Was AIG An Outright Scam?

During Jan/Feb AIG would call up and just ask for complete unwind prices from the credit desk in the relevant jurisdiction. These were not single deal unwinds as are typically more price transparent - these were whole portfolio unwinds. The size of these unwinds were enormous, the quotes I have heard were "we have never done as big or as profitable trades - ever".

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

Was it deemed "critically important" by Treasury that these employees remain under employment agreements - including perhaps confidentiality, one wonders, therefore necessitating huge "retention bonuses", lest they leave and sing?

Now the alleged mechanism for the conduit to shuffle AIG bailout money through to the banks, including banks not in the United States, comes out.

There was no need for "new authority" was there Tim? All you had to do, if this account is correct, is tell AIG to stick it where the sun doesn't shine (and send in a few cops) for making trades that were intentional money-losers and designed to stick the taxpayer with a monstrous (to the tune of $170 billion thus far) bill.

Yes.

They undercut and too premiums at below costs because they never figured they would have to be paid out. They invented, participated in insuring products that had no history of costs. How could you price that? Well, who cares if you are not covering.

Like our government pensions. Or social security.

This is how you make money in financial enterprise. Take in, and don’t pay out. What is government but taking real taxes from real productive work and workers in exchange for promises like, you dolt kid will be edjamaked, or eight time caught felon at 19 won’t rape your wife, or 30 billion plus a year CIA will keep mud head koran babblers from crashing into buildings.

Bla, bla, bla.

Always the same. Pay me now, and I’ll pay you back.

Religion? Pay the priest so that after you are dead, you will live, forever, with out rent in a really nice place.

Why do you think government buildings are built like temples?

Duh.

More proof of the fraud!

Bernanke Bombshell: AIG Insurer Exposed to FP
In researching and think about AIG, I have been writing about them as if it were two separate companies: A well regulated Insurer, and a rogue derivatives products firm (FP).
The working assumption has been that the regulated insurer was run fairly conservatively, and the structured financial product side run like a giant hedge fund. The 32% net profit retention on the FP side is actually better than what most hedge funds see.
This dichotomy is mostly true, but with now has an interesting twist to it. In congressional testimony today, Ben Bernanke implied that had the Fed allowed AIG too fall, he detailed what might have happened had AIG been allowed to fail:

The Federal Reserve and the Treasury agreed that AIG’s failure under the conditions then prevailing would have posed unacceptable risks for the global financial system and for our economy. Some of AIG’s insurance subsidiaries, which are among the largest in the United States and the world, would have likely been put into rehabilitation by their regulators, leaving policyholders facing considerable uncertainty about the status of their claims. State and local government entities that had lent more than $10 billion to AIG would have suffered losses. Workers whose 401(k) plans had purchased $40 billion of insurance from AIG against the risk that their stable value funds would decline in value would have seen that insurance disappear. In addition, AIG’s insurance subsidiaries had substantial derivatives exposures to AIG-FP that could have weakened them in the event of the parent company’s failure.

If we are to take Bernanke at face value, he is saying that AIGFP had buried their own firm with junk paper. BB does not define what “substantial derivative exposure” meant — but given the $2.7 trillion dollars in derivatives exposure that FP had, even a tiny percentage might amount to an enormous sum.
That the collapse of AIG Financial Products would have damaged the other Insurance half of the firm is a frightening development.

Most Frightening indeed but what is even more frightening is The Resident continues to give them and his other Contributors so much of your money! When he moved on UP he brought a lot of baggage with him!

Lori

Source:
Chairman Ben S. Bernanke on American International Group
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
March 24, 2009
http://bluelori.blogspot.com/2009/03/no-banker-left-behind.html

I don’t know what an unwind is and I don’t imagine that very many of the general public understands the term, either, let alone all the other details of AIG.

What the public will understand is that Geithner was asked about his proposal for AIG, and the fact that Geithner refused to clarify his position on paying only a portion of claims from AIG policy holders. The congressman from Illinois asked Geithner what percentage of the claim he would pay out, whether he would pay 90%, 80%, 50%, or what amount did he propose the policy holder receive? Geithner would only say, that would depend on the policy.

So, if any of those flood victims in N. Dakota have their insurance with AIG, they could be a heap of trouble.

It really doesn’t matter. What people are finding out as fact, is the elite’s in this country are liars. Whether it’s ‘No new taxes’, or the Bush/Hastert/Lott, or Madeoff, Greenspan, Obama, ....they all are, as a class, word weasels frauds and unworthy of trust. As a class, they have more excuses than a elementary school lunch cake and milk fight.

Wither fraud, incompetence, stupidity...they can not be trusted.

This must of been how the Russians felt the last 15 years of Brezhnev to O’l Wine Stain, Gorbachev.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.