Daily Lesson from Life 08 October 2008

"AIG execs massage away the stress after US$85 bn loan
Lawmakers say they spent US$44,000 on exclusive getaway after the insurance giant was rescued by US govt loan. -Wed, Oct 08, 2008 AFP

WASHINGTON - AIG spent more than US$440,000 for an executive getaway at a California beach resort just days after the insurance giant was rescued by an 85-billion-dollar US government loan, lawmakers said Tuesday.

"Less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," Democratic Congressman Henry Waxman told the House Committee on Oversight and Government Reform.


The US Federal Reserve stepped in to save American International Group from imminent collapse on September 16, with a loan that gave the US government a stake of 79.9 percent in the insurance behemoth in the deal.

"Less than one week later, AIG held a week-long retreat for company executives at the exclusive St. Regis resort in Monarch Beach, California," Waxman said. Invoices showed that AIG paid the Pacific Ocean getaway resort more than 440,000 dollars, Waxman told the committee on its second day of hearings on the Wall Street economic crisis.

"Well, average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," Waxman said, "We'll ask whether any of this makes sense."


Without the government loan, analysts had argued that an AIG collapse, fueled by problems with complex derivatives known as credit default swaps, could trigger a wave of failures in the global financial system and deepen the credit crunch.

"AIG spent - listen to this one - 23,000 dollars at the hotel spa and another 1,400 dollars at the salon," said Democratic Congressman Elijah Cummings of Maryland.

In AIG's defense, New York State Insurance Department Superintendent Eric Dinallo told the committee that AIG may have been trying to stave off a mass exodus of top talent from the company.


"So if there was a thinking that they needed to bring everybody together in order to keep the productivity of the insurance companies intact and protect policyholders by keeping them from going into a runoff status," said Eric Dinallo. "I do agree that there is some profligate spending there, but the concept of bringing all the major employees together... to ensure that the 85 billion could be as greatly as possible paid back would not have been a crazy corporate decision." "

The headlines are clear enough for all to read and get really angry if you are one of the people affected negatively. So I will not elaborate.

Lessons for me are:

1. leaders MUST have moral values! There must be some sense of shame when things went terribly wrong! There must be ownership and responsibilities taken as these are the people that run the company to it's knees!;

2. while the AIG executives were obviously (unless you are a blind and deaf and dump human being by choice) doing the WRONG THINGS, you get some idiots like Eric Dinallo defending the actions as: 'if you need to keep the top talents together to ensure the USD85B bailout fund is properly utilized' that really takes the cake for being the stupidest remarks by an 'educated person'!! In time of crisis there will still ALWAYS be someone who is prepared to make the most insane and crazy defense for DOING the WRONG THINGS! I would submit that had he not spoken nobody would have known he is an idiot!!;

3. the issue is really a corruption of a corporate culture. The 'fat cat' disease! When you have it good for a long time you really believed that you are 'God'! That you can do NO WRONG! This is something we need to guard against CONSCIOUSLY. It involves putting on the agenda of the Monthly Review Meeting， 'What CAN GO WRONG?' and consciously getting and encouraging 'opposite views'! It just does not happen naturally as in a successful team, everyone just want to congratulate each other and not throw up 'sharp questions' on if we are veering to disaster!

It is a very sad day for American capitalism. Human nature won this round. Will we have another chance to make it right!!