AIG is a consumer scammer, too.

Here is a side of AIG of which you might not be aware. I assist with the care and finances of an 88-year-old relative who has Alzheimer’s disease. When I assumed this role, her finances were in disorder, and she had been scammed financially by various people who prey on the elderly, an all too common situation.

And one of the scammers was AIG. When I reviewed my relative’s bank statements, I noted a monthly debit from her bank account at for $18.95 identified as “AIG.” After taking care of some bigger problems, I finally got around to calling the phone number identifying this charge to find out what it was.

I was told that it was accident insurance. I replied that my relative had no car and had not driven for many years. The AIG representative said that it wasn’t that kind of accident insurance, but it would protect her if she was injured riding in a car or crossing the street. I replied that typically the auto owner’s insurance policy or her own healthcare coverage would cover that, wouldn’t it?

So I asked how my relative came to have this insurance. AIG said that it was because she was a valued client of her bank. Huh, I said?

So AIG had phoned this mentally incapacitated elderly woman, asked her if she wanted to be protected against being injured, and when she said “yes,” started automatically debiting her bank account. No policy was signed, no paperwork changed hands, and she didn’t directly make any payment to start this coverage. If her bank allowed AIG to do this, then it is at fault for sharing my relative’s private banking information with them.

I provided AIG with medical documentation of my relative’s Alzheimer’s dementia, and asked them to refund the several hundred dollars they had charged her for these premiums over the past couple of years. They replied that they would stop the coverage, but not refund the premiums because she had consented to the coverage, something of a contradiction since I had documented that she was mentally incapacitated. AIG hoped that I was satisfied with this answer. I was not.

I tell this story for two reasons. First, to give further evidence of what kind of a company AIG is. And second, to illustrate the kind of free-wheeling business practices on which their financial model has been based. This kind of insurance scam is the equivalent for the insurance industry of the sub-prime mortgage practices in the lending industry. It is not a solid basis for business growth and has led to inflated concepts of their market and company prospects, which then pull the whole economy down when they are deflated.

Finally, further regulation of company practices is needed when it comes to financial scams on the elderly. A company should be barred from marketing this kind of product to people over a certain age and from instituting a policy without the consent of a mentally competent friend or relative. And they should certainly be barred from starting to directly debit an elderly person’s bank account.

Populist Anger Continues to Rise

Jon Stewart is a comedian, not a media critic, but he voiced America's frustration with the financial system last week when he sparred with CNBC's Jim Cramer. Robert Reich is an economist who better summed up the essence of Stewart's populist rant in a word: "helpless."

Writing in Salon.com today, the former Clinton administration cabinet secretary is a frequent speaker at the Commonwealth Club of California. Reich spoke at the Club in January, saying that the federal stimulus bill needed to be much larger than the legislation that ultimately passed ($787 billion over two years). On his blog, Reich recommends that the Obama administration quickly draft another stimulus bill of roughly the same size.

He also believes the populist streak that is becoming more fervent across the nation as instances of financial impropriety increase is hindering the confidence of the American people and rendering them helpless.

If our very own Secretary of the Treasury [Timothy Geithner] doesn't even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG's executives -- using $170 billion of our money, so far -- are accountable to no one.

The possibility of this firestorm of populism possibly engulfing the Democratic-led Congress and White House may be the impetus for a story in today's New York Times in which top White House officials fear the backlash could make future bailouts more difficult to push through Congress.

Reich also makes an interesting point regarding AIG's financial priorities if it were forced into bankruptcy last fall, instead of being propped up by the government.

Had AIG gone into Chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid (they would have had a lower priority under bankruptcy law than AIG's debts to other creditors); indeed, AIG's executives would have long ago been on the street. And any mention of the word "talent" in the same sentence as "AIG" or "credit default swaps" would be laughable if laughing weren't already so expensive.

In the meantime, Geithner and economic adviser Larry Summers, among others in the administration, continue to say there is little the government can do to stop AIG employees from keeping their portion of the $165 million pie. And New York Attorney General Andrew Cuomo wants the names and job performance records of every AIG employee receiving the infamous bonuses. Whether such efforts at instilling confidence in the accountability of recipients of the bailouts works or not will likely play a big role in forming future attitudes of American citizens toward government response to the economic crisis.

--Steven Tavares