March 19, 2009
I haven’t found the link to this particular article, but read it in the paper copy of Maclean’s I picked up today. You can find the Maclean’s website here.
When Warren Buffett speaks, people are wise to listen carefully. The legendary investor became the world’s richest man by keeping his eye firmly trained on the long term, ignoring fads and manias, and sticking to the timeless fundamentals of sound business. So this week, when Buffett gave CNBC a three-hour interview, millions were hoping for some guidance. Those who listened carefully were not disappointed.
But Buffett said one thing that was particularly resonant for those of us wading daily through a deluge of troubling economic data. “People are scared, and fear is very contagious. They’re also confused,” he said. “And if you’re fearful and confused, you don’t start to get over being fearful until you aren’t confused.”
The most important role we in the media can play in this environment is to dispel some of the confusion that fuels fear and paralyzes consumers.
Which brings me to the following question: what of the role of the public to inform itself? Have we been doing a good job with that? We were all (myself included) quick to point the finger at Jim Cramer, but we might as well have turned it on ourselves for not investigating the truth more.
Perhaps now is the time to start that off.
WASHINGTON: As the lucrative bonuses paid to employees of the American International Group fueled fresh outrage at the White House and on Capitol Hill on Wednesday, the embattled chief executive of A.I.G. said that he had asked some recipients to give at least half the money back.
The chief executive, Edward M. Liddy, made the announcement during his testimony on Wednesday afternoon before a congressional committee investigating the problems at the insurance giant.
“I have asked the employees of A.I.G. Financial Products to step up and do the right thing,” Mr. Liddy told lawmakers. “Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments.” (Sahar’s comment: ‘at least’ half? Seriously? I would say they should ‘at least’ give all the money back and perhaps not pay a hefty penatly!)
The A.I.G. chief said that some recipients had already offered to give up all of their bonuses, and he added later that he expected to get most of the money back.
Of the 418 employees who received bonuses, 298 got more than $100,000, according to the New York attorney general, Andrew M. Cuomo. The highest bonus was $6.4 million, and 6 other employees received more than $4 million. Fifteen other people received bonuses of more than $2 million and 51 received $1 million to $2 million.
Before Mr. Liddy’s testimony, the A.I.G. affair prompted President Obama to declare that a culture of “excess greed” demonstrated in A.I.G.’s dealings should have no place in a new Wall Street.
“As we get out of this crisis, as we work toward getting ourselves out of this recession, I hope that Wall Street and the marketplace don’t think that we can return to business as usual,” the president said after meeting with his economic advisers.
Accordingly, Mr. Obama said, he will push for quick congressional legislation to create a regulatory framework for entities like A.I.G., which is not a bank, similar to the powers that the Federal Deposit Insurance Corporation has over banks.
“I’m angry,” the president said. “What I want us to do, though, is channel our anger in a constructive way.”
The president did not call on Wednesday for the bonuses to be paid back, or taken back somehow. But there was strong sentiment on Capitol Hill over the $165 million in bonuses, and it was by no means clear that asking bonus recipients to give up half of their windfalls would appease the lawmakers. A.I.G. has received nearly $200 billion in federal bailout funds.
“We are the effective owners of this company,” said Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee, going on to suggest a lawsuit to recover the $165 million in bonuses. “I think it’s worth trying.”
By “we,” Mr. Frank made clear, he meant the American taxpayers, whose collective anger has been felt on Capitol Hill over the last several days. And no wonder, said Representative Gary L. Ackerman, a Democrat from Long Island. The typical taxpayer knows he is “the ultimate sucker” in the A.I.G. debacle, Mr. Ackerman said.
The lawmakers, having heard from their furious constituents, seemed unwilling to be mollified by the pledge from Mr. Liddy, who took the helm at A.I.G. last fall after it had begun imploding because of reckless investments, that the company’s 116,000 employees were united in wanting to work out of the morass, and work “shoulder to shoulder” with federal regulators. (Sahar’s comment: It doesn’t seem fair that all the regular AIG workers are going to have to pay, quite literally, because of mistakes of a couple of AIG employees).
“A million dollars is a sizable sum to the typical American family,” Mr. Kanjorski said, “and a million dollars is a lottery prize for anyone who has just lost a job.” He called on A.I.G.’s employees to join with the legions of Americans who “have made personal sacrifices to survive these difficult times.” For the American people, said Representative Paul Hodes, Democrat of New Hampshire, the initials ” A.I.G.” now stand for “arrogance, incompetence and greed.” (Sahar’s comment: Ouch!)
But Representative Scott Garrett of New Jersey, the senior Republican on Mr. Kanjorski’s subcommittee, said he had a question for those who are unhappy with the way the A.I.G. story has unfolded: “What did you expect, and why weren’t you asking more questions before?” (Sahar’s comment: Good point. Hopefully we will learn from our lesson. But it doesn’t excuse what AIG did.)
Read the rest of the article here.