Dear AIG CEO John Waters,

Give me back my money!

After reading your letter to shareholders in the January issue of the Big Bend Gazette it started my brain working in terms of what alternatives could exist to change the dynamics of the economy in 2009. According to the article as I read it we have given AIG, Citicorp, the automakers and others approximately $348 billion dollars. Wow, that’s a lot of money. What if we changed the use of those funds and put them to work in another manner?

First let’s look at some statistical data:

• According to the U.S. Census Bureau as of July 2008 there are 304,059,724 people in the United States.

• AIG employs approximately 116,000 workers; I am going to assume all in the U.S. for purposes of this discussion. [Editor’s Note: about half are in the US.]

• Citigroup, a parent company of Citicorp, employs another 300,000 workers and again for this purpose we will say they all work in the U.S.

• Number of mortgages in default according to Realty Trac as of 2008 equals 3,157,806.

• AIG shares outstanding as of January 20, 2009 equals 2.7 billion – average trading price as of today $1.41

• Citigroup shares outstanding as of January 20, 2009 equals 5.5 billion – average trading price as of today $3.00

Now that we have the statistical data out of the way, let’s talk about the “Incentive Program” for fixing the economy as I see it.

First, close the doors at AIG and layoff 116,000 workers, AIG assets are all sold, and at a fire sale we should be able to get somewhere near the $152 billion that we have loaned them. According to AIG’s financial statements they have some $979 Billion in assets, unless there is some Arthur Anderson math happening we just made money. We give each laid-off worker 24 weeks of unemployment wages, prepaid, but we bump the amount of the weekly payments to $1000 for a total of $24,000 each.

Second, close the doors at CitiGroup and let’s lay off the other 300,000 workers. Again, once we fire sale their assets we can get back our $25 billion we gave them; the gain from the sale of their assets should be even better – about $2.19 trillion in assets on their balance sheet. Using the same formula as AIG, we pay each worker $24,000 in advance while they go look for work somewhere else.

Now that we have laid off some 416,000 American workers, let’s take a quick stab at fixing some other problems – like the 8.2 billion outstanding shares of stock or shareholders that invested in these two companies and we have now wiped out their investment. We are going to give them back their current market value. For Citigroup shareholders we pay out $16.5 billion, the current market value of the stock, and for AIG we pay out $3.8 billion again at current market value so we have spent some $21 billion of the $177 billion we just got back from selling their assets, and we still have $156 billion to continue to play with, and we GAINED lets say an estimated $100 billion in selling all those assets. So by my math we are $100 billion ahead of where we were before we started.

This is what is going to drive our market recovery which is critical at this point since we just slashed over 400,000 jobs and sent two companies to the graveyard. The Incentive Fund now has remaining $256 billion dollars, however we are now going to sell our shares in all remaining banks totaling about $150 billion, and we have another $400 billion that has been earmarked for giveaway by the fed and as of now unused that will give us a grand total of somewhere in the neighborhood of $800 billion dollars to start spending. That sounds familiar – like we are now back to the beginning, only difference being that AIG and CitiGroup no longer exist, and 400,000 Americans got laid off but were given enough cash to hang tight and go look for a new job, and the shareholders got dollars back to recover maybe some part of their poor choice of investments.

There are a total of, let’s say, 3,157,806 defaulted mortgages in the U.S. (according to the latest information provided online by RealtyTrac in its 2008 US Foreclosure Market Report), so first thing we are going to do is take $15,000 for each defaulted loan and give it directly to their lender with the following provisions:

a.) it brings their loan current,

b.) their interest rates are dropped to 3% – still higher than the Fed lending rate for the remainder of the term of the loan.

This now solves our defaulted mortgage crisis or comes pretty close. We just gave away some $47 billion to bring the past due loans current and saved the homes of working Americans.

We offer incentives to every American living in the U.S. to buy a new Ford or G.M. automobile in 2009. This incentive package gives each person $7,500.00 to use as a cash down-payment on any new car priced between $20,000 and $30,000, which achieves at least 35 mpg (it’s our job to make sure we push for higher gas mileage), and these vehicles are financed at a rate of 0% interest for 5 years. In order to qualify for this program you have to have a credit score of 675 or higher and be able to qualify based on income.

Let’s assume that 5 million Americans go out and buy new cars with the incentive program we just spent $37 billion dollars of our incentive fund, and we just increased the volume of U.S. cars tenfold over what they sold in 2007 and 2008 combined…. We just fixed the U.S. auto industry!

One item we have not fixed but need to is the 400,000 people we laid off plus the others that have lost jobs. Let’s start by re-educating some of those laid off workers. We institute a new teacher program which offers $25,000 cash incentives to every person laid off from AIG or Citigroup with an education from a state college with a GPA of 3.8 or higher that works in public education for a minimum of 24 months.

This program would give them $25,000 over and above their state paid wages per year in bonuses but only if they work in public school systems we further restrict this to inner-city schools only, no going to the suburbs to the nicest schools that already have the better teachers. This would apply to basic education classes only which means they have to teach English, Math, History or Science classes, no coaching positions or anything of that nature.

Assuming that 25,000 of the laid off workers become teachers, that takes away about $2 billion dollars and gives us a stronger education system with more qualified teachers in inner-city schools. Still stuck on education, we then offer $65,000 annual salaries to 25,000 additional college graduates for a period of 5 years to teach night classes and adult education classes, again focusing only on English, math, history and science programs, this gives each state at least 480 new adult education teachers, and we used $8.1 billion dollars.

It is time to bring American jobs back home to the U.S. Like most people I am totally annoyed when I pick up the phone to call some company related to service for this or that and get some phone operator in some foreign country who has barely mastered the English language. We offer every company in the U.S. a $10,000 per person incentive to bring jobs back to the U.S. – this comes with restrictions and actually means they have to create new jobs – and pay a fair wage, set at $16.50 per hour minimun per person based on a 40 hour work week, and each person hired must have been on unemployment for the last 90 days to qualify. We continue this incentive for 5 years from the date it starts.

Lets assume that we now bring back 100,000 jobs from overseas markets  – we just used $5 billion of incentive funds but we put 100,000 people back to work that were previously on unemployment. (I won’t even begin to try and calculate the unemployment wage savings for each state based on the new jobs created.)

Jumping now to the medical and health care problem in the U.S., which appears to be a hot button for everyone: one thing we need is more rural medical care. We offer 100,000 doctors graduating from accredited medical schools in the U.S. a $100,000 annual salary for five years to go practice medicine at free clinics throughout the U.S. These free clinics would be located in small towns with populations of under 25,000 people, we add to that a $25,000 annual amount per doctor for supplies and medicine costs. The cost of this program $65 billion dollars over 5 years; however we just provided medical care to rural Americans in some of the poorest areas of the country.

Have you driven on some of our state highways lately? Like me you have probably noticed that they need a lot of work. A great way to tackle that problem and put people to work at the same time is fix some of those issues. We give every state in the U.S. $1 billion dollars repair interstate highways, none of which can be inner city, so we only pay with federal funding to fix the interstate highways outside the city limits. This would quickly spend $52 billion or so in dollars but it also puts more people to work.

We need to watch how we just give away this money making sure that it is very competitively bid and that we aren’t paying $1000 for a toilet seat, so to speak, and that 100% of the workers are U.S. workers with proper legal documentation.

With that in mind, let’s add some labor force to our workforce while we are at it and as well raise some more dollars for our incentive fund.

In the last 25 years I have known more undocumented workers in the U.S. than most people probably have. More than 90% of those are willing to pay taxes and be a productive part of our society. Let’s offer 1.5 million illegal workers the chance to become legal workers. For each person that passes a criminal background check and pays a $5000 penalty, he/she receives work papers in the U.S. This does not grant them citizenship; it grants them the ability to work here legally.

In my estimation we would sell 1.5 million work visas in about 30 days, which gives us $7 billion dollars or so in funds to add back to our incentive fund, add to that the taxes that each of those workers would then pay annually to the IRS and we have just recouped 100% of the funds that we spent on additional teachers for our school system. In addition we rent more apartments, sell more cars, and sell more goods and the list goes on and on.

The numbers are staggering  but so far this is where I think we are:

AIG recouped loan $ 152,000,000,000.00

Citigroup recouped loan $ 25,000,000,000.00

AIG laid off worker incentive $ (2,900,000,000.00)

Citigroup laid off worker incentive $ (7,200,000,000.00)

AIG stock payments $ (3,807,000,000.00)

Citigroup stock payments $ (16,500,000,000.00)

Sale of Assets of AIG and Citigroup $ 100,000,000,000.00

Sale of Bank Shares $ 150,000,000,000.00

Loan Payments for past due loans $ (47,367,090,000.00)

Auto Incentiveís for buyers $ (37,500,000,000.00)

Laid off Workers teaching incentive $ (1,250,000,000.00)

New Teachers incentive $ (8,125,000,000.00)

Bringing Back Jobs to the U.S. incentive $ (5,000,000,000.00)

New Doctors incentive $ (62,500,000,000.00)

Interstate Highway repairs $ (52,000,000,000.00)

New work Permits $ 7,500,000,000.00

Cash Remaining   $  190,350,910,000.00  

So we still have $190 billion or so dollars to play with and we have so far created new jobs, stimulated the economy, sold more cars (which increases production), provided more teachers, provided more medical care, helped to fix the immigration issue and saved taxpayers about $190 billion or so dollars assuming we just don’t use the money left over!

As for me? Here is how I have fared:

I sold the relatively worthless shares of my AIG stock back to the company for about $8000, bought a new car and saved $7,500 on the purchase price using the incentive, and stopped 3 homes in my neighborhood from going to foreclosure sale thereby helping to stabilize my property values.

I believe in Trickle Down Economics!