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Author, direct marketing guru, and always entertaining Denny Hatch focuses on a major story in the news and shows how businesses can take advantage of–or avoid the pitfalls from–the lessons to be learned in terms of marketing, sales, PR and communications.
Sep 30, 2008
: Vol. 4, Issue No. 54
Put a Cataloger in Charge of Wall Street!
AIG and the missing $60 billion
IN THE NEWS
Bad Bets and Cash Crunch Pushed Ailing AIG to Brink
For three hours Tuesday evening, the board of American International Group Inc. wrestled with the government's offer: an $85 billion loan in return for surrendering control of the insurance giant. The directors were stunned by the "onerous" proposal, as one called it. They were surprised by an order to replace Chief Executive Robert Willumstad and bristled at what they considered Washington's heavy-handed treatment. One director said he felt "violated."
--Monica Langley, Deborah Solomon and Matthew Karnitsching; The Wall Street Journal, Sept. 18, 2008
For three hours Tuesday evening, the board of American International Group Inc. wrestled with the government's offer: an $85 billion loan in return for surrendering control of the insurance giant. The directors were stunned by the "onerous" proposal, as one called it. They were surprised by an order to replace Chief Executive Robert Willumstad and bristled at what they considered Washington's heavy-handed treatment. One director said he felt "violated."
--Monica Langley, Deborah Solomon and Matthew Karnitsching; The Wall Street Journal, Sept. 18, 2008
Over the past month, I downloaded a boatload of material on the current financial mess for my archive. One story haunted me--the surreal tale of AIG's Chief Executive Officer, Robert Willumstad, who thought he only needed $20 billion to get out of a hole.
Four days later--after a series of reports--he discovered the tab was really $80 billion.
How can a supposedly hands-on, competent CEO misplace $60 billion?
That's $60 billion with a B!
AIG Trip Insurance
A number of years ago, I got hooked on the Aubrey-Maturin novels of Patrick O'Brian. They're about the British navy during the Napoleonic era, and I read all 20 volumes, not to mention saw "Master and Commander" starring Russell Crowe multiple times.
Several weeks ago, I came across an ad in The New York Times Book Review describing a seven-night Mediterranean cruise with tours of ports featured in the O'Brian novels along with lectures about O'Brian and the Battle of Trafalgar. My wife, Peggy, and I talked about it, decided this was a once-in-a-lifetime opportunity, and sent a deposit and reservation. It's killer expensive, and the cruise people suggested that trip cancellation insurance would be a wise investment.
Our travel agent sent over several trip insurance brochures, one of which was Travel Guard. When Sentry launched Travel Guard back in the '70s, I wrote and designed that first brochure. I knew the benefits, liked the company, the price was right and I would've bought it.
But ...
In 1976, Travel Guard was bought by AIG, the huge insurer that came within a whisker of going belly-up and was bailed out on fears its bankruptcy would take down the world's financial system.
Right now, I wouldn't touch an AIG product with a pair of 10-foot tongs.
AIG and the $60 Billion Screwup
On Sept. 18 -- in a brilliant Wall Street Journal story by Monica Langley, Deborah Solomon and Matthew Karnitsching -- I saw how top management of AIG "lost" $60 billion in the course of a week.
In early September, CEO Robert Willumstad realized he needed money. "The holes we'll have to fill are so big, we need to raise capital," Mr. Willumstad told the CEO of JPMorgan Chase. The estimated amount: $20 billion. Here are the relevant paragraphs from The Wall Street Journal account of the debacle:
At AIG, Mr. Willumstad was working through the night with bankers from J.P. Morgan and private-equity firm Blackstone Group to determine how much money the company would need. By the next day, the amount of capital needed had doubled to $40 billion because of the company's fast-deteriorating real-estate related securities.
See What Readers Are Saying About This Story...
Four days later--after a series of reports--he discovered the tab was really $80 billion.
How can a supposedly hands-on, competent CEO misplace $60 billion?
That's $60 billion with a B!
AIG Trip Insurance
A number of years ago, I got hooked on the Aubrey-Maturin novels of Patrick O'Brian. They're about the British navy during the Napoleonic era, and I read all 20 volumes, not to mention saw "Master and Commander" starring Russell Crowe multiple times.
Several weeks ago, I came across an ad in The New York Times Book Review describing a seven-night Mediterranean cruise with tours of ports featured in the O'Brian novels along with lectures about O'Brian and the Battle of Trafalgar. My wife, Peggy, and I talked about it, decided this was a once-in-a-lifetime opportunity, and sent a deposit and reservation. It's killer expensive, and the cruise people suggested that trip cancellation insurance would be a wise investment.
Our travel agent sent over several trip insurance brochures, one of which was Travel Guard. When Sentry launched Travel Guard back in the '70s, I wrote and designed that first brochure. I knew the benefits, liked the company, the price was right and I would've bought it.
But ...
In 1976, Travel Guard was bought by AIG, the huge insurer that came within a whisker of going belly-up and was bailed out on fears its bankruptcy would take down the world's financial system.
Right now, I wouldn't touch an AIG product with a pair of 10-foot tongs.
AIG and the $60 Billion Screwup
On Sept. 18 -- in a brilliant Wall Street Journal story by Monica Langley, Deborah Solomon and Matthew Karnitsching -- I saw how top management of AIG "lost" $60 billion in the course of a week.
In early September, CEO Robert Willumstad realized he needed money. "The holes we'll have to fill are so big, we need to raise capital," Mr. Willumstad told the CEO of JPMorgan Chase. The estimated amount: $20 billion. Here are the relevant paragraphs from The Wall Street Journal account of the debacle:
At AIG, Mr. Willumstad was working through the night with bankers from J.P. Morgan and private-equity firm Blackstone Group to determine how much money the company would need. By the next day, the amount of capital needed had doubled to $40 billion because of the company's fast-deteriorating real-estate related securities.
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Copyright 2008 | North American Publishing Company | All Rights Reserved
1500 Spring Garden Street, 12th Floor | Philadelphia, PA 19130 USA | (215) 238-5300
Privacy Policy
