Posted on 10/11/2008 8:13:32 AM PDT by reaganaut1
Top officials at American International Group Inc. knew of potential problems in valuing derivative contracts long before these risky transactions caused the insurer's shareholders severe pain, according to documents released by congressional investigators.
The disclosures come as prospects dimmed this past week for AIG's efforts to quickly sell assets to repay its bulging debt to the government. The derivative-contract problems would have driven AIG into bankruptcy; in the past month, the government has made available to AIG nearly $123 billion in a rescue plan.
A federal criminal probe under way since earlier this year is also looking at how candid company executives were with investors at a December 2007 investor conference and whether executives at AIG's financial-products unit, which sold derivatives contracts, misled AIG's outside auditor last fall.
At congressional hearings Tuesday, a former internal AIG auditor wrote that he had early on raised concerns about being excluded from conversations about the valuation of the derivatives. The auditor, Joseph St. Denis, wrote in a letter to the House Committee on Oversight and Government Reform that in early September 2007, he learned that AIG's financial-products unit had been asked for billions of dollars in collateral related to derivatives it had sold.
"I was gravely concerned about this," Mr. St. Denis wrote. The derivatives, known as credit-default swaps, protect buyers against the risk of default on other investments, and AIG believed the likelihood of making payouts was remote. Mr. St. Denis wrote that the valuation model of one of AIG's trading partners "apparently indicated" that, in fact, the unit "was in a potentially material liability position."
(Excerpt) Read more at online.wsj.com ...
Fire Paulson!
you can view the complete story by typing “AIG” into the symbol search field at the top right corner of the page at this link....the article is presently the top selection on the list that will appear.....this link is good for today only:
http://www.djnewsplus.com/al?rnd=pz0rU6jVsz%2FDfuqi3KLR1g%3D%3D
Dylan Rattigan of CNBC had a good analogy. He compared AIG with an insurance company who provided policies to insure against loss for nuclear or bio-terror attacks in a city, knowing full well they could not pay up if it actually happen. We would not call them insurers—but rather, THIEVES. He said that is exactly what AIG and these other firms were for knowing the taxpayers would bear the risk if their house of cards collapsed.
The Face of Greed..Joseph Cassano head of AIG's Financial Products Division
Mr. Cassano, who, according to the committee chairman, earned $280 million over eight years at AIG, left the company in March and was slated to receive $1 million a month through the end of 2008; the contract was terminated the day before the congressional hearing.
Worked well didn't they?
Years ago when I called derivatives funny money and dangerous, I was derided as simple and ignorant.
That’s actually Marty Sullivan, the chairman who “succeeded” Hank Greenberg!
Is Cassano the Andrew Fastow of AIG and St. Denis the Sherron Watkins?
Sounds like Cassano intimidated everyone, including senior management.
If so, we can point back to Elliot Spitzer, who drove the former CEO out of AIG as part of his war on Wall Street. Greenburg took no crap from anyone. Had he still been at AIG, I believe he would have kept that punk Cassano under control and not let him sink the company with those out-of-control swap positions.
We could fill the prisons with these greedy pigs.
Correction: we SHOULD fill the prisons with these greedy pigs.
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