Ever since Uncle Sam tossed American International Group a life preserver after the company nearly drowned our economy in reckless credit default swaps, Congress and the consumer press have been hammering AIG for some pretty ungrateful behavior. One major newspaper went so far as to suggest that AIG really stands for “arrogance, insensitivity and gall.” Are the critics right? Unfortunately, I think so, for mistakenly thinking AIG could continue to conduct business as usual in this post-subprime world.

The AIG bashing began when some pretty tone-deaf missteps were cited following the $122 billion-plus in loans granted by the federal government to keep the parent company afloat long enough to sell assets and pay off its debt, all because of insane overexposure to subprime mortgage-based credit defaults by one of its subsidiaries.

New York Newsday, in an Oct. 20 editorial headlined “AIG Needs Attitude Fix,” blasted the company for its post-bailout actions, citing numerous examples of chutzpah.

Noting that “it's been a little over a month since insurance industry giant American International Group went from Wall Street hotshot to a majority-owned subsidiary of the American taxpayer,” Newsday suggested that “you might think by now that all those smart people at AIG would have adjusted to the new boss.”

The newspaper lambasted AIG executives for continuing to “lavish money on themselves, as though they had actually succeeded in business,” alluding to huge golden parachute bonuses given to the firm's former CEO, Martin Sullivan, as well as the head of the Financial Products division, Joseph Cassano, who got the company into this coloassal mess in the first place.

“If that's the reward for failure, it's no wonder that AIG and its ilk need saving,” Newsday wrote.

The paper also skewered AIG's life subsidiary for treating top producers to a $440,000-plus “spa outing” in California just days after the rescue.

“Worse still,” Newsday lamented, “the company is paying lobbyists millions to head off new regulation of the mortgage industry. Yes, that's right: AIG is fighting the very effort to prevent a future crisis. Why? Is it because the last time was so enriching for insurance executives?”

“Talk about an outrageous sense of entitlement,” Newsday huffed.

“It seems like AIG really stands for arrogance, insensitivity and gall,” Newsday concluded.

“Fortunately,” Newsday added, New York Attorney General Andrew Cuomo is “on the case,” pushing to recover “unreasonable expenditures.”

There's no doubt AIG is being beaten like a punching bag, but given the fact that its short-sighted credit default swapping nearly brought down the company–and threatened to take the entire economy down with it–the shots are well-deserved.

The company's new CEO, Ed Liddy, made a smart move to diffuse this explosive situation by meeting with Attorney General Cuomo to vow cooperation on the rectifying these problems, rather than arguing a hopeless, defenseless case.

Recognizing that standard operating procedures no longer apply, he announced the cancellation of 160 additional conferences and events, and said he would seek to recover more than $40 million in payments to Mr.Sullivan and Mr. Cassano.

Were very grateful for the guidance of Attorney General Cuomo,” Mr. Liddy said in a joint statement with the AG's office. “We know that the attorney general shares our commitment to rebuilding AIGs business and paying back the U.S. taxpayer, and we will address the attorney generals concerns expeditiously.

That's more like it.

AIG has bigger problems than PR right now, as it struggles to get top dollar for its assets even though buyers know the company needs to move relatively quickly to raise cash, and when the economic turmoil–partially started by AIG's poor judgment–makes capital harder to raise, and just about every property on the market undervalued.

But Mr. Liddy's proactive moves were a good start.

Special Reports /

Does AIG Need An 'Attitude Fix'?

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