Misery Index

Less than a week after the Fed's committed $85 billion to bail out AIG, the executives of AIG insurance company headed for a week-long retreat at a resort and span, the St. Regis Resort in Monarch Beach, California.  This was revealed today by Congressional investigators.  "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," Waxmay told the House Committee on Oversight and Government Reform.

The AIG group occupied more than 60 rooms.  AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including $139,375.30 on rooms, $147,301.71 for "banquets," and $1,488 at the resort's Vogue Salon, which offers manicures, pedicures and hairstyling.  The group spend $6,939.09 on golf, $2,949 for gratuities, $5,016.32 at the StoneHill Tavern and $3,064.71 for in-room dining and the lobby lounge.

The group booked the restort's 3,100-square-foot Presidential Suite for $1,600 a night for five nights, a discount from the standard rate of $3,200 a night, a hotel document released by the committee showed.  It also paid $1,075 in "no-show fees." 

A more detailed listed can he found on the Oversight House HERE. (PDF)

"Have you heard of anything more outrageous?" said Rep. Elijah Cummings (D-MD), who plans to seek an investigation of the spending.  "On the 22nd of September to the 30th, they spent almost 400,000-something at a resort having manicures and playing golf," said Congressman Elijah Cummings (D-MD).  "They're getting their pedicures and their manicures and the American people are paying for that," he added.  ""hey spent $25,000 on 'leisure dining.' I don't know what that is," Cummings questioned.  Rep. Jackie Speier (D-CA) answered his question with, "That's bars."

"It is very upsetting, because the American people are giving and say for example gave AIG some 85 billion dollars - 85 billion to bail them out," Cummings told CNN.  "That is the kind of thing that upset my constituents, many of whom are losing their houses and losing money in the 401(k)s," he said.  "They are upset and rightfully so."

"Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said this morning as his committee continued its investigation of Wall Street and its CEOs.  "Well, average Americans are suffering economically.  They're losing their jobs, their homes and their health insurance," Waxman said.  "We'll as whether any of this makes sense."

"This is unbridled greed," said Congress Mark Souder (R-IN), "it's an insensitivity to how people are spending our dollars."

Congressman Waxman also said there is evidence that former CEO and Chairman of the Board Willumstad and former AIG CEO Sullivan changed the bonus schedules once the company began to post losses, so that executives under the "Senior Partners Plan" would continue to make multi-million dollar salaries.  Sullivan testified that the company's bonus plan was amended to exclude unrealized losses, in effect protecting executive bonuses from millions of dollars in losses. 

WHAT DO THE EXECS HAVE TO SAY ABOUT AIG FAILING?

So what do Willumstad and Sullivan have to say for themselves?  The ex-CEOs themselves blamed accounting rules and market conditions for the problems that led to the crisis stating the accounting rules forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.  In testimony for the committee hearing, ex-CEOs Willumstad and Sullivan said the rules forced AIG to take billions in writedowns and led to a downward spiral that led to the government action. 

Waxman however, put the blame on AIG's troubles squarely on its past and present leaders.  "In each case, the companies and their executives grew rich by taking an excessive risk," said Waxman.  "In each case, the companies collapsed when these risks turned bad.  And in each case, their executives are walking away with millions of dollars while taxpayers are stuck with billions of dollars in costs."

In particular, Waxman singled out AIG's financial products division, headed by Joseph Cassano.  "This (bailout) was a direct result of the mistakes made by Mr. Cassano," Waxman said, blaming him for putting AIG in a situation where it had a $60 billion debt without the money to pay it.  "Yet even today, he remains on the company payroll, receiving $1 million a month."

"Mr. Sullivan and the other top executives should have had their bonuses slashed due to poor performance," Waxman said.  Sullivan said it was "substantially reduced" by the board in 2007 due to poor performance.  Sullivan was given a $15 million "golden parachute" payment after being replaced as CEO in June.

AS FOR THE RETREAT?

When questioned about the retreat, Willumstad  replied that he was unaware of the retreat and that it "seems very inappropriate."  Of note, Willumstad had refused his $22 million in severance pay.  In a letter, Willumstad said he did not have the time to launch his restructuring plan and that he preferred "not to receive severance payments while shareholders and employees have lost considerable value in their AIG shares."

Sullivan replied that he was not leading the company at the time, adding, "If I had seen bills like that, if I was CEO, I can assure you I would have been asking questions."

But AIG spokesman Nick Ashooh said that the St. Regis retreat had been "completely mischaracterized." He said it was an event to reward top-performing sales agents, and it was not for executives.  "This is very standard in the industry to reward the top 5 to 10 percent of top sellers," he said.  "In the insurance industry, it's as basic as salary as a means to reward independent agents who sell the company's products."  "They're playing it as AIG executives running off to California while all this was going on," said Ashooh, adding that the event was scheduled a year ago.  "It wasn't AIG executives running off for a lavish weekend."

TIMELINE OF CEOs FOR AIG

Maurice "Hank" Greenberg, 1970 - 2005
Martin Sullivan, 2005 -  June,  2008
Robert Willumstad - June, 2008 - September, 2008

INFORMATION SOURCES

• ABC News
• AFP
• CNN Money
• CNN Money
• CNN Money
• Forbes
• MSNBC
• AZ Central
• The Hill

PICTURE SOURCE

• New York Times

A bill presented to parliament authorizes the financial supervisory authority to take control of commercial banks' assets and appoint boards, Haarde said.  It also allows the state-backed Housing Financing Fund to take over banks' mortgage operations.  By doing this, the government takes over housing loans held by the banks and puts them into a government housing fund, in an effort to help thousands of islanders who face the loss of their homes.

"I would like to defuse all doubts that deposits by Icelanders and private pension savings in all Icelandic banks are not secrure," Haarde said.  "No-one need be in any doubt about that."  He didn't mention deposits held at Icelandic banks' foreign subsidiaries.

According to Standard & Poor's, Haarde's comments implied that depositors and creditors at foreign units of Icelandic banks "must rely on the financial resources of the overseas subsidiaries themselves."

"The interests of the nation are greater than the interests of the individual banks," Haarde said.  "We in the government are only acting with the interests of the nation in mind, even if it means that harsh measures have to be taken against those with a vested interest.  When a situation like this comes up the shareholders suffer damage, in this situation it is to be expected that some lenders' claims will not be met."

Haarde also stated, "We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankrputcy."

His government aims to ensure that deposits at Kaupthing Bank hf and Landsbanki Island hf are protected from bank debts that have spiraled to about 12 times the size of the island's economy.  "It is too risky for the Icelandic nation as a whole to secure a lifeline for the banks," Haarde said.  "The danger is real that the Icelandic economy would be sucked, along with the banks, under the waves and the nation would become bankrupt."

The government last week took a 75 percent stake in Glitnir Bank after the third-biggest lender failed to secure funding. 

On Tuesday, Iceland's market authority said it would take control of Landsbankinn.  "Based on new legislation, the Icelandic Financial Supervisory Authority (IFSA) proceeds to take control of Landsbankinn to ensure continued commercial bank operations in Iceland," the authority said in a statement.

Landsbankinn owns an Internet savings bank called "Icesave".  British savers have been blocked from withdrawing funds from Icesave, after Iceland's financial regulator took control of the country's second largest bank yet the Netherlands Icesave webpage states nothing of the sort.  The Icelandic government has dismissed the bank's board and put the institution into receivership.  Confirmation on the move came from Iceland's banking minister this morning, as the Icesave bank, controlled by Landsbanki, said that 300,000 British savers with the bank would not be allowed to withdraw their money.  The banking minister also confirmed that the bank where British savers have £4.5 billion of funds (USD$7.8 billion), would be taken over by the Icelandic Financial Supervisory Authority (IFSA), according to the emergency banking legislation that was passed last night.  "Domestic deposits are fully guaranteed, as declared by the government.  Landsbanki's domestic branches, call centers, cash machines and internet operations will be open for business as usual."  According to the Icelandic central bank, Russia would provide a loan of 4 billion euros ($5.44 billion) to finance the collapsing bank.  The suspension of non-Icelandic accounts will remain in place until further notice.

Kaupthing Bank, which operatives in 13 countries, foreign assets make up about 90 percent of its holdings, while the central bank's foreign reserves were 308 billion krona in August, making any bailout hard to finance.  Something interesting to note about Kaupthing Bank, is that in 2000 they began operations in the US under the name of Kaupthing New York Inc.  The company website states "The company focuses on securities brokerage.  Brokerage of shares and bonds takes place through the subsidiary of Kaupthing Securities."  They stated today, October 7, that they have not been approached by authorities over any intervention, adding it had received a 500 million euro ($679.5 million) from the central bank.

Outside of Reykjavik's Hofdahollin car showroom, looking a little rumpled for men trying to sell new and used cars for £35,000 (US $60,800+) and up, owner Runar Olafsson and his top salesman are sharing a Marlboro.  They are not expecting any customers today.  "A few years ago we couldn't get enough top-end cars and we started importing them.  We were selling 120, 140 a month.  But it turned around so fast," says Olafsson.  "It's so dramatic, just in one month.  We have already seen two dealers go down."

"Customers would come in and we would apply for credit online for them, a 100 percent loan, and they can drive away in their new Range Rover.  It took ten minutes, it was easy.  But 60 to 70 percent of those loans were in foreign currency, Japanese yen or Swiss francs, and they have gone up 90 percent as the krona burns.  A car worth 5 million krona (USD$46,607) now has a 9 million (USD$83,892) loan on it; how are people going to make those payments?"

Foreign currency loans are a problem for homeowners, too.  "Loans have been very cheap, house prices rose and there was a lot of good-quality homebuilding.  But the building has halted, nothing is being finished, nothing is selling.  The interest rates are staggering.  What people are doing right now is swapping houses if they want to go bigger or smaller.  That is what is keeping us afloat," says real estate agent Ingolfur Gissurarson. 

SOURCES:

• Bloomberg
• Times Online
• Reuters
• RTE Business
• New York Times
• Associated Press
• International Herald Tribune
• Bloomberg
• Reuters
• Reuters

Officers went into the gated community, and approached 20644 Como Lane.  Police then entered the large, 2,800-square-foot modern home in the San Fernando Valley neighborhood of Porter Ranch, called Sorrento Pointe set in the foothills of the Santa Susana Mountains about 23 miles northwest of LA,  found the mother-in-law, Indra Ramashesham, 69, shot to death in bed downstairs, he said. 

The AP report states that the other bodies were found throughout the house but not in bed.  A Straits Times article reports that the 19-year-old son, Krishna Rajaram, a sophomore at UCLA majoring in business economics, was found upstairs dead in bed in the master bedroom.  The wife, Subasri, 39, was found in another room, also apparently shot while sleeping, Moore said.  In an adjoining room, a 12-year-old son, Ganesha, was dead on the floor, and his 7-year-old brother, Arjuna, was dead in bed.  The father's body was found there with a handgun "in his grasp", More said.  The father, Krishana Rajaram,  was 45.

Coroner's assistant chief Ed Winter said the family was from India, and the mother-in-law was an Indian national, but he did not know the status of the others.  "I think they are legal residents," he said.  Winter also stated the victims were shot multiple times.  All had been shot in the head.

Moore stated, the deaths occurred sometime after 6 p.m. Saturday evening,  Moore said.

A handgun that had been bought Sept. 16 was found near the father's body, Moore said.  The father left two suicide notes - one for police and one for friends and relatives - and a will.  "This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair, somehow working his way into believing this to be an acceptable exit," said Moore.

The man wrote in his suicide letter that he felt he had two options - to just kill himself or to kill himself and his family - and he decided the second option was more honorable, Moore said.  "The source of it appears to be a financial state, a crisis if you will, that this man become embroiled in that has unfolded over the past weeks," Moore said.  In the suicide letters, "he attests to some financial difficulties, takes responsibility for the taking of the lives of his family members and himself as a result of those financial difficulties," Moore said.  "We believe that he has become despondent recently over financial dealings and the financial situation of his household."  Moore did not specify what financial trouble the man had been in.  He noted that the family did not own the home.

The landlords, another Indian couple, said that the family paid their rent on time and that there were no indications of trouble.

The man had no record of mental disabilities or contacts with mental health professionals in Los Angeles County, Moore said.

Rajaram should have been sitting fairly well, financially.  The father had a master's of business administration in finance, formerly worked for PricewaterhouseCoopers and Sony Pictures, but had been unemployed for several months, Moore said.

PricewaterhouseCoopers spokesman Steven Silber said Karthik Rajaram last worked for the company in 1999.  "This is a terrible tragedy, about which we are very saddened.  However, Mr. Rajaram has not worked for PWC for nearly a decade, so it would be inappropriate for us to comment further," Siber said.

Sony Pictures Entertainment spokesman Steve Elzer did not immediately return a call seeking comment.

Investigators have determined that Rajaram was at least the part-owner of a financial holding company,  Moore said.  He is listed as a co-manager of a corporation called SKGL, which is incorporated in Nevada, according to state records.   He formed the corporation for his family's assets and used his family members' initials to form the name, said Las Vegas attorney Christopher R. Grobl.   Grobl did not know what sort of business SKGL was or why Rajaram incorporated in Nevada.  The business was incorporated in 1999 and renewed its annual license in December 2007.

The LA Times reported that Rajaram was a financial manager who once made more than $1.2 million in a London-based venture fund.  A 2001 article in The Daily Telegraph of London, under the headline "Bust, but big bucks for the big boys," called Rajaram a "winner" in a deal for NanoUniverse, a Los Angeles- and London-based venture fun taken public on the London Stock Exchange.  For a 12,500-pound investment, Rajaram, one of the company's founders, received 875,000 pounds - or about $1.2 million in 2001 dollars - after a voluntary liquidation, the newspaper reported.

In 2003 and 2004, Rajaram worked for Greg Robinson, an entrepreneur and founder of several companies, at Azur Partners LLC, a management consulting agency.  Robinson said he was forced to fire Rajaram becuase "his life wasn't moving in the right direction."  "He had some behavioral problems," Robinson said.  "He wasn't reliable... He was not an emotionally stable person.  It was a real problem and would affect any business he was involved in."  The two had also worked together in the Century City office of PWC and Robinson recalled Rajaram as being "a very smart guy," who believed posted a perfect score on his business school entrance exam.  Although Karns and her husband said they liked Karthik  and were stunned by the news, they said he was "very high-strung, very intense."  "The man was never relaxed," Sue Karns said.

Rajaram sold their Northridge house in 2006, a calculated decision even though his wife, did not want to move, their former neighbors said.  He sold the house for $750,000, making a sizeable profit on a home the couple purchased in 1997 for $274,000.  "The market was going down and he wanted to get out before the bottom dropped out," Sue Karns a previous-neighbor said.  "I talked to him last December and he said, 'I feel I did a good thing by selling when I did.'"

It is unclear how Rajaram invested the cash since then and how he lost it. 

Neighbors in the Northridge neighborhood where the family previously lived said they were well-liked and enjoyed entertaining guests.  Except for one night when residents heard a man screaming for hours, the family seemed content for the nine years they lived there.  "He loved those kids more than any man I've seen love his sons," said next-door neighbor Sue Karns.

In the Porter Ranch neighborhood, next-door neighbor Kinda Almukaddem said she had rarely spoken to the family since they moved in a couple of years ago.  But in the last two weeks, Rajaram visited her twice asking whether she would be home this past weekend.  He urged her to keep her side windows shut because he had heard of burglaries in the area.  She stated he seemed nervous - shaking, packing and taking notes on a notepad as he spoke to her.  "He noticed my side windows were open, the side that my house shares with him," she said.  "Now, come to think of it, I think he was trying to have me close my windows on that side so I wouldn't hear anything."

In their current neighborhood, Ryan Ransdell, who lives across the street, said the house had been occupied by the family for about a year.  "It's very quiet here, " Ransdell said.  "That's what's so shocking about this... You'd think someone would have heart it.  You can hear a car door shut at night." Ransdell said he didn't hear any gunshots on Saturday night.   "They didn't socialize too much," he said.  "They kept pretty much to themselves." 

SOURCES:
AP
Monterey County - The Herald
Straits Times
Examiner
LA Times
Picture Source - LA TIMES

The following cities, are those who show a -2.0% over the past year in unemployment levels.  I originally had planned on doing 1.5% and above however, that itself would have been approximately 90% of the entire Regional Report.

SOURCES:

• http://www.bls.gov/news.release/metro.t01.htm