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In an historic move, the federal government bails out insurance corporation AIG with an $85 billion loan, giving control of the firm to the US government. After resisting AIG’s overtures for an emergency loan or other intervention to prevent the insurer from falling into bankruptcy, the government decided AIG, like the now-defunct investment bank, Bear Stearns, was “too big to fail” (see March 15, 2008). The US government will lend up to $85 billion to AIG. In return, the government gets a 79.9 percent equity stake in warrants, called equity participation notes. The two-year loan will carry a LIBOR interest rate plus 8.5 percentage points. LIBOR, the London InterBank Offered Rate, is a common short-term lending benchmark. The bailout comes less than a week after the government allowed a large investment bank, Lehman Brothers Holdings Inc., to fold (see September 14, 2008). As part of the loan agreement, Treasury Secretary Henry Paulson insists that AIG’s chief executive, Robert Willumstad, steps aside. Willumstad will be succeeded by Edward Liddy, the former head of insurer Allstate Corp (see September 18, 2008). (KARNITSCHNIG et al. 9/16/2008) Shares in AIG drop to $3.75 on the news. (Bloomberg 3/5/2009)
Edward Liddy is approved by the board of insurance giant AIG as its chief executive officer. Liddy replaces former boss Robert Willumstad, who had only been in the job for a few months (see June 15, 2008). (Bloomberg 3/5/2009; Reuters 4/17/2009) Liddy tells employees he intends to repay a two-year Federal Reserve loan that recently bailed the company out (see September 16, 2008) sooner than scheduled. (Bloomberg 3/5/2009)
Edward Liddy, the recently installed chief executive officer of troubled insurer AIG, says the company soon plans to repay the bailout loan it received from the US Federal Reserve (see September 16, 2008). To do this, it intends to sell life insurance operations in the United States, Europe, Latin America, South Asia, and Japan. Liddy says AIG has been contacted by “numerous” potential bidders, adding, “The values that we will receive from the assets we intend to dispose will be more than enough to repay the Fed facility.” (Bloomberg 3/5/2009; Reuters 4/17/2009)
Edward Liddy, chief executive officer of the recently bailed-out insurance corporation AIG (see September 16, 2008), says that the $122.8 billion already offered by the government “may not be enough” to stabilize the company. The size of the bailout and favorability of the terms will be increased the next month (see November 10, 2008). (Bloomberg 3/5/2009)
Recently bailed-out insurance giant AIG sets the salary of its Chief Executive Officer Edward Liddy at $1 for 2008/9. It also freezes pay and scraps bonuses for its seven most senior executives. (Bloomberg 3/5/2009) In addition, 50 more AIG executives will be locked out of pay rises in 2009. (Reuters 4/17/2009)
Edward Liddy, chief executive officer of recently bailed-out insurer AIG, pledges to repay taxpayers “every single penny we owe them.” The company currently has around $150 billion of the taxpayers’ money (see November 10, 2008). However, Liddy adds that the company will get the money by selling business units, and the timetable of such sales could change. AIG shares close at $1.73. (Bloomberg 3/5/2009)
Having received over $170 billion in taxpayer bailout funds in the last five months, troubled insurance giant American International Group (AIG) pays executives nearly $200 million in bonuses. The largest are bonus payouts that cover AIG Financial Products executives who sold risky credit default swap contracts that caused huge losses for the insurer (see September 16, 2008). Despite a request by US Treasury Secretary Timothy Geithner for the insurance conglomerate to curtail future bonus pay—and AIG’s agreement to do so—the global insurer cuts bonus checks on Sunday, March 15, 2009, in order to meet a bonus payment agreement deadline. The Treasury Department has publicly acknowledged that the government does not have the legal authority to block current bonus payments, although AIG stated in early March that it suffered its largest corporate loss in history, when it reported fourth quarter 2008 losses of $61.7 billion.
Treasury Tried to Prevent Payments - An anonymous Obama administration official says that on March 11 Geithner called AIG Chairman Edward Liddy demanding that the CEO renegotiate the insurer’s present bonus structure. In a letter, Liddy informed Geithner that outside lawyers had advised AIG that the company could face lawsuits, should they not make the contractually obligated payments. “AIG’s hands are tied,” Liddy wrote, although acknowledging that, with the company’s fiduciary situation, he found it “distasteful and difficult” to approve and pay the bonuses. He wrote that the early 2008 bonus payments agreement was entered into prior to the company being forced last fall to obtain the first taxpayer bailout because of the company’s severe financial distress.
Some Monies Already Paid Out - A white paper generated by AIG asserted that the firm had already distributed $55 million in “retention pay” to nearly 400 AIG Financial Products employees. According to the white paper, the global entity “will labor to reduce 2009 bonus payment amounts,” trimming payouts by at least 30 percent this year. (Crutsinger 3/15/2009)
Edward Liddy, chief executive officer of troubled insurer AIG, asks employees to repay part of their bonuses. The bonuses were to be paid out in late 2008 and earlier this month, but there has been a public outcry over them, due to the billions of dollars taxpayers have spent rescuing the company (see September 16, 2008 and March 15, 2009). According to Liddy, employees receiving more than $100,000 in bonuses should repay at least half. (Reuters 4/17/2009)
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