From the Times Picayune:
"Bilking American taxpayers is what insurance companies do. Why is anyone surprised?!" Rep. Gene Taylor, D-Miss., said in a news release Wednesday afternoon about the AIG bonuses.My grandfather always said that insurance was for people who didn't need it. Katrina, Rita, and Gustav proved him right.To many on the Gulf Coast, watching AIG Chief Executive Officer Edward Liddy talk about the sanctity of contracts in defending the award of $220 million in bonuses to employees at the embattled insurer was an ironic moment.
"How about that?" said Bob Hunter, a New Orleans native who is director of insurance at the Consumer Federation of America and author of a 2007 study documenting the decline of claims payout ratios at Allstate, Louisiana's second-largest insurer, during Liddy's tenure. "He's always disregarded contracts to maximize profits."
Liddy was appointed by the federal government in September to run AIG when the ailing insurer got its first installment of taxpayer bailout money, which now totals $170 billion.
Before caving to pressure Wednesday and saying he would ask those who received more than $100,000 in bonuses to return half of the money, Liddy argued that the money needed to stay where it was because contracts are sacrosanct.
"We cannot attract and retain the best and the brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of American taxpayers -- if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury, " he said earlier in the week.
Delay and deny
Liddy ran Allstate Corp. from when it was spun off from Sears, Roebuck & Co. in 1995 until the end of 2006. During that time, Allstate perfected the practice of getting tough with policyholders to delay and deny claims, as documented in the book by New Mexico attorney David Berardinelli, "From Good Hands to Boxing Gloves."
While that book dealt mainly with a strategy for tamping down car insurance claim payouts to increase profitability, many believe those same practices could be seen at work en masse after Hurricane Katrina in Louisiana, where thousands of policyholders filed suit against the Illinois company.
"It's rather ironic that Ed Liddy is espousing the sanctity of contracts when it serves the interests of the insurance company, but when the sanctity of contracts is violated from the homeowners' perspective, there's no obligation and it's up to the homeowners or the courts to enforce it, " said Johnny Denenea, an attorney for Slidell homeowners Bob and Merryl Weiss, who won a verdict against Allstate in the first insurance trial to be completed in federal court after Hurricane Katrina.
More later.
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Good post and comment, Wayne!
ReplyDeleteBack in 2002 when I was in a car accident, I had to fight like crazy for our insurance company to 'abide by their contract'.
Sometimes people don't seem to realize that your insurance POLICY (which you pay for), is not just a 'policy', but a CONTRACT WITH TERMS OF FINANCIAL PROTECTION that when the circumstances are in accordance with the INSURANCE COMPANY'S COMMITMENT TO YOU, are DUE AND PAYABLE.
Think about it, we have to use an attorney to GET A CLAIM PAID, and then the attorney gets 33% of the payment; it's a complete RACKET!!!!
On top of AIG, read this article - it will make you realize that the bankers who GOT MONEY (ours), and the banks who would not be banks without OUR MONEY to start with, seem to think they can hold the government and us, hostage.
The remarks made in this article imply that if they don't get their bonus payments, then they won't be able to carry out what they're supposed to do per the agreement of the bail-out.
While most people wouldn't agree with me on government stepping in, I think we've seen the criminal actions (yes, I call them criminal) of the private sector holding OUR MONEY not only to fund our homes; our credit payments for car loans, and the like, and I'd prefer to either only allow CREDIT UNIONS (which we have), where YOU ARE A MEMBER AND HAVE A VOTE AND SAY.....
If we can't get private industry to operate with fair-play, TAKE THEM OUT OF THE PICTURE when it comes to making CONTRACTURAL PROMISES, LOANS, MORTGAGES, AND INSURANCE PROTECTION for our citizens.
Here's the article that made me feel sick:
Fannie Mae CEO defends retention bonuses
Fannie Mae CEO defends retention bonus plan for executives amid public outcry
Alan Zibel, AP Real Estate Writer
Friday March 20, 2009, 6:27 pm EDT
Buzz up! Print Related:Fannie Mae, Freddie Mac
WASHINGTON (AP) -- Mortgage giant Fannie Mae's chief executive and a top government regulator warned Friday that canceling bonuses for workers at institutions receiving federal bailout money could undermine efforts to stabilize the U.S. housing market.
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{"s" : "fnm,fre","k" : "c10,l10,p20,t10","o" : "","j" : ""} Herbert Allison, who was installed by government regulators as CEO of the Washington-based company last fall, sent a companywide e-mail Friday defending Fannie Mae's bonus program for thousands of workers.
"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the government has given us to address the housing crisis," he wrote, citing President Barack Obama's plan to prevent up to 9 million foreclosures.
The awards for roughly 9,000 workers at Fannie and sibling company Freddie Mac, enacted shortly after their federal takeover last fall, initially ruffled few feathers. But now the generous paychecks are proving politically touchy as lawmakers and the public seethe over roughly $165 million in bonuses paid out last weekend by bailed-out insurance giant American International Group.
Allison, who is not receiving a salary as CEO, wrote that the bonuses -- including at least $1 million each to four top executives -- were needed to "ensure we maintain the skills and experience we need to help keep the mortgage market operating."
Employees, he wrote, "deserve tremendous credit for staying here and demonstrating unswerving dedication to the public interest despite" uncertainty about the company's long-term future and the stock awards that have become worthless.
But Rep. Barney Frank, chairman of the House Financial Services Committee, urged the government to cancel the retention bonuses.
The Massachusetts Democrat asked the Federal Housing Finance Agency, which regulates both firms, to eliminate the bonuses approved for this year and next. Frank also wants employees to repay bonuses from last fall, after the two companies were placed under government control.
The public "rightfully insists that large bonuses such as these awarded by institutions receiving public funds at a time of a serious economic downturn cannot continue," Frank wrote in the letter dated Thursday and released by his office Friday.
The government seized control of the companies in September and installed new chief executives. After the takeover, regulators designed a bonus program designed to encourage workers to stay at their jobs.
"Many employees at all levels at each company have been working far more hours, with far less compensation," James Lockhart, director of the housing agency, wrote Friday in a letter to Frank. "We run a great risk of these same employees deciding this is the last straw and walking away."
More than 5,000 Fannie Mae employees are receiving retention payments over 18 months, with an average of $21,000 per employee, Lockhart wrote. At Freddie Mac, about 4,000 workers are getting an average of $19,000 in payments.
Fannie Mae disclosed last month that four top executives will receive retention bonuses totaling at least $1 million apiece. Freddie Mac has yet to detail which executives will benefit.
The two companies have been hobbled by skyrocketing loan defaults. Fannie Mae recently requested $15 billion in federal aid, while Freddie Mac has sought a total of almost $45 billion.
But Frank cast doubt on that argument. "In this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave," he said.
House lawmakers on Thursday voted decisively to impose a 90 percent tax on millions of dollars in employee bonuses paid by AIG and other bailed-out companies. But Senate Republicans are applying the brakes, arguing that Democrats were letting populist outrage trump informed decision making in the Senate.
Ain't it interesting to trace the history of people like Liddy? I would never have known about his relationship with Allstate because I live on the left coast and haven't kept track of those in the Gulf. I wonder if anyone in Congress knew his background...
ReplyDeleteThanks for enlightening me
BG