NEW YORK — American International Group Inc could get nearly $38 billion in fresh cash under a program announced by the Federal Reserve on Wednesday, as the insurer tried to fend off criticism of a lavish event held days after getting an initial $85 billion government loan.

Under the new plan, the Federal Reserve Bank of New York will take up to $37.8 billion in investment-grade, fixed-income securities from AIG in exchange for cash.

The securities were previously lent by AIG's insurance company subsidiaries to third parties. The Fed said the new program will allow the company to replenish liquidity used in settling transactions with counterparties.

AIG had drawn fire in Washington on Tuesday for spending $200,000 on hotel rooms and $23,000 on spa services at an event, just days after it got the emergency loan from the government to avoid bankruptcy in the middle of the worst credit crisis since the Great Depression.

As lawmakers grilled former top executives at a hearing, Rep. Elijah Cummings, a Maryland Democrat, said: "They were getting facials, manicures and massages, while the American people were footing the bill."

On Wednesday, AIG said the "business event," hosted by one of its subsidiaries, was for independent life insurance agents. It said the event was planned "months before" it received the loan last month, and no AIG executives from headquarters attended.

AIG's effort to correct the record on the event came after White House spokeswoman Dana Perino used the word "despicable" on Wednesday when asked about the AIG event.

"I understand why the American people would be outraged," she said at a White House briefing. "It's pretty despicable, to realize how callous somebody might be."

President George W. Bush did not intend to benefit industry titans when he approved the bailout of AIG and a wider $700 billion Wall Street rescue package, she said.

"Rewarding failure is something we have a very hard time swallowing," Perino added.

AIG said current Chief Executive Edward Liddy had written a letter to Treasury Secretary Henry Paulson to clarify the circumstances of the business event.

The company said Liddy assured Paulson that AIG now faces very different challenges, saying: "(W)e owe our employees and the American public new standards and approaches," and that the company is "re-evaluating the costs of all aspects of our operations..."

AIG said 10 employees from its subsidiary, AIG American General, attended the 100-guest event.

(Reporting by Jonathan Spicer, with additional reporting by Andy Sullivan, David Lawder and Glenn Somerville in Washington, and Juan Lagorio in new York; Editing by Tim Dobbyn)

AIG's effort to correct the record on the event came after White House spokeswoman Dana Perino used the word "despicable" on Wednesday when asked about the AIG event.

"I understand why the American people would be outraged," she said at a White House briefing. "It's pretty despicable, to realize how callous somebody might be."

President George W. Bush did not intend to benefit industry titans when he approved the bailout of AIG and a wider $700 billion Wall Street rescue package, she said.

"Rewarding failure is something we have a very hard time swallowing," Perino added.

But what no one wants to admit is that you don't plan a $400k shingdig overnight.
This party had been planned and scheduled long before AIG's insurance subsidiary brought the company down.

Do you not have the event or spend thousands canceling?

Have the event, which they did, as seems reasonable (or would be without the attendant disastrous PR.)

SUPRMAN said:

you do the right thing and cancel. or, as an agent, you don't go. hold a meeting by teleconference. simple as that.

IrresistibleB1tch said:

It wasn't a "meeting" it was an event. There may have been an agenda listing meetings but walk into one that isn't mandatory and its empty.

I don't think you cancel though. That's not helping the economy.
[Edited 10/9/08 10:32am]

SUPRMAN said:

Exactly. It is imperative that all financial institutions maintain a "business as usual" impression at the moment. Cancelling would have just added to the impression of crisis. Besides, the point of these events is that they generate business and create more money than they cost. We need that right now.

razor said:

And you need to spend almost half million dollars for rooms, food, spa, alcohol and pedicures to do this!!!!PLEASE!

Astasheiks said:

That's a call for their business. Remember, it is their customers they are spending the money on. They obviously believe they will generate significant business from this type of event and recoup the cost and more. If they do, its money well spent and they will start generating profits from which to pay back the taxpayer. Would you rather they went bust you lost all your taxpayer investement? Business has to go on...

razor said:

no, it's their salespeople they are spending the money on. these salespeople have their own motivation to generate profits - spa treatments or not.

that sort of thinking is fine and good in normal times. right now, while these companies are using the people's money, they need to be accountable. thanks to the taxpayer, they are still in business, and as far as i'm concerned, they should be kissing our feet every single day.

IrresistibleB1tch said:

So what are you suggesting? That management need to hold a poll of the public everytime they need to make a business decision? Whether you like it or not, you have to let them run their own business, with the obvious caviats that the bailout restrictions imposed. If you wish to interfere in the daily running of the business, you will simply hamstring them.

As for desisons on what is or isn't a sound business move only being ok in "normal times", I would say it is more important than ever that our financial institutions recieve support to get out there and do business, in whatever way they see as best. If we make them fearful of doing anything that may be percieved negatively by the public, the business will suffer and you will lose your taxpayer investement. The best thing to do is let them get on with it. Beleive it or not, they are not out to lose money. They will be doing everything they can to recover the business...

razor said:

no, i'm not suggesting a poll for every decision. but just like companies have to be accountable to their shareholders, with reports, etc., these companies that have accepted taxpayer bailout money now are accountable to us. and in difficult financial times, brought on in part by irresponsible business practices by these same companies, luxury junkets like these are simply not appropriate. if their profits rise and fall with the delivery of spa treatments and golf outings, then maybe their business plan is misguided.

IrresistibleB1tch said:

So in effect you are suggesting that the public decides what is or isn't a good investment for this and other companies aided by the bailout i.e. we think this is an "irresponsible junket" so you can't do it. But how does the company check with the public first? How can the public judge what is or isn't a good expenditure? What about business lunch's with cleints at expensive restaurants? Are they now disallowed also?

How does the behavior of other companies come into this? e.g. if cleints are getting entertained by non-bailout companies and putting their business there, wouldn;t you want "your company to compete and fight for that business? How can make any of these judgements from your armchair?

Whether you like it or not, such things (lunch's, games of golf, spa days (bit spurious I agree, but whatever)) grease the wheels of business. Always have done and always will. Deals get discussed and done at these events. That's why business set aside money for a corporate entertainment budget..because it makes that company money to do so.

IYou are saying that because they have some of our money, er get to decide what they do? That would be commerical suicide. No good shareholder wants to run the business. They want good managers in place to do so for them. They are the experts (despite recent events) and we as shareholders need to trust them to do their jobs. If they don't we can have them removed at the AGM etc.

My point is that you have no idea if this was a valid expenditure or not. You;re just pissed at what you see as extravagence. The only measure that matters (and the only thing we should judge them on) in their bottom line over the next few months/years. How they acheive it is up to them and they will be judged appropriately. In the meantime, we should not be trying to make decisions from afar and with no knowledge of whether something is a sound business proposition or not.

razor said:

i guess we'll have to agree to disagree. you're willing to trust these people and i'm not. either way, we as taxpayers are on the hook for their decisions.

many people share my thoughts that this was not a valid expenditure. and yes, i'm pissed.

IrresistibleB1tch said:

So in effect you are suggesting that the public decides what is or isn't a good investment for this and other companies aided by the bailout i.e. we think this is an "irresponsible junket" so you can't do it. But how does the company check with the public first? How can the public judge what is or isn't a good expenditure? What about business lunch's with cleints at expensive restaurants? Are they now disallowed also?

How does the behavior of other companies come into this? e.g. if cleints are getting entertained by non-bailout companies and putting their business there, wouldn;t you want "your company to compete and fight for that business? How can make any of these judgements from your armchair?

Whether you like it or not, such things (lunch's, games of golf, spa days (bit spurious I agree, but whatever)) grease the wheels of business. Always have done and always will. Deals get discussed and done at these events. That's why business set aside money for a corporate entertainment budget..because it makes that company money to do so.

IYou are saying that because they have some of our money, er get to decide what they do? That would be commerical suicide. No good shareholder wants to run the business. They want good managers in place to do so for them. They are the experts (despite recent events) and we as shareholders need to trust them to do their jobs. If they don't we can have them removed at the AGM etc.

My point is that you have no idea if this was a valid expenditure or not. You;re just pissed at what you see as extravagence. The only measure that matters (and the only thing we should judge them on) in their bottom line over the next few months/years. How they acheive it is up to them and they will be judged appropriately. In the meantime, we should not be trying to make decisions from afar and with no knowledge of whether something is a sound business proposition or not.