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Ellyn
Joined: 16 Jul 2000
Posts: 4406
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Bailed-Out AIG Forcing Poor to Choose..Running Water or Food
 Sat Nov 28, 2009 4:10 am
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http://www.alternet.org/workplace/144203/bailed-out_aig_forcing_poor_to_choose_between_running_water_and_food?page=2
Bailed-Out AIG Forcing Poor to Choose Between Running Water and Food
Thursday 26 November 2009
by: Yasha Levine | AlterNet
Thanks to AIG, some of the poorest residents of rural Kentucky learned you can always be made poorer by corporate villains.
What are we getting in return for the bailout? So far, predatory credit card rates, exorbitant bank fees and obscene Wall Street bonuses. But we're being robbed in other, sneakier ways, too. It seems that taxpayers in the poorest, most vulnerable parts of the county are getting plundered by the same institutions they bailed out. One example is AIG's underhanded fleecing of residents of rural Kentucky.
Middlesboro and Clinton are two tiny, impoverished towns in southern Kentucky with a combined population of 12,000. In 2008, Middlesboro's per capita income was $13,189 a year, only a few hundred dollars more than the average worker earned in third-world Mexico. That is if they were lucky to even get a job. Real unemployment hovers somewhere around 30%, and the state is so broke that half the people eligible for unemployment benefits can't receive them. Life may be tough and most people live in poverty, but that doesn't mean they can't be made a little poorer. That's the lesson locals learned after bailed-out insurance villain AIG took over their water utility and instantly raised rates to squeeze an extra $1 million in profits out of its new customers, forcing some to consider choosing between running water and food.
The towns are so rural, their residents have yet to be touched by the Internet revolution. Forget comment sections or forum threads. In Clinton, you have to track down actual hand-written notes that residents filed with city hall to read their complaints about the rate increase. Luckily, city officials were nice enough to scan some of them.
Here's one, dated August 8, 2009:
My husband and I are on a fixed income and with everything going up in price this would be very a very large burden on us as well as most of the citizens of Clinton. Our town is mostly of people like us and this would be such a hardship for us. A 50.8% raise is outrageous on anything. Please do not let this happen. It would mean the difference in bringing buying food and medicine or paying a high water bill to make someone else's life easier.
Here is how the AIG takeover went down: In 2005, flush with cash from its shady dealings in the mortgage derivatives market, AIG announced that it was in the process of acquiring Utilities Inc., a holding company that controlled scores of small water utilities across 17 different states. With just 300,000 customers, the company wasn't huge, but it boasted of being the largest privately held water utility in the country.
"We have long considered water infrastructure as an attractive investment opportunity and an excellent complement to [our] existing energy infrastructure portfolio. Utilities Inc. is a leader in this industry and we are pleased that [we have] the opportunity to acquire this business,” AIG Chairman and CEO Win J. Neuger gloated in a press release.
AIG had reason to be pleased with its purchase. Water utilities are one hell of a profitable business, with international corporations easily making a 20 to 30% profit margin, according to a 2007 report by Food and Water Watch. In the US, federal regulations limit profits to 10%, a pesky rule that companies easily subvert by shuffling their income around and “investing” it in side businesses. These kinds of returns would be the envy of the pharmaceutical and oil industries. How do water companies do it? According to Food and Water Watch, they charge 50% more for services than public utilities and pocket the difference, thereby unleashing the potential of the free market.
People who have been ripped off by bailed-out banks' schemes to trick late fees out of their customers will recognize what Utilities Inc. did to the people of Middlesboro and Clinton. In the summer of 2008, as AIG was teetering and desperate for funds, it "upgraded" its billing system, and suddenly a slew of late fee charges hit the struggling locals.
Residents had been getting their water bills like clockwork for as long as anyone could remember, but confusion and disorder set in as soon as Utilities rolled out its new and improved billing system. Monthly statements started coming late or didn't come in for months at a time. People were double-billed and double-penalized for bills that never arrived. One month, a bill would include sewer fees, the next month it wouldn't—and you'd be charged if didn't catch the omission. It's obvious the new invoice system was designed for pure harassment, creating chaos and reaping the rewards of the late fees it generated.
Internally, Utilities referred to their revamp of the billing system as "Project Phoenix." It sounded eerily similar to the CIA's "Phoenix Program," which was designed to terrorize, kill and torture uppity Vietnamese villagers into submission during the Vietnam War. One month after Project Phoenix started wreaking havoc on locals, AIG collapsed and took the first of over $150 billion in taxpayer bailout funds. That meant Project Phoenix could still go on terrorizing locals—which it did.
Here is how a local newspaper described the new billing program in Clinton in March, 2008:
It wasn’t until the summer of 2008 that the new bills began to arrive and from Day One, they were messed up. Few customers here in Clinton [called] the water company because they got multiple bills. One business thought it got a break when its bill went down somewhat, only to discover that the bill hadn’t included sewer costs. This went on for several months. Finally, the [sewer bill] showed up – due in full – on one bill. Requests to spread out the payment fell on deaf ears. . . . Some of us were so confused by the bills, we paid them every time they came in. . . . Fears of bad credit reports and shut offs kept most customers paying whenever a bill arrived.
To make it harder for Clinton residents to file complaints, AIG closed the utility's local office as soon as it took over the company. Pleas made by phone were rejected.
Local citizens are angry, upset and fearful. Many senior citizens on fixed incomes are already stretched past the breaking point. Others living below the poverty line without hope of getting a job are worried about how to pay another rising utility bill.
Customers we’ve talked to “want to do something,” but say they cannot afford to file to intervene in the case. The trip to Frankfort is daunting and expensive. Some dare not leave the jobs or businesses they have for the time it would take to travel and attend a hearing in Frankfort.
In November 2008, right as AIG was recieving the second installment of its bailout and the economy was in a free-fall, AIG's water utility notified Middlesbro and Clinton residents that it would be raising rates by 51%. It would mean more than $750,000 in additional revenue a year, just from 8,000 customers. The money wouldn't be used to fund infrastructure improvements—none had been made and none were planned. No, according to a company spokesman, the utility was trying to recoup money it had invested in its "improved" billing system, in effect forcing the victims of the billing system to pay for their own fleecing.
It seems Utilities was quite honest about explaining that a good chunk of the $750,000 would be transferred straight into the pockets of its investors, according to the West Kentucky Journal of Politics and Issues.
[Another] reason came from [the] company's financial expert, Pauline M. Ahern, who opined that a rate increase will allow [the utility] to “earn a range of common equity cost ratio of 11.60% to 12.10%.” In the present market, that is an attractive return on investment.
One million dollars may not seem like much these days, but it sure meant a lot to the poverty-stricken residents of Middlesbro and Clinton. There were quite a few bleak handwritten statements filed with Clinton's city hall during a public hearing on the water rates increase. It makes sense to quote them to get a feel for the level of despair that exists in rural communities like this all over the United States.
Here's one from August 8, 2009:
I get $675.00 a month, if they raise the water, or utilities, I can't pay them. I would have to go without water, etc. or gas. I'm disabled and I can't walk. Raising the utilities hurt a lot of people here in Clinton. Not just me but everyone. As it is I can't pay the water bills because its high. But I pay what I can.
And here is another from August 12, 2009:
I feel that a rate increase of 50.8% will add a heavy burden on our small rural community. Our citizin [sic] that lives in our city are on Social Security, have full time jobs that pay barely minimum wage or are working as many as 3 part time jobs to make their monthly budget.
And another from May, 2009:
“I always have a high bills [sic] to pay. I pay what I can. I am on disable. [sic] I try not to use too much water. But yet I have a high water bill. If the bill goes up, I will be lucky to pay them $10.00 instead of $80.00.
In the end, Kentucky's regulatory commission reduced the water rate increase from 50.1% to 30%. How long before they try raise the rate again? Or until the energy company decides to follow suit? It's hard to say. But one thing is for certain: AIG's takeover shows again that the American people were screwed by the bailed-out billionaires, who, instead of showing gratitude or willingness to reciprocate, have been preying upon the most vulnerable Americans like they are 15th century barons soaking the peasants.
And as our cities and states start leasing out and selling public infrastructure to pay off their municipal debts, we can expect banks to gain more control of public wealth. Middlesbro and Clinton are a glimpse into the future of post-privatized America. |
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sicntired
Joined: 27 May 2007
Posts: 586
Location: columbus, ohio |
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Sat Nov 28, 2009 2:31 pm
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I don't know when I have been more angry. This must be passed on to as many as will hear it. Thanks Ellyn for exposing this horrible injustice. |
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Ellyn
Joined: 16 Jul 2000
Posts: 4406
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Sat Dec 05, 2009 2:22 am
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More on AIG:
Dec. 3 (Bloomberg) -- Treasury Secretary Timothy Geithner should explain what taxpayers gained by accepting units from American International Group Inc. in exchange for reducing the insurer’s debt by $25 billion, Senator Chuck Grassley said.
“Exchanging debt for equity still leaves taxpayer dollars at substantial risk,” the Iowa Republican said in a letter to Geithner released yesterday.
Republican lawmakers are stepping up a campaign to put a spotlight on Geithner’s role in AIG’s bailout. The rescue, which began last year when he was president of the Federal Reserve Bank of New York, swelled to $182.3 billion. AIG transferred American International Assurance Co. and American Life Insurance Co. to Fed vehicles to lower its debt, the firm said Dec. 1.
The units are to be sold, and New York-based AIG is entitled to a portion of the proceeds if the sales reap more than $25 billion.
Grassley is concerned about “the status of the billions of dollars in taxpayer money that is in jeopardy due to actions by both” Treasury and the Fed, he said in the letter. The request for information was also addressed to William Dudley, president of the New York Fed.
Treasury spokesman Andrew Williams said the department will respond to Grassley’s letter and one from Representative Roy Blunt asking about the bailout. Jack Gutt of the New York Fed declined to comment.
The plan to transfer the businesses was disclosed in March amid the company’s fourth bailout. The deal permitted AIG to pay down its debts while waiting for a recovery in credit markets, which may allow for higher sale prices for the units.
‘Give-Away’
Treasury’s preferred share investment of as much as $69.8 billion was changed in March to allow “non-cumulative” dividends which may permit the insurer to avoid making payments, Grassley said, citing a September report by the Government Accountability Office.
“There seems to be no reason for this give-away of taxpayer funds other than to manipulate the rating agencies into giving AIG an artificially higher rating than it deserved,” Grassley said. “I would greatly appreciate getting a detailed explanation about how and why this decision was made.”
Treasury is entitled to appoint two directors to AIG’s board because the company missed four straight dividend payments, and Grassley asked about efforts to find candidates.
AIG has tapped more than $40 billion from two Treasury facilities. The bailout also includes as much as $52.5 billion to buy mortgage-linked assets owned or backed by AIG and a $60 billion credit line. The line was reduced to $35 billion after AIG turned over the life units.
‘Wasted Taxpayer Dollars’
Blunt, a Missouri Republican, asked Geithner to appear before Congress to discuss payments AIG made to banks that bought credit-default swaps from the insurer.
Before the Fed stepped in late last year, AIG tried to persuade banks to accept so-called haircuts of as much as 40 cents on the dollar, according to people familiar with the matter. The Fed’s decision to pay the banks in full may have cost taxpayers $13 billion, or 40 percent of the $32.5 billion AIG paid to retire the swaps, the people said.
“Thirteen billion in wasted taxpayer dollars at a time of economic crisis cries out for explanation, as you and the president seek to regain the trust of the American people on the economy,” Blunt said in a letter to Geithner. |
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mr. jones
Joined: 03 Mar 2006
Posts: 1899
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Sat Dec 05, 2009 10:17 pm
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Unbeleivable!......
taxpayers bail out wall street.....
and in return they get raped!
_________________
"The whole aim of practical politics is
to keep the populace alarmed, and thus clamorous to be led to safety, by menacing it with an endless series of
hobgoblins, all of them imaginary." |
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