Note: This letter will be a shorter letter to you to allow space for a letter I received from one of our of our readers who is an authetic CEO – who has done some painstaking number crunching and has come up with a modest proposal to fix the economy.
Dear Shareholders,
January was not a kind month for AIG. On January 19, a US Airways jet for which we are the lead insurer made a spectacular splash landing in New York’s Hudson River. I’m sorry to say I think the aircraft is a complete loss and we’re going to take a bath on this one. No pun intended.
The executives at your bank, Citibank, won’t worry about about commercial aviation: in late January the bank you invested over $45 billion in moved forward to take delivery on a new Dassault Falcon 7X.
What? I have just received word the Obama administration is pressuring us not to use your bailout money and to halt delivery of our jet. How dare they; whose money do they think we’re using? All that talk during the election about Obama being a socialist….Why can’t we spend $50 million for a jet that holds 12 people? Some elitist! No socialist is he. I believed Sarah Plain! OK, we won’t take delivery of the jet.
Chaos in Davos
JP Morgan CEO Jamie Dimon lost his cool at the World Economic Forum in Davos, Switzerland last month when he said “JP Morgan would be fine if we stopped talking about [the] damn nationalization of banks … we’ve got plenty of capital.”
Oh, the dreaded “N” word. No, not nationalization – never! Not needed. Not necessary. Nefarious, neurotic, niggling, nitpicking nationalizing nerds.
Especially now! With Treasury and The Fed investing billions of dollars in banks the last thing Mr. Dimon would want is someone actually taking away [nationalizing] his bank. Mr. Dimon and his friends are in a good place: nice jobs, nice offices, nice jets, nice conferences in Davos, nice Treasury and Fed, nice line of credit for hundreds of billions of dollars.
What Mr. Dimon fears most, a fear greater than fear itself, is the fear someone will take it all away.
So far this is how it has worked: 1. Invent and make really, really, weird investments that most people don’t understand. 2. Get a former Senator like Phil Gram to pass legislation outlawing the regulation of such investments. 3. Make billions of dollars when times are good, sometimes keeping a quarter of a billion dollars to yourself. 4. Scream for a massive lifeline when times are bad and you are losing billions. 5. Get that lifeline. 6. Although you have really messed things up, insist that as a financial master of the universe, only you can fix things and only you can properly oversee the billions of dollars to fix your mistake. 7. Take some of the money you have been given as a bailout to save the world financial system from catastrophic implosion and pay yourself even more to stick around to fix your problems.
Sound Impossible? Sound like something out of a popular satirical column in a small West Texas newspaper? I kid you not!
I’m happy to report we at AIG are paying 400 of the good employees of our credit default swap unit $450 million of your money to stay at AIG. You might ask why would we pay the people who were responsible for our write down of $34 billion over $1 million each so they can hang on?
Good question. Maybe because were using O.P.M. – Wall Street speak for “Other People’s Money,” which in this case is your money.
This small incentive of $1 million is peanuts.
Joseph Cassano was our guru at AIG Financial Products until he ran us $5 billion in the red. In the last eight years, we paid him $280 million. Yes, at the unit of AIG that is the reason we accepted your $150 billion investment: we are going to pay our employees at least $450 million to stay on.
General Motors
The chilly January winds brought harsh news to us at GM. On January 21st we announced we had blown through the $4 billion we received from the U.S. treasury on December 31 and unless we received the next installment of out bailout package we would run out of cash. While we are a proud company, this quick expenditure of the $4 billion is $181.8 million per day or about $66 billion per year.
In my next letter to you I will brief you on what the Great Dutch Tulip Bubble of the 1630’s should have taught us about speculation. Why we can whine about former Senator Phil Gram, bless his heart. Plus: The First Amendment Bailout! Newspapers have been defending the Constitution for centuries. If Congress shall make no law abridging the freedom of the press, maybe Congress can make a law bailing out the press?
JOHN WATERS, CEO
