My washing machine broke, which is creating a crisis in my household. People cannot find clean socks and tempers are rising.
Today, I called Maytag (owned by Whirlpool) 4 times to try and get service for the high-end machine we purchased in December of 2016.
You may think this tale has no relevance for AIG but you will be surprised.
I started by calling Maytag this morning since the washer is under warranty. At first I was told I would have to wait until next Wednesday.
I said we couldn't wait a week and a half to get my washer fixed.
The Maytag rep gave me the number of their 3 contractors in my region (in a valley of 4,500,000 people).
One of the contractors said they could come out this Friday if I called Maytag to get a work order.
That is when the problems really started. I spent 2 hours making 4 phone calls to Maytag. At the end of the day I had no service appointment and had learned from their service contractor that, allegedly, Maytag/Whirlpool representatives routinely lie to customers about service appointments.
I wouldn't have believed such lying would occur except it happened to me twice today when Maytag/Whirlpool service representatives assured me they had sent a service order to a contractor who told them they wouldn't service my washer.
My experience proved the point that these Maytag-Whirlpool service representatives have a very odd view of service that entails customer deception.
But why wouldn't their contractor service my washer. Well, it turns out that my warranty is an AIG warranty.
And the contractor doesn't like doing business with AIG.
Now why would that be? Why wouldn't the contractor want to service AIG warranties?
I have this feeling that perhaps the reason the contractor doesn't like doing business with AIG is because the company is notorious for not paying its debts, as I've documented extensively in my book on crisis communications published by Palgrave here.
I would like to know why AIG is paying for the warranty costs of a washer that is only months old?
And I would like to know why AIG is still in business after its notorious business practices, which played a significant role in producing the financial crisis.
The 2007-2008 financial crisis was precipitated by a torrential cascade of defaults among the trillions of derivatives based on a comparatively small pool of underlying debt-based assets. Credit default swaps (CDS) sold by AIG were a primary derivative involved in the crisis. CDS - the credit default swaps - basically insured the collateralized mortgage-backed derivatives called CDOs.
Comments on AIG excerpted from my book, Crisis Communication, Liberal Democracy and Ecological Sustainability (Lexington, 2016)
[during the crisis] The Federal Reserve Bank authorized the Federal Reserve Bank of New York to lend up to $85 billion to American Insurance General (AIG), which lacked the reserves for payouts linked to its CDS sales. Regulators designated the firm as posing a systemic risk because of its leading role in creating the CDS market, valued in 2008 at $45.5 trillion with almost no collateral.
AIG was too big to fail.[i]
Yet, the agents who held the CDS betting the mortgage defaults would collapse the CDO market were the same agents who created those CDOs.[ii] For example, the Federal Reserve’s lifeline allowed AIG to pay out approximately $13 billion to Goldman Sachs for AIG insured CDS it held for mortgage-backed derivatives of the type Goldman Sachs helped create.[iii]
What was remarkable about the Federal Reserve’s conditions was that AIG’s counter parties were not required to take a loss or “haircut” on the swap payout, an unusual outcome for insolvent firms.[iv] The U.S. had contributed $163 billion to AIG to fund CDS payouts by March 2, 2009.
The U.S. Government launched the $700 billion Troubled Asset Relief Program (TARP) in 2008, which provided funds to insolvent and distressed banks and financial corporations, including AIG and Fannie Mae.[v]
The Federal Reserve Bank approved conversion of Goldman Sachs and Morgan Stanley into bank holding companies, rendering them eligible to borrow directly from the Federal Reserve, benefiting from its lower interest rate and making it eligible for TARP.[vi]
TARP was criticized for making government funds available to financial and insurance institutions that were not part of the Federal Deposit Insurance Corporation, such as AIG and Goldman Sachs.
Moreover, as explained by economist Dean Baker, the general public was strongly against TARP because it essentially allowed the Treasury to purchase up to $700 billion in bad assets with little transparency or oversight.[vii] Baker explains that TARP did not allow bankruptcy judges to rewrite mortgage terms and it precluded limits on executive compensation in banks receiving public funds. The implications of these exclusions would soon be made clear...
[i] Mary Williams Walsh, “AIG Lists Banks it Paid with U.S. Bailout Funds," The New York Times, March 16, 2009, accessed March 17, 2009, http://www.nytimes.com/2009/03/16/business/16rescue.html.
[ii] Nomi Prins, It Takes a Pillage: An Epic Tale of Power, Deceit and Untold Trillions (Hoboken, NJ: John Wiley and Sons, 2011), 67.
[iii] Dylan Ratigan “Goldman Sachs' Black Magic, Here's How They Did It,” The Huffington Post October 16, 2009, accessed October 17, 2009, http://www.huffingtonpost.com/dylan-ratigan/goldman-sachs-black-magic_b_324095.html.
[iv] Richard Teitelbaum and Hugh Son, “New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers,” Bloomberg October 27, 2009, accessed October 28, 2009 http://www.bloomberg.com/apps/news?pid=20601109&sid=a7T5HaOgYHpE.
[v] Timothy Lavin, “The Feds Cash Machine,” The Atlantic, May, 2009.
[vi] Irwin and Appelbaum, “Giant Investment Banks."
[vii] Dean Baker, Plunder and Blunder: The Rise and Fall of the Bubble Economy (Sausalito, CA: PoliPoint Press, 2008), 114-115.