|Rick Newman: Why AIG Gets Billions, GM Gets Scorn.
||[Dec. 12th, 2008|07:49 pm]
Rick Newman paints an accurate picture of why AIG is a sacred cow.
Why AIG Gets Billions, GM Gets Scorn
Friday December 12, 2008, 1:09 pm EST
Let me see if I'm getting this right: AIG, the huge insurance company, has so far gotten $173 billion worth of federal aid, because traders at one small division made bets on exotic securities that were so calamitous they threatened to bring down the whole company. So far, the amount of money the feds have pledged to this one firm equals nearly one-third of the nation's defense budget.
General Motors, America's biggest automaker, has asked for a $10 billion federal loan, equal to one-seventeenth of what AIG has gotten - and Congress has said no. There were no rogue traders at GM, and the company's problems have intensified in plain view, over several months, instead of coming from out of nowhere in a single, cataclysmic episode.
Make sense? Doesn't to me. So maybe if we look at each company a bit more closely, it will be clearer why the government favors companies like AIG over ones like GM.
Is AIG bigger? No. AIG doesn't break out its U.S. employment numbers, but it has 116,000 workers worldwide. Perhaps half of those are U.S. jobs.
GM employs 96,000 Americans. Total worldwide employment is 252,000, more than twice AIG's.
Are AIG executives humbler? Not really. Here's how CEO pay stacks up:
Former AIG CEO Martin Sullivan earned about $14 million in 2007. Total pay over the last three years: About $53 million (including only 9 months in 2005, the year he became CEO).
GM CEO Rick Wagoner earned $14.4 million in 2007. Total pay over the last three years: About $30 million.
AIG is also offering controversial "retention bonuses," ranging from $92,500 to $4,000,000, to a select group of execs deemed essential to the company's turnaround. Congress has asked questions - but so far shown little outrage.
Has AIG had a regime change? Yes. Former Allstate CEO Ed Liddy took over the company in September, replacing Sullivan, who presided over a wipeout in credit-default swaps and other exotic investments. The fresh blood pacified critics somewhat.
GM has had no regime change, although key members of Congress have called for that. Wagoner has been running the company since 2000, and the company continues to aggressively defend him.
Has AIG presented its turnaround plan to Congress? Not formally. There's only been one Congressional hearing on AIG, and that focused mostly on past practices. No current AIG officials have testified before Congress since the feds got involved.
Wagoner has testified before Congress four times since November. And GM has presented a 38-page "viability plan," that's publicly available, showing how it would use government money.
Does have AIG have friends in high places? You could say that. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both support the AIG bailout, and they've steered money to the company without Congressional approval.
GM's most important friends in Washington have been the Michigan Congressional delegation, which obviously doesn't have the clout it used to. Paulson has actually argued against using part of the huge $700 billion financial bailout fund to help the automakers, because they can't pass a "viability" test proving they'll stay in business long enough to pay back the loans. But AIG hasn't passed a viability test either, and without federal help there's little doubt it would be in bankruptcy.
Does AIG have unionized workers? Few, if any.
GM has a bunch: 64,000. Ah ha! Maybe that explains it. In fact, Senate Republicans who blocked a $10 billion emergency loan for GM and a $4 billion loan for Chrysler said they wouldn't approve a Detroit bailout unless the United Auto Workers made much deeper concessions than they've already offered, essentially giving up any advantages they have over non-unionized workers in other states.
So here's one lesson: If you want a government bailout, try to have problems that are too complicated for most people to understand. And make sure your employees are the kind who wear a suit to work every day. Once you've satisfied those two requirements, ask for as much as you want: The coffers are open.
Don't worry, and keep opposing logic. There won't be anything left to bail, once this country falls apart from within. When AIG asks for a 2nd helping, I hope these same people will be there with a knife to cut their palms.