Just last month, the government agreed to loan the American International Group (AIG) $85 billion to keep the company from filing for bankruptcy. The loan made by the U.S. Treasury was among a number of expensive bills authorized by Congress, including the $700 billion bailout for Wall Street last month. AIG has subsequently spent $442,000 for executives at a California resort, $86,000 for a hunting trip in England and another $23,000 for spa services. All of this information came out during congressional oversight hearings last week. Would the American people approve of these expenditures after giving AIG such a huge loan?
A company that has mismanaged their business should not be rewarded for its failure with a bailout loan. U.S News and World Report said that “the insurer is guilty of stupid spending.”
But Congress chose to act against common sense and authorize the loan. They were afraid that if the insurance company filed for bankruptcy that the world, not just domestic markets, would suffer. In exchange, the U.S. government also received a 79 percent stake in the company. In time, AIG will most likely have to be liquidated, but not sold through a fire sale like Bear Stearns. The Wall Street Journal has also reported that AIG has been lobbying for relaxed oversight rules which is not illegal but sounds like AIG has its hand in the cookie jar.
Essentially, the American people are stuck with an $85 billion tab from a company that does not want to be held accountable. And do executives at this company care?
They already know that they will probably have to switch jobs and their best days are not ahead. New York Attorney General Andrew Cuomo, a Democrat, said that legal action would be taken if AIG did not stop “outrageous” expenditures and takes back some of the ridiculous bonuses executives have received in the months before the government loan. AIG has since promised to cancel $8 million worth of conferences and events for employees. The insurer has also agreed to help recover bonuses given to former executives which have proven to be illegal.
How much socialism can be tolerated to get this company in order?
The sticky wicket is that once the loan was authorized by Congress, oversight should have followed to make sure the funds are spent correctly. Obviously, AIG cannot be trusted to manage its money responsibly - which was a good reason not to authorize the loan in the first place. America cannot afford to set a precedent that makes socialism acceptable. And taxpayers shouldn’t stand for having their hard-earned money taken from already strained paychecks in order to be misused by corporate fat cats.