Floyd Norris is right to say the bailouts are seriously lacking on the accountability front.
Here he gives AIG a deserved bit of smacky-face:
Before it collapsed, the American International Group was a haughty company that thought it was better than anyone else. It still feels that way.
Instead of sounding chastened as its second bailout was announced this week, the company was bragging about how wonderful its insurance operations are, and denying this was really a bailout at all.
At a minimum, can’t the government announce and enforce a rule that companies that receive more than $100 billion in bailout money must at least admit their brilliance is open to question?
And Norris calls out its CEO for lying:
That new chief executive, Edward Liddy, now says he saw his first priority as being to negotiate more lenient terms. While he was at it, he asked for more money and for a mechanism to get Uncle Sam to take on the risk of some of his company’s worst assets while letting A.I.G. share in the profits if those assets should prove to be valuable. He got it all.
Then he told the world that this was not really a bailout at all. “The terms of the restructuring are commercial in nature,” he said on a conference call. “All of the facilities being provided by the U.S. government are at market rates.”
Market rates? The government is getting the London interbank offered rate, plus 1 percentage point, while it takes large risks that the bad assets it is taking from A.I.G. will keep losing value. If they do, A.I.G. is under no obligation to repay that loan.
I wouldn’t make that loan, would you? Only Uncle Sam would.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum.