The research arm of Congress reported on Monday that the American International Group’s financial condition had stabilized but that it was not clear whether the giant insurance group would ever be able to repay the federal government.
Diesel Civil Trust
Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.
Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.
He suspected Joe Cassano didn’t understand what he had done, but even so Park was shocked by the magnitude of the misunderstanding: these piles of consumer loans were now 95 percent U.S. subprime mortgages. Park then conducted a little survey, asking the people around A.I.G. F.P. most directly involved in insuring them how much subprime was in them. He asked Gary Gorton, a Yale professor who had helped build the model Cassano used to price the credit-default swaps. Gorton guessed that the piles were no more than 10 percent subprime. He asked a risk analyst in London, who guessed 20 percent. He asked Al Frost, who had no clue, but then, his job was to sell, not to trade. ‘None of them knew’, says one trader. Which sounds, in retrospect, incredible. But an entire financial system was premised on their not knowing — and paying them for their talent!
Michael Lewis in his Vanity Fair article The Man who Crashed the World (via quotingthecrisis) (via financegeek)
So is that it? Is the downturn over? After bouncing off of 6500, or more than half its peak value, and with Citigroup briefly breaking $1, the Dow Jones Industrial Average has rallied back more than 1200 points. So, is it safe to go back in the water? Best to figure out what went wrong first — what I like to call a bear-raid extraordinaire.
About that AIG resignation letter
i’ve been thinking a lot about the letter from the guy resigning from AIG that was in the nytimes earlier this week. since my first reaction was white hot incandescent anger, i’ve been trying to sort out what about it made me so upset in a way that could be typed into tumblr instead of just screaming incoherently.
some salient points from the letter:
- he was not involved in the problematic transactions that AIG was a part of and is proud of the work he did for the company
- even after the company was in trouble, he continued on out of a combination of a sense of duty and sacrifice and reliance on ongoing promises that his ongoing work would be rewarded
- he came up from nothing through hard work and dedication
- he feels that company management realized they were in trouble and they still made assurances to staff that they’d be ok and be compensated
- now the company is acting unfairly in asking employees to return their bonuses.
let’s compare AIG man’s situation to this NASCAR mechanic who was laid off.
- he was proud of the work he did and was not involved in the problematic sponsorship decision that created financial problems for his team
- even after the team was in trouble, he continued on out of a sense of loyalty and trust, as well as assurances that his ongoing work would be rewarded
- he came up from nothing through hard work and dedication
- he suspects that company management realized they were in trouble and did not warn staff
- now he’s fired and has no money.
or compare to practically any employee who has gotten laid off during the economic downturn. all of whom are in nearly identical positions. the only difference is the arrogance mr AIG man displays in thinking that because he worked hard and didn’t do anything wrong, he should be totally safe and adequately compensated for that work. why does he think the 5 million people who lost their jobs over the past 12 months became unemployed - because they weren’t working hard? because they engaged in fraud or bad behavior? they deserved to lose their jobs?
Bob Schieffer spoke with National Economic Council Director Lawrence Summers about AIG spending hundreds of millions in bailout money on executive bonuses.
Hoping to reduce a swirl of speculation over its role in the bailout of the American International Group, Goldman Sachs reiterated Friday that its direct losses would have been minimal if AIG had failed.
It’s over — we’re officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.
Matt Taibbi is a foul-mouthed, bitter SOB. He’s also one of the few telling the story in plain English. Emphasis mine.
For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn’t until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back.
Treasury will attempt to claw back some of the $160M being given out by AIG in “performance bonuses.”
We have to continue managing our business as a business — taking into account the cold realities of competition for customers, for revenues and for employees.
AIG’s Edward Liddy (CEO) on why bonus payments were required
(CBS/AP) American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.
WASHINGTON: American International Group, the insurer that has received more than $170 billion in taxpayer bailout money from the U.S. Treasury and Federal Reserve, plans to pay about $165 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year.
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