Sunday, October 12, 2008

Pricipitous Action - not necesarily correct.

We have something like a "Perfect Storm" going here. The gov't is taking unprecedented action at a pace never seen before. Is it the right thing to do? Are all arguments being presented? are all stake holders being given consideration? or are we taking precipitous actions due to panic?

Here is a letter written to the Wall Street Journal by one of our readers that highlights some key pints I'll "betcha" (thanks to Sarha Pallin for making that terminology cool) most people haven't considered.

Subject: Your Editorial "Free AIG"

Dear Editor:

Thank you for your editorial recommending that we "Free AIG". I totallly agree. As a shareholder of AIG I was shocked at the "gun at your head" conduct of Mr Paulson and the fact that this 11th hour one sided negotiation was conducted with absolutely NO REGARD for shareholders. In retrospect what massive meltdown was so imminent that shareholders should give up 80% of the stock and subject the company to a debt transaction under such onerous conditions. I believe this transaction was at least unethical and possibly illegal. Also there is an inside story on this that most likely is tied in with AIG's massive portfolio of Credit Default Swaps. The possibility that some of these might flow back to Goldman Sachs and other protected elites is not good news for Mr Paulson if true.

The final insult to shareholders stacked on top of the outrageous conduct of the US government is that the current slate of AIG Directors remain directors. How is it possible that these people have not been frog walked to the nearest jail let along being given responsibility for selling the henhouse they were supposed to be protecting. The corporate governance melt down by the Directors is breathtaking in it's own right and I look forward to the WSJ's continuing coverage of the people responsible for this financial trainwreck that has laid to waste a once great company to the tune of $60 billion of market value.

As I ponder what else could have been done, I come to the conclusion that management should have threatened to file for bankruptcy. No doubt this filing was what the FEDS did not want and thus would have allowed AIG management to negotiate a better deal. Perhaps our present ownership of 20% is the EQUITABLE ownership that the government should have presently rather than their current 80% stake.

This transaction smells bad all the way around. I am hopeful that Hank Greenberg might lead a charge to take back what is rightfully ours.

Best Regards

Thomas Delaney
Avondale Estates Georgia

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