Edward Liddy, who was asked by Henry Paulson, former Secretary of the Treasury, to take over the ruined insurance company AIG (AIG:NYSE), is now stepping down.
According to Bloomberg, Liddy feels it is important to leave the position of CEO with his reputation intact. However, his reputation may already be tainted.
Per Bloomberg:
Congressman Elijah Cummings called for Liddy’s resignation one month after he took over, when a U.S. House committee learned the firm had rewarded insurance agents who sold AIG policies with a $440,000 trip to a California resort less than a week after winning its first government bailout. Criticism intensified over bonuses to employees of the Financial Products unit that brought the firm to the brink of bankruptcy.
In March, with Liddy’s consent, the company “gave $165 million in retention pay to keep Financial Products employees involved in unwinding derivative transactions AIG had entered into before the bailout.”
The bonus payouts outraged citizens across the country, including President Obama. In fact, in an article in The New York Times, Obama asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”
But who will be Liddy’s replacement? Seeking Alpha says sources say a search could take three to six months, which seems optimistic considering the job description includes coming out of a comfortable retirement to put up with congressional buffoonery on an almost weekly basis for a $1 pre-tax salary.
AIG also said it will split the two jobs, and proposed a 20:1 reverse stock split, which would bring shares back on to the radar screens of institutional investors.
However, Justice Litle, editor of Safe Haven Investor says, “It isn’t likely AIG will see investor enthusiasm for the stock for quite some time.”
Justice doesn’t recommend AIG as a safe investment. Instead he suggests companies such as HudBay Minerals (HBM:TSE), Peyto Energy Trust (PEY.UN:TSE) and Central Fund of Canada (CEF:AMEX) are much safer and offer investors best possible returns.
Justice says, “The exciting thing about names like HudBay, Peyto, and Central Fund of Canada is where the share prices could be in a few years time. Two or three years from now, those could all be $20 names. Central Fund could be even higher.”
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