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GM Boss Wagoner to Resign, Source Says

March 29, 2009 5:30 PM

ABC News' Jake Tapper, Zunaira Zaki and Charles Herman report: A White House official tells ABC News that the Obama administration asked GM chairman and CEO Rick Wagoner to step down, and Wagoner agreed to do so.

GM had no official comment.

The move is part of the administration's plans to restructure the auto industry, which President Obama is expected to announce Monday.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is," President Obama said in a taped interview broadcast today on CBS' "Face the Nation."

Since late last year, General Motors and Chrysler, the No. 1 and No. 3 automakers in the country, respectively, have received more than $17 billion total in aid as the two companies struggled to stay afloat amid plummeting auto sales and a difficult credit market. Last month, GM and Chrysler requested an additional $22 billion.

March 29, 2009 | Permalink | User Comments (71) | TrackBack (0)

Liddy: AIG Name 'So Thoroughly Disgraced' It'll Have to Change

March 19, 2009 1:40 PM

ABC News’ Alice Gomstyn reports: The government bailout of AIG is of historic proportions, but will the name AIG become history too?

According to the embattled insurance giant’s CEO, the answer is yes.

Late into Wednesday’s House Financial Services hearing on AIG -- in between the spirited and sometimes testy exchanges over the AIGFP bonus controversy -- CEO Edward Liddy revealed that while the company’s healthy businesses would survive, its name probably wouldn’t.

“I think the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it,” he said.

Liddy cited one example: AIG’s U.S. property casualty business, American International Underwriters,  which is being “rebranded” as AIU. The AIG cord for AIU hasn’t been cut completely yet -- the business’ Web site, near the top, reads “a member company of American International Group Inc.”

Many of AIG’s life insurance businesses already have distinct names, Liddy said.

“So where there may have been an approach to use one single name like AIG,” he said, “we're reversing that and going back to some of their individual brand names.”

AIG won’t be unique in trying to save face through a name change: Phillip Morris Cos. distanced itself from its increasingly controversial tobacco products by reemerging as Altria, while discount airliner ValuJet -- which saw its reputation disintegrate after the crash of one of its planes in 1996 -- flies today as AirTran Airways.

While the AIG name remains in use, some are having a bit of snarky fun with the abbreviation, which is short for American International Group.

AIG stands for “arrogance, incompetence and greed,” Rep. Paul Hodes, D-N.H., said during Wednesday’s House hearing.

“Who cares what their name is,” one ABC News reader recently posted on the Political Punch blog. “They could (c)all themselves An Irrelevant Gaffe for all I care.”

March 19, 2009 | Permalink | User Comments (32) | TrackBack (0)

O'Neill's Prescription for the Financial System

March 17, 2009 1:31 PM

As banks continue to undergo the stress tests announced last month by the Obama administration, former Treasury Secretary Paul O’Neill is advocating his own prescription for the financial system. O’Neill laid out his proposal to ABCNews.com.

I believe there is no hope for a market bottom until we embrace the companion ideas of truth and transparency. If I were in charge I would require each financial institution to classify their assets, by amount, into rating classes, beginning with AAA, and then down through the investment grade ratings. For assets such as credit card debt, I would have them post the dollar amounts, late pays and defaults and update the numbers every day. All of this would be posted on the Internet. For those assets the institutions claim cannot be properly valued, I would have them specify the amount and put them into a separate category called the quarantine account. The expectation would be that such assets would be held to maturity or until some event causes them to be reclassified.

The argument against doing this is that we can't handle the truth. However gruesome the truth may be, I believe the truth would give us a base to build on. ... We can't build a base so long as uncertainty causes the market to act as though there are no valuable assets at any financial institution.

The stress test idea is inside baseball. Is the market going to accept a judgment from people who have no credibility? I don't think so. If we, the people, had the facts I have called for, we could make an informed decision as to what action should be taken next. Without these facts one has to wonder, what is the basis for the actions that are being taken and contemplated by the people in our government?

March 17, 2009 | Permalink | User Comments (10) | TrackBack (0)

Former AIG CEO Greenberg Defends Reputation

March 16, 2009 6:50 PM

ABC News’ Alice Gomstyn reports: Former AIG chief executive Hank Greenberg is defending himself against criticism that his creation of AIG’s Financial Products unit was what ultimately led to the company’s spectacular decline.

“I’ve been out of the company for four years,” he said in an interview with ABCNews.com. “How could I be responsible for the problems they are suffering?”

A source close to AIG told ABC News that Greenberg was to blame for creating a unit that "put the whole company and the whole economy at risk.”

But Greenberg, who also criticized AIG for its retention bonuses today, said that under his tenure, the unit earned $5 billion by writing credit default swaps -- financial instruments that essentially act as insurance policies on other investments -- that passed the standards set by “the best risk management (departments) in the damn industry.”

Greenberg said after he left the company in 2005, AIGFP wrote double the number of credit default swaps but those swaps, he said, were of a lower quality than before.

“The losses didn’t come from what we did -- the losses came from what they did afterwards,” he said.

Greenberg also dismissed criticism that he created a culture of extreme risk-taking at AIG that later led to its calamitous investments.

“We had a culture of being innovative but prudent,” he said. “You rewarded creativity, not stupidity.”

--With reports from ABC News’ Matt Jaffe.

March 16, 2009 | Permalink | User Comments (21) | TrackBack (0)

Betting on Geithner’s Future

March 10, 2009 3:59 PM

ABC News’ Charles Herman reports:  Complaints about the administration’s response to the worsening economic situation have zeroed in on the Treasury Department and Secretary Timothy Geithner.

Despite all that his overworked department has accomplished in the first 50 days of the new administration, his less-than-successful unveiling of the Financial Stability Plan (or Troubled Assets Relief Program 2.0) and subsequent public appearances and on Capitol Hill have resulted in Geithner receiving low marks for his leadership, as my colleague Jake Tapper reported.

Now the wondering is not just about when Geithner will reveal specifics about how to tackle the toxic mortgage assets still polluting banks’ balance sheets, but whether Geithner will keep his job.

Intrade, which lets you trade in predictions, has set up a futures market on whether or not Geithner will still be in office by the end of June and another one for him leaving office by the end of December.

You can basically look at the trade price as the percentage of people who think that some event will happen.  Accordingly, 22 percent of people trading believe Geithner will leave office by the end of this year.

Intrade has futures markets for a range of topics like whether Apple CEO Steve Jobs will leave by the end of this year (55 percent), whether Osama bin Laden is captured in September (8 percent) and if General Motors files for bankruptcy by December (75 percent).

(Psst ... Adam Lambert is currently predicted to win “American Idol”).

March 10, 2009 | Permalink | User Comments (44) | TrackBack (0)

Govt. Free Credit Reports Hit YouTube

March 10, 2009 1:44 PM

ABC News’ Andrew Springer reports: How much did you pay for your last “free” credit report?

Guitar in hand, surrounded by friends, one young man in a new video isn't lamenting his poor credit history but how much he had to pay to see it. But this isn't from the average YouTube user. It's from the Federal Trade Commission.

The FTC released two "spoof" videos today to let consumers know the only place to get a free credit report is from its site: AnnualCreditReport.com. The two videos parody the popular ads from FreeCreditReport.com -- a site that allows users to view a copy of their credit report only if they sign up for a trial of a paid credit monitoring service.

"More than ever, consumers need to know there's a place they can go to get a free credit report," said Eileen Harrington, acting director of the FTC's Bureau of Consumer Protection. She said that's because as the economy gets worse, it's getting harder and harder for consumers to get credit. The FTC says that checking your credit is an effective way to deter and detect identity theft.

Consumers under a 2003 federal law have the right to get a free copy of their credit report once every 12 months. The commission set up AnnualCreditReport.com in response, but this is the first time since it went online nationwide in 2005 that the commission has made videos to promote it.

The site the videos parody, FreeCreditReport.com, provides access to a free credit report only with a trial membership in one of its credit monitoring services. Users have seven days to cancel their membership, or start paying $14.95 a month, according to the company's Web site.

Harrington said the FTC has received complaints about FreeCreditReport.com. "Consumers are confused," she said.

In 2005, the FTC settled charges against the site's parent company, Experian, alleging its ads for free credit reports were deceptive. Alhough she said the FTC has criticized the company's ads for deceptiveness in the past, Harrington won't comment now.

After posting its own PSAs on its Web site, YouTube and MySpace, the FTC hopes the videos will go viral, so it can get the word out to as many people as possible.

March 10, 2009 | Permalink | User Comments (2) | TrackBack (0)

AIG: The Mother of All Bailouts

March 02, 2009 11:05 AM

ABC News’ Betsy Stark reports: Before this is over, AIG may earn the dubious distinction of being the mother of all bailouts.

The U.S. taxpayer was on the hook for $150 billion before today's $30 billion lifeline from the Troubled Assets Relief Program’s round four of government efforts to save AIG. What taxpayers have gotten in exchange is an 80 percent stake in a monstrous global insurance company now trading on the open market as a penny stock, i.e., worth well less than a dollar a share.

AIG has lots of good businesses that still make money but not nearly enough money to cover the cost of AIG's disastrous bets on "credit default swaps." In the simplest terms, AIG sold insurance policies on the trillions of dollars of mortgage-backed securities that made financial firms a fortune as housing prices went up. And for a time it made AIG a fortune, too.

But now that the tide has gone out, to borrow Warren Buffett's metaphor, we see that while AIG insured approximately $450 billion of these securities, incredibly, it failed to set aside any funds to cover potential losses. Why? Credit default swaps were not considered a traditional insurance product, so they were not regulated. So AIG was not required to set aside money for potential losses. And here's the kicker (as explained so well by Joe Nocera in his Feb. 28 column this weekend in the New York Times): The customers who bought these products all felt safe  because these securities carried the coveted AAA rating, conferred because AIG was, once upon a time, so well run that its default swaps deserved a AAA rating.

OK, but why does the federal government -- i.e., American taxpayers with plenty of problems of their own -- continue to bail out this company that behaved so irresponsibly? Isn't this is a classic example of the government throwing good money after bad?

Today the Treasury Department conceded this $30 billion bailout may not be the last. "This will take time and possibly further government support if markets do not stabilize and improve," Treasury warned in a press release. But it went on to explain its belief that AIG's long tentacles have the government in a choke hold: "Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high. AIG provides insurance protection to more than 100,000 entities, including small businesses, municipalities, 401(k) plans and Fortune 500 companies that together employ over 100 million Americans. AIG has over 30 million policyholders in the U.S. and is a major source of retirement insurance for, among others, teachers and nonprofit organizations. The company is also a significant counterparty to a number of major financial institutions."

In other words, the government believes it faces a terrible choice: Bail out AIG or risk bailing out all the businesses, cities, retirement funds and individual Americans AIG still insures.

March 2, 2009 | Permalink | User Comments (30) | TrackBack (0)