Memo To: Hank Paulson

Published: October 10, 2008

By Jim Lichtman
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Dear Hank:

I know you and your staff at Treasury are busy managing the $700 billion bailout of the financial sector, but when you have a chance could you, or someone in your office, take a closer look at what they’re doing at A.I.G.?

A.I.G., they’re the ones that we gave the $85 billion bailout “loan” to not long ago and the Fed authorized loans of another$38 billion.

I know that according to the terms of the loan, the government will hold collateral of $38 billion of investment-grade yada, yada, yada…. but there’s another problem here that, due to your work-load, you may not have heard of yet.

One week after A.I.G. got their first installment of the bailout, the company held an exclusive retreat for some of their own executives along with some “high-performing” life insurance agents at the St. Regis Resort.  The total tab came to some $442,000 (that includes $150,000 for food and $23,000 for spa charges.)

A.I.G.’s PR guy, Joe Norton said that the party had been scheduled last year but did not know if executives considered canceling the event in light of the bailout situation.

Now, correct me if I’m wrong here, but if these guys were on the verge of collapse, why are taxpayers giving them $442,000 for a party?

But that’s not all.

Financial products manager Joseph Cassano whose investments nearly caused the meltdown at A.I.G. receives $1 million a month in consulting fees.

Consulting on what?

Former CEO Martin Sullivan on whose watch the whole A.I.G. failure occurred is receiving a $5 million “performance bonus.”

Performing… what, some stand-up routine somewhere?

Mr. Sullivan is the guy who reassured investors about A.I.G.’s health “…in December despite warnings from company auditors that its exposure to those contracts was growing,” the Washington Post reported.

At a House Committee on Oversight and Government Reform hearing, Representative Henry Waxman promised to ask if any of “…this makes any sense.”

Sullivan (that’s him with former Chief Robert Willumstad in the enclosed photo, testifying) said he was not giving up any of his $5 million bonus.

“Looking back on my time as CEO,” former Chief Executive Willumstad said, “I don’t believe A.I.G. could have done anything differently.”

Now there’s word that another junket planned a year ago may take place at another exclusive resort on the west coast.

Hank, are these people, in any way, in touch with the newreality, here?

Do you intend to hold them personally accountable for any and all unnecessary expenses beyond those that directly affect the purpose and intention of the bailout?

And if A.I.G. is allowed to get away with this kind of activity, what about others that we’re bailing out? Who’s going to hold them accountable?

Is anyone at Treasury watching what these people do with our money?

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