The good life continues at AIG after its $122 bn bail-out

As governments around the world bail out failing financial institutions, politicians are desperate to convince sceptical voters that their money will not be used to keep top executives in the lifestyle to which they have become accustomed. Only yesterday, David Cameron demanded such assurances from Gordon Brown.

But, in the current climate, with the public’s anger focused on them, wouldn’t the city slickers decide to lie low for a bit anyway? Wouldn’t they think it just too risky to be seen living the high life on taxpayers’ money?

Apparently not.

Only a week after AIG was effectively nationalised with an $85 billion bung from the US government, some of its senior executives spent $440,000 on a retreat at a posh California resort. It included all the usual stuff, like golf, spa treatments and banquets.

As you might expect, American politicians and newspapers are outraged.

So are the AIG execs suitably apologetic about their little jolly? Has the opprobrium heaped on them by the public made them realise that they are now operating in a different world?

Erm….no.

In fact, they are planning a few more of these posh retreats. Fifty of them are off to the Ritz-Carlton in California’s Half Moon Bay next week. Other similar events have been scheduled throughout the autumn.

Despite the public anger, AIG does not seem to think that it has done anything wrong. And why would it? That is the way it has always conducted business. Even as it goes to the federal government to ask for another $37.8 billion on top of its original bail-out, there is not a trace of contrition from the company. CEO Edward Liddy dismissed the criticism and defended the trip as “standard practice in our industry“.

Mr Liddy is clearly not used to this type of media scrutiny but it will be familiar to anyone who has worked in the public sector. Even if there are good reasons for taking your staff way to a nice hotel for a few days, the press and the public just won’t wear it.

Clearly the penny hasn’t dropped at AIG yet. They are now, effectively, public servants and they are spending taxpayers’ money.

There is a warning here too for bankers in the UK. If you take government cash, there will be a lot more people watching what you do.

As with the executives at AIG, it will probably take our bankers some time to get used to this. They will continue to do things that most people regard as horrendously expensive but which, for them, are quite normal. Journalists will be scouring the City and Canary Wharf looking for people whooping it up in wine bars, hoping to get them drunk enough to say who they work for. It is only a matter of time before a newspaper reveals excessive pay awards or expensive corporate junkets at a taxpayer-funded bank.

Welcome to the public sector folks. This is how things will be from now on.

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2 Responses to The good life continues at AIG after its $122 bn bail-out

  1. Heidi Moulson says:

    Hi Rick,

    This simply demonstrates that until the senior executives of these financial organisations are fired, nothing will change.

    It has astounded me that not a single boss of any financial institution has been fired as yet.

    I wonder which of the UK financial organisations will be the first to be caught out doing this “standard” behaviour.

    Heidi

  2. Rick says:

    Heidi, it looks as if Fred Goodwin at RBS might be one of the first to go, if the bank gets a state bailout.

    http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4909992.ece

    BTW – Thanks for the link.

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