Monday, March 16, 2009

AIG Plays The Hysteria Machine

AIG (AIG) seems to enjoy its position as the whipping boy for Wall Street. They announce a list of counter-parties who benefitted from the billions that were pumped into AIG. The outrage from the financial press just plays to the hysteria. Solving the AIG dilemma is like solving cancer of the blood you have to do it because it influences anything important.


AIG in announcing bonuses is just adding oil to fire. You may talk about contractual obligations but when your employer is one of the largest recipients of emergency government funding in all of financial history you should just be thanking your lucky stars that you are not flipping hamburgers.

AIG by issuing these bonuses and not declaring a financial force majeure is indicating that they do not get it or even want to get it. Even with new management they do not get it. Heads I win tails you lose is not a credible value proposition for investors or emergency government funding.

You have to be suspicious of the 50/50 approach in releasing the recent information. AIG knew that the public would be outraged. AIG knew that the public would be ignorant about the counter-party implications. So AIG put out both announcements into the same fire storm.

Challenge to legal community: find a way to win an injunction to stop the bonuses and have them reviewed in a more sober light.