Gunn Law Blog

AIG: Needed Regulatory Accounting Of A Failed Trust

Taxpayers now own 80% of American International Group, Inc., as a result of an $85 billion "bridge" loan.  The insuring public deserves to know the cause and that those responsible for this financial disaster are held appropriately accountable.  As the ripples of economic consequences created by the corporate greed that drove the reckless business risks undertaken expand, it is clear that ultimate accountability of the involved corporate leaders is imperative.  Otherwise, we are creating a "moral hazard" by having de facto government insurance against the consequences of corporate malfeasance.

Certainly, AIG executives' conduct deserves public scrutiny in the same way any creditor would scrutinize any borrower.  The basic questions that must be addressed are; why do you need this loan, and how can I be sure that you can pay it back?  To answer the why, regulators must look at the business practices of AIG that placed so many policyholders at risk.  Next, to assure the ability to pay back the loan, a clear separation of the insurance business from investment risk-taking must be a mandate.

Insurance is, at its core, a holding of premium dollars in trust for the benefit of the policyholders.  By pooling the financial risks of society, insurers facilitate the orderly funding of health care, risks of commerce, and the compensation of those damaged by natural disasters and negligence.  Insurance performs a public function and is highly regulated by the states.  The coordination of the regulatory schemes is facilitated, in part, by the National Association of Insurance Commissioners.  The financial conduct of licensed and authorized insurers is overseen by the states.  Strict requirements for adequate liquidity in the form of cash reserves to pay claims, minimum surplus funds in excess of expected claim payments, and restrictions to low risk investments, such as bonds, for to these funds, provides the necessary solvency and security that is essential to a viable insurance system.

So, how can the consumer of AIG's insurance products be at risk for the improvident investment practices of AIG Financial Services?  After all, AIG FS is a separate company, not subject to the same strict solvency requirements of the regulated, publically audited insurance companies within the AIG holding companies.  Will the needed investigations reveal that AIG was impermissibly leveraging its insurance assets to prop up the failed practices of AIG FS?  Did AIG disclose these practices to insurance regulators?  If the insurance assets were not placed at risk by improper cross-collateral practices, then why were the adequately funded and "healthy" insurance companies at risk?  If the insuring public was not at risk, then what public purpose was served in using public dollars to salvage a failed business?

I hope that consumers will get these answers and that the investigative media and public regulators will provide both truth and accountability.  Otherwise, the government is simply encouraging bad business by insuring against its consequences to the wrongdoer; the definition of a moral hazard.

Regards,

Lee Gunn

Judge Carey - Rethinking the Recount Process

Judge Carey's election is now in a recount with him 277 votes behind his opposition, attorney Catherine Catlin. I can tell you that this can challenge a belief in submitting sitting judges to the re-election process. Still, I believe that there must be direct voter input into the process of selecting our judges. Perhaps a once elected judge should be subject to a merit retention vote, rather than a direct contested election. The merit retention is currently used to allow voters to have input into our appellate system. It might work well for the judges who have been elected to a trial court. I do not know what the answer is for a trial judge appointed, but not elected, due to an opening during a term. Perhaps such an appointment should be subject to open election for the first election cycle and merit thereafter. My concern is for the politicizing of judicial office and the escalation of the contentious and expensive nature of any campaign for any office, even a non-partisan one.

Thank you to all who voted, as you are among the less than 5% who voted at all.

Regards,
Lee D. Gunn IV
Gunn Law Group, P.A.
Tampa, FL

Reelect Judge Kevin Carey

To our friends in Hillsborough County, please let me highly recommend Judge Kevin Carey for reelection on August 26, 2008.

I have known Judge Carey since undergraduate school at UF where we were both members of Florida Blue Key. Judge Carey was elected to the Circuit Court in 2002. He has served with distinction in various divisions of the court. He received the highest ratings from the local Bar poll.

His opponent has largely run a negative campaign, acussing Judge Carey of being indecisive and inattentive in her literature. Apparently, she sold the local papers on this rhetoric, despite the court statistics which place Judge Carey's disposition rate in line with his peers (4th out of 7 in the Family Law Division).

Judge Carey has two young children and gave up a lucrative law practice at Carlton Fields to perform service on the bench. He has provided that service with care and compassion. I you would like to learn more about why you should vote for Judge Carey please visit www.judgekevincarey.com . He has earned your vote.

Many Thanks,
Lee D. Gunn IV
Gunn Law Group, P.A.
Tampa, Florida