Poor, poor Robert Benmosche

"I generally believe our financial sector could use a lot more mutuals (think credit unions, some insurance companies, and Vanguard)"

There's nothing special about not having shareholders. Look at Kaiser. It's basically run for the benefit of its executives.

Credit unions & mutuals are considered cooperatives where the members or policyholders are the owners. They are often called stakeholders and would never be called shareholders. Many are described as not for profit because they return benefits back to their owners in the form of lower interest rates on loans and lower insurance premiums. Kaiser Permanente is a not-for-profit. None of these set ups mean that executives cannot earn outrageous salaries though. However, credit unions & mutuals are usually local or regional organizations because their status limits their ability to access capital and to grow. Smaller organizations tend to pay less to everyone including the CEO. Kaiser clearly does not fit the model of these cooperatives and mentioning it is like comparing apples to oranges.

This article misses the point. This CEO was hired to come in and clean up AIG. He cannot hire competent enough workers, because they would rather go to a company that would pay them more.

Obviously, the author of this article (Justin Fox) didn't bother reading the actual quotes of Robert Benmosche. He specifically mentioned that the curtailing of his employees pay was hindering his efforts.

The US government owns about %80 of AIG. Shouldn't we the taxpayers have the most qualified employees to fix this mess? What normal person would go work for a government run bank if he can work for JPMorgan etc. that doesn't have any limits? What will end up happening is, all the government run banks will end up having workers who can't get hired in a real bank.

". . . at least cost to taxpayers."

No taxpayer has given AIG a cent. And, when AIG pays the government back, no taxpayer will receive any of that money. Check your bank account and see if you see any check or deposits with AIG's name on them.

And no, the money isn't increasing your taxes. What you pay each year doesn't even cover current year expenditures, much less previous years' deficits. There is no relationship between tax rates and deficit spending.

The real crime is not that AIG took the money, but rather that they will pay some back. This will remove money from both AIG and the economy, hurting both.

Question to all: What happens to the money you pay in taxes? Does it make the government any wealthier? Any more able to spend? Any further from bankruptcy?

Answer: None of the above. The government merely makes a notation in a balance sheet account -- which it can do any time, with or without your tax payment.

Suggestion: Go to Warren Mosler's web site at http://www.moslereconomics.com/ and click "The 7 Deadly, Innocent Frauds." It's a real eye opener.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

If I read the information correctly, AIG is at $4.9 billion market cap. Compared to about worthless a year ago.

Instead of liquidating AIG a year ago, the government decided to leave it as a business entity, sort of private, sort of nationalized. The idea being that a forced liquidation at that time would mean the asset sale would be a fire sale.

So... somebody tell me what the liquidation value of AIG is today. If you sold off the insurance businesses, etc, how much would you get?

How long should we wait to break up this company? Where is our trigger point at which the government unloads its interest in AIG?

Because if we have only gone from worthless to 4.9B market cap, that is not a big gain, because AIG is a government sponsored entity, an entitiy that can lowball insurance premiums compared to their competitors. And there is a lot of evidence they have done just that.

Therein lies the hidden cost of USGov owning AIG, the pricing advantage they enjoy because their losses are essentially backstopped by the federal treasury. This means all those other companies are at a competitive disadvantage.

So tell Benmosche his job is to immediately structure liquidation of the company. Until then, pay him at maybe a GS 15 step 10 around $127K, or go all out and pay him the same as the president. And give him a bonus if he can liquidate it in a year, at prices favorable to the treasury.

His marching orders should not be to keep AIG alive as an entity, because nobody thinks AIG will ever be viable if they had to pay off the treasury. His marching orders should be simple: Sell it all.

". . . nobody thinks AIG will ever be viable if they had to pay off the treasury." You are right on target, Randy. This is the other reason why the government should give money -- never lend it -- to save the economy.

The first reason is the federal government neither needs nor uses nor even keeps the money AIG will return. The government has no money; it creates ad hoc, all it spends.

Try sending a physical dollar bill to the federal government. That physical dollar will be destroyed and replaced with a balance sheet notation.

Rodger Malcolm Mitchell

You are right on target, Randy. This is the other reason why the government should give money -- never lend it -- to save the economy.

Banker rule # 1 never throw good money after bad.

Banks impose loan convents on businesses (including pay caps). So why shouldn't the government put those same standards on banks and insurance companies?

Seems like a double standard to me?