Friday, October 10, 2008

AIG - Bail Out - Fuzzy Thinking Explained

In our locksmith business we keep track of how much comes in and how much goes out; call it an old fashioned principle which permits us to understand whether or not the business is making money. I actually record the cost of goods sold on each work order; making it easier at the end of the month when entering the sales figures into the computer. We’ve been doing this for quite some time and found it helpful; especially at the end of the year when it comes time to square up with the IRS and the State Comptroller (the sales tax folks).

During any given week I already know if the amount coming in matches up to the average known expenses; I call it minimum budget. The old saying, “Some days chicken, some days feathers”, fits our roller coaster of recorded sales; however, these figures tend to average out in the long run.

I try not to waste much money eating out for lunch; but, when business is good I’ll have extra spending money for things like a roast beef sandwich at Lenny’s. Lucy and I know how much money is available for our Saturday night date; are we having steak or hamburger? We live within our means and consider ourselves blessed for having enough and then some.

We set money aside for a special extended weekend; usually looking at the calendar to coincide with locksmith convention where we can see new products for a few minutes and spend the rest of the time relaxing under the umbrella of “business expense”. Knowing how much money we have available makes all this possible.

I read where the folks at AIG spent a considerable chunk of change, around $440,000 ( nearly half a million dollars ), rewarding some of their top producers at a fancy retreat. They didn’t stay at the Holiday Inn or Motel 6; no, they required one of the best and most expensive, the St. Regis Monarch beach resort in Dana Point, California.

AIG issued a statement saying that “This type of gathering is standard practice in the industry and was planned a year advance of the Federal Reserve's loan to AIG. We recognize, however, that even activities that have long been considered standard practice may be perceived negatively. As a result, we are reevaluating various aspects of our operations in light of the new times in which we operate.”

I recognize how different businesses operate and how closing a deal on the golf course makes perfect sense, or making sure the client gets a nice juicy steak and a couple of extra Margaritas might grease the wheels on the way to productivity; however, none of this goes down too easily now that I’m the one picking up the tab; remember me, I’m John Q. Taxpayer; remember the bail out? I’m glad they’re reevaluating aspects of their operations in light of the new times; a fancy way of saying we had a great time, thanks for the ride.

If this was a telegram, “To: Step Children, We’ll try to be more discreet (stop) It runs against our up bringing (stop) Don’t expect too much too soon (stop) Send more money (never stop).”

AIG, along with some other huge corporate entities ( some loan sharking firms, Fannie and Freddie comes to mind ) can’t seem to manage the amount of money coming in with the amount of money going out. The top executives all require the best in clothing, the fanciest restaurants, exclusive golf courses and the list is endless when it comes to “the best life has to offer”. They live in houses which are featured in the Life Styles of the Rich and Shameless, have country vacation houses and get away condos and never stand in line to board since they all get to use the corporate jet. Is this class envy or just a complaint from Joe Lunchbox who now gets to pick up the tab?

Maybe I’m suffering from fuzzy thinking, maybe not; but how come some among us, those on shaky ground for quite some time, unable to determine whether or not their company makes a profit due to inept or flat out dishonest bookkeeping practices, how come these folks are living like kings while the rest of us are happy to have an extra ten bucks to splurge at Lenny’s Sandwich Shop every now and again? Why is that?

No comments: