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Monday, December 22, 2008

AIG's Liddy's little lies

AIG's Liddy was on CNBS this morning, attempting to defend the $450 million that AIG needed to pay employees to stay at AIG. "Retention" bonuses is what this is called.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAPt6J4dALFE&refer=home

Liddy said, "If you don’t use retention bonuses, those people are some of the best in the insurance industry, they will go elsewhere and we won’t have anything to sell."

Then let them go.

Liddy said that if the people go, they wouldn't be able to pay back the government it's loan. Well they couldn't in this environment anyway. AIG got the government money, because AIG subsidized the Investment Banks that were smarter than AIG's people. They had the other side of the bets that AIG (excuse me, the taxpayer) had to make good on.

But I don't have a "black box" like AIG did, but I can do some simple math. And with this simple math, let's see what AIG can get for it's crown jewels.

AIG sold it's Hartford Steam Boiler unit today for $742 million, of which it paid $1.2 billion for 8 years ago.
http://www.portfolio.com/views/blogs/daily-brief/2008/12/22/aig-lets-out-some-steam

This was one of it's crown jewels. It was sold at 5X earnings. Now supposedly AIG used to make $10 billion a year, but we know that they were booking phantom earnings from credit default swaps that they were selling under AIGFP. AIG used to make around $4 billion a year, before they became enamored with these derivative side bets. AIG plans on selling 70% of the company. 70% of $4 billion is $2.8 billion. Round it up to $3 billion, and give it a 5 multiple, and you get $15 billion.

How then is AIG going to sell $70 billion worth of assets? And what is AIG's market cap today with the non counted but needed to be counted piece, that you the taxpayer has? It's less than $20 billion.

So why would anyone listen to Liddy's lies?

Liddy said that his organization was the only one that had a plan to pay back the Government $60 billion in 2009.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDXR6Ayuezx4&refer=home

Where is his plan? Can we see that? Will he show it to us or do we have to do a FOIA and then find out that the plan is "confidential?"

AIG first snowed shareholders, and now Liddy wants to snow taxpayers.

Either way, it's just lies coached in the veneer of business judgement!

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