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| Subject: |
I have changed my view
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Date:
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3/26/2009 10:12:24 AM
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Congress knew exactly what they were doing. Making scapegoats out of private citizens to deflect their own culpability nauseates me. Washington for the most part is a cesspool of stale thought, dishonesty, and selfishness that exists because the media has tanked and is failing to do the job we require of it. And you ask why newspaper publishing is failing?
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| Name: |
Talullahhound
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| Subject: |
I have changed my view
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Date:
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3/26/2009 5:55:16 PM
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I have a real problem with Congress asking for the names of private citizens. This morning on the news, they were broadcasting some of the hate mail these people are getting -- death threats even. It's one thing to get upset with the institution or the laws that allowed this to happen, but to go after individual people is not.
I'm not sure what happens to people that go to Washington. Even the best, high-minded people eventually seem to slide into the wink and handshake mode. I've always suspected that what were once normal people go to Washington and are constantly offered "favors" and perks and people hang onto their every word and before long, they forget what it was they started out to do.
And when everyone else is doing it, the line between right and wrong gets really fuzzy.
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