BU Now » AIG

AIG repayment plan

Jo Breiner — Thu, 30 Sep 2010 18:03:39 +0000

American International Group announced they have finalized a repayment plan with the Treasury Department. Mark Williams, a former Federal Reserve Bank examiner who now teaches finance in the School of Management and author of “Uncontrolled Risk” about the fall of Lehman Brothers, offers the following view.

“The Treasury would be jumping the gun by cashing out of AIG and leaving money on the table. The government should sit tight, be patient and not sell its shares in AIG. This is not about government timing the market, but about insuring a fair return for taxpayers.

“The Treasury is making the same mistake it did with Citigroup – getting out too early. Could the November election cycle be clouding what should be a purely financial decision?”

Contact Mark Williams, 617-358-2789, williams@bu.edu

AIG bill still hitting taxpayers

Dick Taffe — Thu, 10 Jun 2010 21:42:08 +0000

The Congressional Oversight Panel says in a scathing report that the government failed to exhaust all options before bailing out the insurance giant American International Group – although the rescue did help the financial system avert collapse. Nonetheless, the watchdog panel says taxpayers may never be paid back all of the $182 billion funneled to support AIG. Former Federal Reserve Bank examiner Mark Williams, who teaches finance in the School of Management and is author of “Uncontrolled Risk” about the fall of Lehman Brothers, says the report speaks to the elevated role that policymakers have in conducting stronger risk management.

“Taxpayers deserve better decision making that incorporates basic risk-management tools, including risk measurement, worst-case forecasting, monitoring, and frequent reporting. With significantly more taxpayer money at risk, now it is time for policymakers to exercise better risk management.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

AIG backlash heats up

Dick Taffe — Thu, 24 Dec 2009 16:40:02 +0000

The heat continues to increase on insurance giant AIG, which got $182 billion in taxpayer bailouts yet gave out $165 million in bonuses. New York Senator Chuck Schumer says President Obama’s pay czar should be given the power to recover the “outrageous” bonuses. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, says taxpayers also must be concerned about AIG’s ability to unravel and the complex debt obligations that led to the financial meltdown.

“Refusing to pay back ’08 bonuses, and maneuvering for ’09 payouts, gives us little confidence that their efforts at unwinding the complex products they created will be done in the best interests of the company’s taxpayer-shareholders. Why should we be trusting the same AIG folks that created these products to drive the hard bargain with counterparties to AIG? Where is Elizabeth Warren and her TARP oversight white hat when needed?”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

AIG breaks bonuses promises

Dick Taffe — Wed, 23 Dec 2009 15:37:46 +0000

Insurance giant AIG, bailed out by taxpayers to the tune of $180 billion, had promised to return $45 million of the $165 million in bonuses it paid despite the bailout. But most of that remains unpaid, the Washington Post reports. Former Federal Reserve Bank examiner Mark T. Williams, who teaches finance at BU’s School of Management and whose book “Uncontrolled Risk” about the fall of Lehman Brothers will soon be published, says AIG is just greedy.

“If these executives do not want to honor their obligation to refund bonuses, then the government should impose an AIG bonus tax to have these funds returned. At minimum, the government needs to remind AIG executives who they are now owned by.”

Contact Mark T. Williams, 617-358-2789, williams@bu.edu

AIG reconfiguring its board

Dick Taffe — Wed, 20 May 2009 20:47:50 +0000

Under pressure since admitting paying out milions in bonuses after receiving billions in federal bailout money, insurance giant AIG says it will reconfigure its board to include six new independent directors. School of Management Professor James Post, an authority on corporate governance and business ethics, says the AIG effort is not a surprise because “the current governance failed.”

Contact James Post, 617-353-4162, jepost@bu.edu

Anger at AIG bonuses could reshape economic landscape

Dick Taffe — Thu, 19 Mar 2009 12:46:43 +0000

School of Management Professor James Post, an authority on corporate governance and business ethics, in a BU Today Q&A discusses the impact of the furor over the AIG bonuses and how it could impact both the short-term recovery process and the long-term future of executive compensation in the financial services industry.

Contact James Post, 617-353-4162, jepost@bu.edu

School of Law professor Cornelius Hurley comments on AIG

Jo Breiner — Tue, 17 Mar 2009 18:24:41 +0000

AIG bonuses: Don’t pay, “let them sue”

Dick Taffe — Tue, 17 Mar 2009 14:56:26 +0000

Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and former counsel to the Fed Board of Governors, says taxpayer-owned insurance giant AIG should just not pay those executive bonuses and let them sue.

“Since the AIG bailout in September, the moribund company has paid out $120B to counterparties and others. The cynic in me says that there is a very good chance that a year from now the AIG bonus recipients will be employees of the AIG counterparties and that maybe, just maybe, these financial wizards did not drive the hardest bargain in settling with the counterparties in exchange for their future employment prospects.

“So how to get out of paying the bonuses? Just don’t pay them, let them sue for their bonuses knowing there’s going to be a massive counterclaim and a reevaluation of their performance over that last year or more.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Say ‘no’ to bonuses at bailed-out AIG

Dick Taffe — Mon, 16 Mar 2009 14:46:18 +0000

Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law (and early in his career responsible for executive compensation at Shawmut National Corporation, now part of Bank of America) says there should be no bonuses at bailed-out insurance giant AIG.

“It defies imagination that the Treasury Department would sign off on bonuses to AIG executives of any stripe, particularly to those in the company’s infamous Financial Products unit. The claim that the bonuses are contractually owed is a fig leaf covering up corporate waste and abuse of taxpayer dollars on an enormous scale.

“At a minumum, any executives that choose to accept such bonuses should be required to demonstrate to the U.S. taxpayers that theire performance had nothing to do with the massive losses the firm is experiencing. Treasury should be talking with AIG and its executives about the disgorgement of bonuses awarded from 2004-2007, not negotiating over awards for the disastrous results of 2008.

“AIG is de facto a failed enterprise. Failed firms do not typically award bonuses to their executives. This is a clear example of what Chairman Barney Frank of the House Financial Services Committee refers to as the ‘heads I win, tails I break even’ mentality of executive compensation.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu