Monday, November 17, 2008

Risk Management At AIG: A Few Choice Words

I’ve been busy studying Depression-era slang. Apparently, that historic period gave us “boondoggle” (1935), “baloney” (1928) and “cojones” (1932).

But I took a break to check out the term sheet for Treasury's latest deal with our friends at AIG: last week's $40 billion preferred stock investment, which, per Treasury's press release, is “part of a comprehensive plan to restructure federal assistance to the systemically important company.”

Having sold us taxpayers this nifty preferred stock, AIG has a month to “establish...a risk management committee of... AIG’s Board of Directors that will oversee the major risks involved in AIG’s business operations and review AIG’s actions to mitigate and manage those risks.”

I take it, then, that AIG - whose risky deals have made it a recidivist recipient of behemoth bailouts - still does not, um, have such a risk management committee? And that Mr. Paulson didn't make them set one up when he lent them $85 billion in September?

How is this even possible?

Hank, Hank, Hank. This is the kind of thing that makes folks think this bailout boondoggle is a buncha baloney. Go and get yourself some cojones, before it's too late.

1 comment:

Brad said...

The picture of baloney reminds me of "salami tactics," a war tactic which I think started with an episode of "Yes, Prime Minister." I'm waiting to use it in regards to business.