News detail

Media’s knives out

24/03/2009

Scott Vincent

THE SCANDAL of the AIG bonus payments is continuing to dominate international news pages and the wider political issues surrounding the company’s bailout are showing no sign of falling off the agenda of media commentators on both sides of the Atlantic.

The ferocious backlash to the planned bonus payments has been applauded by those writing on the subject, with little sympathy for the plight of the financial services company once lauded as the world’s largest insurer. “Hats off to US legislators for taking decisive action to deal with AIG’s ridiculous $165m bonus pot,” wrote Tracey Boles in the UK’s Sunday Express. Leaving AIG’s bonuses unchecked after a $180bn bailout would have been insanity, she said.

“Washington is in the process of passing a law that will slap a 90% tax on the bonuses of anyone who works for an institution bailed out by the US government,” Boles continued. “I challenge UK ministers to prove all their talk is not just hot air by following the example of the US.”

While the Express placed its comment on AIG within the business section, the issue was deemed significant enough to lead the Observer’s comment and debate section. “Obama should beware the growing anger in America,” ran the headline, with columnist Michael Crowley arguing that the “AIG fiasco is likely to leave the Congress gun-shy about supporting more assistance to Wall Street”.

An excitable news media and opportunistic members of Congress spent most of last week in a frenzy of assigning blame and stoking public outrage, Crowley said, despite the fact that “plans to award the bonuses have been known for months”.

The bonus fury, Crowley said, “is about much more than a gross payday for underserving cretins. In the near term it has created a huge and unwelcome distraction for political leaders desparately trying to manage the financial crisis. In the medium term, it threatens to undermine [Barack] Obama’s future flexibility to save the US economy. Above all, it has fuelled a rising populist tide that threatens to swamp Obama’s presidency altogether”.

Over in the US, AIG is not surprisingly receiving a far harsher battering in the press. According to the Los Angeles Times, “the deluge of bad publicity, which AIG’s regulatory filings delicately call ‘headline attention’, is gnawing at sales in the company’s core insurance businesses and may be making it harder to get a good price for some of the units AIG is trying to sell to raise cash”.

The bonus scandal has led the paper to suggest that it is “likely that the formerly well-regarded AIG brand name will one day disappear from the marketplace, even if the company itself survives”.

AIG’s chief executive, Edward Liddy, who must be seriously questioning his decision to come out of retirement to take the helm at the ailing financial services group last September, suggested as much in his presentation to Congress last week.

Meanwhile, the Wall Street Journal (WSJ) began this week by highlighting the competitive advantages that rival companies claim AIG has received as a result of its $180bn bailout. “In the six months since the government stepped in, AIG has slashed insurance prices – by more than 30% in some cases – to fend off rivals and to keep or win contracts, according to public documents, insurance buyers, executives and others in the industry,” the WSJ reported. “This tack has helped AIG insure customers ranging from the US Olympic Committee and an Arizona airport to an Illinois nursing home and a Florida town government.”

The complaints from AIG’s competitors, the paper argued, have added to “the reservoir of resentment building over government decisions to intervene in the private sector in the name of public good. Some insurance executives who managed their businesses prudently object to having to compete with government-supported AIG”.

The backlash is unlikely to die down in the coming weeks – images of protesters gathering outside AIG offices (pictured) indicate the strength of public feeling. To what extent this feeling translates into a hit to AIG’s insurance business will become clearer next month when US corporate insurance buyers meet in Orlando for the annual Risk and Insurance Management Society conference, an event where AIG has traditionally been dominant but at which many rivals this year are expected to make a play for the ailing insurer’s clients.