American International Group has used a quartet of PR heavyweights (Burson-Marsteller, Kekst, Sard Verbinnen and Hill & Knowlton) to fumble its way through its financial morass.
A friend called this morning to say that AIG is getting the "all-time worst PR advice."
As of yesterday, it appeared that any pearls of wisdom flowing from the mouths of those PR wizards had either been ignored or trashed. AIG finally showed its first PR pulse with the March 16 release (albeit way late in the game) of the names of American/international banks and governments (California) that were “on the hook” for the financial junk cooked up in the insurer’s London office.
Two-thirds of the nearly $175B taxpayer payout went to AIG’s trading partners led by Goldman Sachs ($12.9B), Societe Generale ($11.9B), Deutsche Bank ($11.8B), Barclays ($8.5B), Merrill Lynch ($6.8B), Bank of America ($5.2B). Other AIG dancing partners include Citigroup ($2.3B), Wachovia ($1.5B), ING ($1.5B) and Morgan Stanley ($1.2).
The Bush Administration justified its bailout by saying it feared a “domino effect” of banking failures if it pulled the plug on AIG. The list indeed bears out the extent of exposure to AIG's toxic assets.
CEO Ed Liddy says the disclosure was finally made after talking things over with “counterparties and the recognition of the extraordinary nature of these transactions.” He had his priorities wrong. Uncle Sam appointed Liddy to run AIG after the bailout.
Liddy's focus should have been on taxpayers, who own 80 percent of AIG, instead of on the tender feelings of the more than willing players in the insurer’s financial shell game.
Sen. Chris Dodd, chairman of the Senate Finance Committee, noted AIG’s partners are not exactly babes in the financial woods.
“They were sophisticated investors who took enormous, irresponsible risks,” said the Connecticut Democrat.
Rather than bailout outrage, Americans need to answer whether they want to take their own enormous and irresponsible risks by shutting down any further aid to the financial sector. The truth of the matter: financial bleeding must stop before regulations are put in place to end the fun and games in the derivatives world.
It’s more populist fun to trash the unjustified $450M bonuses “earned” by AIG officials, saying bailout money is being funneled into a financial rat hole and then doled out to crooks.
Like it or not, AIG is contractually bound to “honor its legal and binding obligations,” according to Liddy. “Honoring contractual commitments is at the heart of what we do in the insurance business,” he wrote in a letter to Treasury Secretary Tim Geithner. Getting back to the staid insurance business is exactly what the remains of AIG must do.
Let’s hope more transparency from AIG is forthcoming.