Pauly: Better manners should be prerequisite for bailed-out firm execs

David Pauly

08/15/2010

Executives of General Motors Co. seem ashamed that U.S. taxpayers saved their jobs.
“We don’t like this label of Government Motors,” CEO Edward Whitacre moaned last week. “It turns us off.”
Folks at American International Group Inc., whose livelihoods were spared by an even larger bailout than GM’s, also have a beef with the government.
AIG, where CEO Robert Benmosche has complained regularly about government interference, said in an Aug. 6 filing with the Securities and Exchange Commission that new U.S. financial rules may force the insurance company to raise capital and restrict the bets it makes in the marketplace.
How can that be bad? AIG’s trades in credit default swaps without sufficient collateral helped ruin the world economy.
Some CEOs just don’t know when to keep their mouths shut. Candid talk should be encouraged. From GM and AIG, complaints about the government are just plain rude.
Whitacre said a week ago that if he had his druthers, the coming public offering of GM stock would include the government’s entire 61 percent stake rather than just a portion of it.
“We want the government out, period,” Whitacre said. That’s out-and-out ungrateful, considering that the government’s shares stemmed from $42.2 billion of loans the U.S. floated GM through bankruptcy. Whitacre said today he will step down as CEO on Sept. 1. He will remain as chairman.
Benmosche, you’ll remember, threatened to quit as CEO because Kenneth Feinberg, the former government paymaster, cut the income of some AIG executives. He also said New York Attorney General Andrew Cuomo was “unbelievably wrong” for publicizing retention bonuses for AIG employees responsible for unbelievably wrong credit default swaps. AIG has turned over almost 80 percent of its stock to the U.S. as part of the bailout. It also still owes the taxpayers about $73 billion. The government had committed as much as $182.3 billion to AIG.
Whitacre and Benmosche weren’t themselves saved by the bailouts. Quite the contrary, they were both called out of retirement to take over the beleaguered companies. Whitacre, 68, had been head of AT&T Inc. Benmosche, 66, once ran MetLife Inc.
Hired as GM’s chairman last year, Whitacre quickly ousted CEO Fritz Henderson and took the reins himself. While Whitacre said the notion of Government Motors turns off customers as well as employees, statistics tell another story. The company’s light-vehicle sales in the first seven months of the year rose 13 percent over those of the same period in 2009.
Benmosche struggles to sell AIG assets and repay its government debt. He agreed to sell American Life Insurance Co. to MetLife for $15.5 billion, but the planned sale of AIG’s Asian affiliate, AIA Group Ltd., to Prudential Plc for $35.5 billion fell through.
The bailout of AIG was necessary. If the company had defaulted, it might have triggered a series of defaults making the recent recession even worse than it was. Rescuing General Motors wasn’t as necessary but as time passes it doesn’t seemed to have hurt.
In any case, it’s bad form for the rescued to complain about their rescuers. Before Whitacre and Benmosche speak out again, they should consult Miss Manners. •

David Pauly is a columnist for Bloomberg News.

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