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Days after AIG's $85bn rescue, insurer hosted banquets

The world's largest insurance company, AIG, spent $440,000 on a lavish corporate retreat at one of California's top beachside resorts a few days after accepting an $85bn emergency loan from the US government to stave off bankruptcy.

Details of the week-long getaway enraged legislators at a congressional hearing yesterday where AIG's former bosses were accused of spending taxpayers' money on pedicures, golf games and cocktails.

Crippled by losses on financial insurance companies, AIG was bailed out by US taxpayers on September 17 to avert a collapse which risked causing further failures.

The House oversight committee, which is investigating the company's problems, confronted AIG executives with an invoice from the St Regis resort in Monarch Beach, south of Los Angeles, detailing an eight-day company event which began five days after the rescue.

"Average Americans are suffering economically," said Henry Waxman, chairman of the committee. "They are losing their jobs, their homes and their health insurance. Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

The bill shows that AIG spent $139,375 on rooms, $147,301 on "banquets", $23,380 on spa treatments and $6,939 on golf at an eight-day company event which began on September 22.

"US taxpayers will be, in effect, paying for this," said Elijah Cummings, another Democrat, who demanded to know who was responsible for the outlay. "I think that person ought to be fired."

Rates for the 325 rooms at the resort are typically upwards of $500 a night and the travel guide Fodor's gives the place a rave review, saying: "Exclusivity and indulgence carry the day here; you can even have someone unpack for you."

AIG has defended the event, saying it was to entertain freelance insurance salesmen who sold life, health and accident policies for the group's US subsidiary.

But former chief executive Robert Willumstad, who stood down as a condition of the government's bail-out, conceded that the getaway "seems very inappropriate".

"If I had been aware of it, I would have prevented it from happening," he added.

Defending their conduct in AIG's final days, Willumstad and his British-born predecessor, Martin Sullivan, blamed the company's problems on accounting rules which required it to write off billions of dollars on mortgage-related securities.

Sullivan said these rules had "unintended consequences" in making AIG's books look worse than they actually were against the backdrop of a "financial tsunami".

Carolyn Maloney, a Democrat from New York, accused the two executives of blaming accountants for AIG's difficulties when in fact they had been "wrecking a great company" by gambling on obscure derivatives. "I think you should apologise to the American people for your mismanagement," she said.

"Looking back at my time as CEO, I don't believe AIG could have done anything differently," said Willumstad. "The market seizure was an unprecedented global catastrophe."

unprecedented? really? when you start a trend towards increasingly risky speuclation or derivatives which rely on confidence and upwards trends, thus increasing your exposure-is it unlikely that if the system fails, it will bring down everyone, when everyone shares a great deal of high risk exposure?

i think not, the shock is that bankers have been so deluded in denying that such a shock could occur, gamblers in denial. unregulated markets trade on the traits of gambling men, and therefore levels of confidence, intuition, guestimates, in addition to market data. a stable market makes no one money, so there is greater incentive for speculators to incorporate some degree of variation.

all these things add up to an irrational agent network, not a fluid, mathematical system. and then to see the denial or lack of cuplability and humility by going on some jaunt on taxpayers money....what world does the people live in? they even blamed the downfall on a regulation. if you know a regulation, you work around it, it does not suprise you. they can see no blame for themselves, and do not understand public anger. how separate are the worlds of the 'haves' and 'have nots' and so much for the laissez-faire trickle down economics vaunted by reagan/friedman/thatcher et al....trickle down to whom? sure some may feed in to the economy, but one only has to look at the myriad ways clever financial bods have ensured the majority of their earnings and bonuses are minimally taxed.

the corporate world promotes efficiency, performance related pay, accountability. those who sit atop, remain above this. they take no risk (due to corporate legal structures) and reward failure.

i am, quite frankly pissed off. it's one thing doing this for a general consumer led coroporation, but ones that manage other people's savings, current account, mortgages, and pensions, it is not acceptable. i know the arguments abou t hos this swells pension funds, or offers us chepa loans to buy houses, but in the long run pension funds can make reasonable returns through less risky routes and buying a house at inflate value due to chepa loans does no one any good .

i am sure i will rant further, but seriously, i don't want to hear any more bollocks about voluntary regulation for financial markets and punitive sums for wrongdoings. it is too serious a business to be conducted on the whims who only view the aspect of profits. the cause, greed, and a culture which rewards it.