Skip to comments.Watch AIG's payouts, not the bonuses, Spitzer says
Posted on 03/19/2009 9:03:40 PM PDT by Professional
"Bonus is a real issue. It touches us viscerally," Spitzer said. But he added, "The real money and the real structural issue is the dynamic between AIG and the counterparties."
"Virtually all" of the $80 billion-plus in the initial AIG bailout went to the company's counterparties, including nearly $13 billion to investment bank Goldman Sachs alone, Spitzer said.
(Excerpt) Read more at cnn.com ...
AIG and the GOVT is a smokescreen, and the "bonuses" is meant to feed the idiot masses. Stealing Employee Pay is another example of what our fine govt is like today too...
Right now, if I was an AIG employee, I’d be inclined to walk out, walk off the job.
In many key positions, this is the equivalent of the airline pilot walking away in mid flight.
Think Spitzer is mad about being thrown out?
He certainly isn’t toeing the party line nowdays.
His effort to “restore” himself, could reveal some interesting things. The media meanwhile will dismiss him as the pervert or whatever. Freepers falling for it hook line and sinker too it appears.
I’d listen very carefully what he has to say, now that he does not have power, or conflicts of interest. He sees the truth now, as a way to rebuild himself.
AIG placed bets and lost. We paid off the bad bets.
There are two elements involved that made this a “crisis”:
1. Paulson’s buddies were set to lose money, money for nothing and they weren’t going to go home wihout it...Hank saw to that.
2. There is a rumor that certain pension funds were involved with these high stakes bets...pension funds belonging to highly placed parties and vote critical groups...parties like congress and teacher’s unions. This is a whispered little rumor that slips around in the backwoods of the internet.
You’re right. Paulsen used AIG to save Goldman Sachs, that is plain to see. While Geithner is just a plain idiot, Paulsen is a traitor. On the other note, with the new 90% tax rate effectively capping compensation at $250,000 for AIG, Citi, BoA, Goldman, etc, there hasn’t been much talk what happens to the tax base of NYC. New York will become the new Michigan, and NYC the new Detroit.
Just like the bonuses are a smoke screen to AIG's larger problems. AIG is a smoke screen that keeps attention off of Freddie and Fannie and the Community Reinvestment Act. The government fell down from a regulatory standpoint - no doubt. But, this raging fire started with bad paper written to people who couldn't pay it back, even in a great economy.
Lastly, it's hard to comment on Spitzer. I do happen to think that he had target on Hank Greenberg and that it was largely personal. I believe that if Greenberg had still been with AIG, we may have avoided many of the problems that we're now dealing with. That's Spitzer's fault.
You think Congress will tax GS 90%, then let the state take the last 10%? Yeah, I doubt that too....
You may find this post very interesting as well. I found if fascinating,
What kills me, is that congress acted that fast on some pissant bonus issue, but meanwhile.
Naked shorting, was never dealt with. Uptic rule still not in place. Mark to market still not dealt with. Meanwhile the US Govt is stealing equity ownership of US Corporations being called a “bailout”.
Even Carter didn’t steal Chyrsler from the shareholders!!??
Spitzer is still pond scum because he was part of the problem.
In 1998 LTCM nearly took the world down. LTCM compared to what had been amassed by 2007 was a chumps chump change. Hedge Funds are clearly the most evil and dangerous financial undertaking in human history. And even now, after all this, nothing is being done.
I suspect, that what is at hand, goes as follows.
Hedge Funds get unlimited leverage, preferential tax treatment, and lack of regulation. They pay for this.
They pay for the removal of the uptick rule.
In collusion they work to go after stocks and industries systematically.
They blame all this on Bush, and the Republicans.
The stupid public votes for Obama.
The Hedge Funds have made trillions.
With fear everywhere, the Obama admin gets stimulus package, that is just political payoffs.
Obama administration fixes what they know is broken.
Hedge funds go long, instead of short.
Markets go up, hedge funds make trillions more, Obama is the hero for “saving” the day.
End of story.
All of that is absolutely true.
I understand that FASB is in the process of easing some mark-to-market restrictions which may ease some balance sheet pressure. But, it's just a little too late. I'm mad at the GOP because for six years they had an opportunity to really reform the US financial oversight bodies. They didn't. And, I'm not in the Limbaugh crowd of "all regulation is bad regulation" - not at all. But, bad regulation or poor enforcement of good regulation is a recipe for disaster, and I don't see anyone proffering any good ideas on how to improve, not destroy what we have.
This populace wave is very dangerous. Obama is going to use it and our economic system will be much worse off for it.
I really don’t care, just how scummy anyone is, when I’m searching for the truth. This is why the DEA, justice system have informants. The scum actually know the details...
This is also why Joe Kennedy was involved in fixing the stock market, created the SEC in the 30s. He broke it, and he knew how to fix it...
Spitzer’s trumped up pogrom against the Greenberg family is what caused the removal of the Greenberg family's steady hand at the top of the AIG structure. It wasn't until after Spitzer had collaborated with AIG insiders to remove Hank Greenberg and install the insiders to the head of the Group did the shysters in the Financial Products take control of the corporation and expand the hedge fund and gearing of the AIG group contracts.
I think you’re wrong. Look at my timeline of activities above. Power and money are the goal.
The bad guys have gotten all the power and money they need, and will make even more money when they fix it. Not only that, they will be more powerful as they become the accomplished messiahs who saved the world. My god, doesn’t anyone get it??????????????????
In a few months, you’ll scratch your head as the headlines read.
Banks Make Historic Profits
Go to Google, and read the accounts of what happened at the m2m meetings. Unified support, anxious, demanding....
Forget spitzer, forget madhoff, forget aig...
Behind the smoke screen you have the Democrats, Goldman Sachs, Soros, and the Hedge Funds. Man, I must say I’m incredibly impressed with how clever they are. Because it is working like a F’n charm.
The real bad guys, are happy that you’d clutter the truth with that diversion.
Hardly a happier person than me, when Spitz went down. But that was a different issue. Spitz knew the right thing, but appreciated money and power far more than that. When he no longer served his purpose, the POWERS THAT BE destroyed him, and made him so toxic that nobody, not even a smart freeper could see straight...
Remember that Spitzer’s NY AG office cut a deal with the AIG SVPs and corporate board to oust Greenberg, even though the SVPs then increased Cassano’s influence on the AIG Group.
Politics from all over, right here
Did Cassano And AIG Commit Fraud?
AIG chief Edward Liddy endured his anticipated ritual flaying today by Capitol Hill lawmakers angered by those bonuses. But, as Josh has been writing about over at TPM, theres mounting evidence that some current and former AIG execs could have much more to fear than angry questions from Gary Ackerman when all is said and done.
Since at least June 2008, the Justice Department has been investigating (sub. req.) whether AIG intentionally and criminally overstated the value of its credit default swaps, hiding its dire position from investors and government regulators. Joseph Cassano who during the period at issue ran AIGs financial products unit, AIGFP, which made those disastrous swaps, out of a London office has reportedly hired a lawyer in connection with that investigation. Britains Serious Fraud Office is said to be on the case as well.
So here at TPMmuckraker, weve spent much of today taking a close look at the reams of evidence contained in news reports, documents submitted to congressional investigations, SEC filings, and civil lawsuits filed by AIG shareholders one of which charges that Cassano hid AIGFPs ballooning exposure from public markets and short-circuited alarms within the AIG organization. And from this mass of data, a clear picture emerges in which Cassano aided by other AIG execs, who appear to have given his AIGFP unit broad autonomy within the company repeatedly downplayed the risks his unit faced, publicly painting a rosy picture that was at odds with reality. Perhaps most egregiously, he actively shut out voices primarily those of AIGFPs own internal and external accountants that highlighted potential problems at the unit.
Heres a rough, and far-from-comprehensive, timeline of events that begins to suggest a level of deliberate fraud and deception on a level that goes beyond whats generally been acknowledged so far.
- 2004: AIG pays $80 million to settle criminal charges brought by the Justice Department against Cassanos unit, AIGFP. The unit had been charged with securities fraud for allegedly helping PNC Financial improve its reported financial results by shifting about $750 million in assets off PNCs balance sheet, in return for lucrative fees. AIG admits to engaging in transactions that violated accounting rules, and signs a deferred prosecution agreement with DOJ, meaning it has to be on its best behavior to avoid charges. The episode suggests that Cassano and AIGFP were, at best, happy to cut corners in the pursuit of profits. (Wall Street Journal, June 2008)
- Late 2005: AIGFP execs, worried about loosening lending standards in the subprime-mortgage market, decide to stop selling credit protection on certain swaps, partly due to concerns that the model was not going to be able to handle declining underwriting standards, according to one AIG risk expert. In other words, Cassano and his colleagues were aware of the risk even at this early stage. (Wall Street Journal, October 2008)
- Mid 2007: Cassano is still providing assurances that AIGFPs accounting is on the level. Referring to the PNC episode from 2004, Cassano says publicly: We made some mistakes in those transactions and we suffered dearly for that [T]hat was the only accounting driven transaction weve ever done. Cassano added that AIGFP had instituted new controls to prevent a recurrence of the problem. (Investor lawsuit, found online via Google cache)
- Aug 9, 2007: Referring to credit default swaps, Cassano tells investors: It is hard for us, and without being flippant, to even see a scenario, within any kind of realm of reason that would see us losing $1 in any of those transactions .we see no issues at all emerging. We see no dollar of loss associated with any of that businesss. (Investor lawsuit)
- Aug 13, 2007: Summarizing those comments, the Wall Street Journal reports: Exotic financial instruments linked to subprime mortgages are showing huge losses in debt markets and weighing on companies from lenders to banks to insurers. But not at American International Group Inc. or so its executives say. In other words, Cassanos representations to investors achieved their goal of reassuring the press and public that AIG was doing fine. (Wall Street Journal, August 2007)
- August 2007: Cassano berates Joseph St. Denis, AIGFPs in-house accountant, for discovering accounting irregularities in a target companys hedge accounts. St. Denis had been brought in specifically to address problems in AIGFPs accounting cited by an auditor. (Letter from St. Denis to House Oversight committee)
- Sept 2007: Cassano tells St. Denis: I have deliberately excluded you from the valuation of the Super Seniors [ CDS’s] because I was concerned that you would pollute the process. St. Denis later told Congress he had no involvement in the process of valuing the CDS portfolio, because Cassano worked to exclude him from that process. (St. Denis letter.)
- Oct 2007: St. Denis resigns. He would later explain to Congress: I resigned because on multiple instances beginning in the late summer of 2007, Mr. Cassano took actions that I believed were intended to prevent me from performing the job duties for which I was hired. (St. Denis letter)
- Nov 6, 2007: Michael Roemer, AIGs chief auditor, informs the firms audit committee of the reasons St Denis gave for his departure. (St. Denis letter)
- Nov 29, 2007: Accountants for PriceWaterhouse Coopers (PWC), AIGs outside accounting firm, inform AIG CEO Martin Sullivan of their belief that the company has material weaknesses related to the credit default swaps, which could result in future errors on income statements or dislcosures. PWC later said that AIG was not interested in fully understanding the impact of the collateral disputes that at this point had been set off with AIGs counter-parties. (Investor lawsuit)
- December 2007: Cassano, preparing for an upcoming presentation to investors about potential losses associated with the credit default swaps, tells PWC accountants not to interfere. (Investor lawsuit)
- Dec 5, 2007: At that meeting, Sullivan and Cassano assure investors that everythings fine. Sullivan: AIG has accurately identified all areas of exposure to the US residential-housing market we are confident in out markets and the reasonableness of our valuation methods. Cassano: It is very difficult to see how there can be any losses in these portfolios. These statements, in particular, would later be looked by federal investigators as evidence of possible fraud. (Investor lawsuit)
- Jan 2008: In an audit opinion included in an SEC filing, PWC accountants write that AIG did not maintain effective internal control over financial reporting related to its credit default swaps. They assert that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. (AIG SEC filing).
- Feb 26, 2008 In what appears to be an effort to absolve itself of responsibility, PWC accountants declare at an Audit committee meeting, that AIGFP alone conducted the process of valuing 4th quarter assets. (Investor lawsuit)
- Mar 31, 2008: Cassano retires with million dollar a month consulting contract and a $34 million golden parachute. According to one investor lawsuit filed in January, Cassano had earned $280 million over the previous 8 years more than AIGs CEO. (Investor lawsuit).
- June 13, 2008: In a statement put out in response to news of the DOJ investigation, AIG declares, As is the case throughout AIG, our colleagues [in the financial-products division] have been rigorously focused on transparency and accuracy in all its disclosures. The goal is clear: make sure the numbers are right, whether its good news or bad news. (Wall Street Journal, June 2008)
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Posted in: TPM | 18 March 2009 | by: admin #19436
Yes. I have to agree. Greenberg knew then and knows now that the strength and future of the company was with its' core business and core competency. There's absolutely no love-loss between Greenberg and the people that took over AIG-FP and ran it into the ground. That is self-evident fromt the interviews Greenberg has given the last two months.
The Obama administration doesn’t have a clue what is broken much less how to fix it. The Fed took over the reins yesterday and doubled down. We’re in for a very rough ride. Please explain if you think differently, I am very much open to a more positive interpretation. Right now I’m pretty freaked out at the Fed’s actions.
Ah yes Chgogal, humpty dumpty right? What a mess...
Think how IMPRESSED and amazed you’ll be when Obama fixes this?! He’ll be your personal savior, best friend...
Sorry, you and everyone else are being duped beyond belief. Granted, I’ll credit these jokers as pulling off the greatest heist in the history of mankind. It makes everything else look miniscule in comparison.
Of course, Obama is just the useful idiot they let be the face of this thing. The they is Soros, the powerful democrat socialist establishment, and some others I suspect but will not name. True evil is at work.
But hey, in a little while, when things are much better, you’ll forget, and feel much better. Hey, we can go back to complaining about petty things instead.
It’s a decent overview article, if you’re interested in this you probably know most of it, TIME is writing to the lowest common denominator here.
Two paragrapha are worth attention:
“With its high credit rating, AIG FP wasn’t required to stockpile reserves, or collateral, as traditional insurers must to cover potential losses. As the CDOs that AIG insured began to crater, the counterparties began asking for more collateral to back their policies, which was written into the contracts. Cassano said in August 2007 that he couldn’t imagine a situation in which AIG would “lose one dollar in any of these transactions.” He was right. AIG didn’t lose a dollar; it lost billions of them.
In a rare interview, former CEO Greenberg, who is suing AIG and being sued by the company over financial-management issues, tells TIME that once the company lost its top credit rating, AIG FP should have stopped writing swaps and hedged, or reinsured, its existing ones. But Cassano’s unit doubled down after the spring of 2005, writing more and more subprime-linked swaps as the ratings plunged, which made the possible need for collateral enormous in the event its debt was downgraded. The downgrades occurred in 2008. “Of course they were going to run out of money,” says Greenberg. He adds that as the liquidity crunch hit in 2008, AIG FP should have renegotiated terms with the banks to ease their demands on collateral. “You can renegotiate almost anything, anytime.” “
All the fed did was buy bonds off the street. By taking the bonds off the street, they put cash into the hands of the former owner, and drove rates down to the point where the cash holder should find “something better to do”. And what is so bad about that?
Right now, imagine the left side of your room with 10 trillion dollars, in 100 dollar bills. On the other side of the room, imagine deflated bonds, stocks and real estate.
What you going to do with that 10 trillion paying you zero interest, but making the bank rich?
Great, you just reminded me how much I hate ratings agencies, and just how big a jail they should make for the directors of them.
Years ago, i couldn’t understand why such a terrible company like AIG had a AAA rating. Now, now I know...
I'm not exactly sure what you think I'm wrong about - but I'll leave that aside.
I'll agree with you that hedge funds have made trillions - nothing wrong with people making money. I think you're saying that there's been horrible market manipulation through shorting of key financial stocks - I'll agree with you there. I'd take it a step further and say that the massive consolidation of the financial services sector the last 30 years, and especially the last 15 has been a net detriment rather than a benefit. In addition to the UPTICK rule, the consolidation has made the market manipulation even easier.
Here's where I think we part ways. I don't put Obama in this global cabal. There may be people, like Soros et. al. that wanted Obama in power purely for a profit motive. But, Barry's a true believer. He's not wedded to anyone or really anything but his own ego and own ideology - whatever you want to call it.
Barack Obama sees wealth - no matter whose wealth it is - as the enemy of the poor. He does intend to remake the country into something different, and something completely foreign to what the founding fathers had in mind. If people, any people, think that they're going to manipulate Barry into doing something for them so that they can make some cash, I have a feeling they're going to be disappointed.
>> He certainly isnt toeing the party line nowdays.
That was Morris, not Spitzer.
I hope you are right. I’ll collect my early retirement and get the hell out of dodge and live on a small tropical island. ; )
Thank you! Seems that everyone has forgotten Spitzer’s heavy handed attack on AIG and Hank Greenberg.
Yes, I have to agree 100%. I don't want to pick a fight with Professional because I think much of what he says is legitimate. But, Obama is not going to turn this around - even if he wants too, and I think that's probably debatable.
We are going to see such inflation because of our "magical" monetary supply, it may be unprecedented for a stable western democracy. Then, what's China going to do when they see their American nest-egg fall off the cliff?
Things are bad and are only going to get worse and it is completely out of Obama hands so long as he continues to spend like a drunken sailor the night before the ship's due to pull out of port.
Listen, we're not even a 100 days in, and he's already spent $1.3 trillion - hasn't touched health care, hasn't touched education, hasn't touched the "poor". And, he's already promised the largest tax increase in AMERICAN HISTORY while the country is staring down the biggest recession of the last 69 years. The country is in a flat spin with a rookie pilot.
Ok, You and I agree on almost everythign. But, I think like anyone going to DC, the power and money there is so tasty, they eventually forgot why they got there. Same thing with Spitz. He may have been driven at some point by justice, but got corrupted along the way. That doesn’t mean they don’t know the difference later, between what they think is right/wrong.
Fortunately, Obama becomes harmless for this, and even if not, there are people more powerful and money hungry than Obama is an idealist. They’d boot him out before he violated their needs. Obviously, that is EXACTLY what happened to spitz and blago.
May I ask you. What is it inflation inflates?
And you’ll find me on that Island. We’ll have a drink together.
I can clearly see the roadmap of the next 5-6 years. They will be exciting, profitable, potentially bankrupting, and all points in between.
Were you here during y2k? Careful what extreme views, fear, and the collective power of folks can do with your mindset.
Inflation inflates the cost of goods and services relative to a previous point in time.
Don’t forget cap and trade that will add hundred’s of billions of taxes on Americans.
Very well said. Remember, if you can confuse people, manipulate them, regarding things you don’t understand, this is how they get their way. Like your mechanic does!
So, what you’re saying is, the cost of goods goes up, but the companies that make the goods don’t make any more money, they in fact lose money?
Inflation inflates not just goods and services, but the providers. Real Estate and Stocks must “inflate” too right?
I find it frustrating that people are to have their opinion both ways. On one hand they say stocks are down, and going lower. Then they say inflation is a problem, they’re printing money.
Hello Money, meet Mr. Asset.....
Trust me, it’s coming. Like a gallon of gas on an ember.
Inflation is going to be the problem, yes indeedy, but not quite yet. It will strike in the middle of night, just when everyone makes a really cute song about how Obama saved the world...
So, I’m basically telling you, that we have a 3 part game ahead over the next 6 yrs. A smart guy could make a buck or two. Especially next time.
But no, I was not on FR during that time. I remember someone telling me that my car wouldn't start because of y2k. Sheesh....it's much like the global warming fear that governments are promoting for tax collection purposes.
Hey, can you give some roadmap markers for the next 5-6 years? ; ) I'm all ears and eyes.
Not at all. Real Estate is only worth what someone will pay for it. If there's no demand for Real Estate, prices will fall even in a time of great INFLATION - Let me ask you, how much do you think a condo in Zimbabwe is worth today?
Second, stocks will absolutely fall during times of high inflation - check out the stock prices for companies between 1929 to 1939 - not pretty although inflation was substantial.
But, you're right about inflation not coming - just yet. But, I temper that with one caveat. We truly are in times like no other. Historical precedent could be worthless. Historical precedent says inflation should come later, then again, it could come much more quickly if the historical models are worthless.
Didn’t fall for y2k eh? Yeah, I hear that a lot. I even try to convince myself I didn’t fall for it sometimes.
People later, will claim that in this dark time, they didn’t sell out, or think the world was ending either. Oh yeah, and if I’d have had some cash, I would have bought at the market lows...yada, yada, yada.
Baby, and you don’t have a good enough crowbar to have removed folks from MSFT at the top, KKD at the top, or SBUX at any of their tops. People are fools, and they are fooled almost all the time.
The market from here is going to spike higher, it will be jaw dropping. Duh, just like what happens after ALL market crashes. Then, we’ll get warm and fuzzy, everything will be fine, and right when EVERYONE thinks things are better, watch out. We’ll crash to bits even faster than this time, and the new fear will be better than the last time. People might just get really freaked out, bad. And then, just when all hope is lost, and everyone is literally on their last breath, last dollar, BAM, straight up again, and then we’ll have relatively smooth sailing for a good while.
That is how I see it, and I’m going to be very decisive about it. The big nasty downspike will be as inflation runs away from us, just like Bernanke has been muttering about. Bernanke is smart, and currently honest. Listen to him.
Stocks were up nearly 400% during the 30s, what are you talking about?
Adjust for inflation, get back to me.
I have a very complex view on real estate. And my fingers are tired.
Hey...you Big Monkey... Ha, I like that. If you’re a pessimist right now, you’re in good company. If you’re an optimist, you’ll probably make money. I made that up the other day, as right now 99.9% of folks are suicide basket cases that have no faith in the laws of gravity. F politics, I’m talking econ and gravity.
BM, if you believe, what nearly everyone else believes, then what chance you got of typically being right?
BTW, I was a screaming maniac about being bearish on r/e a couple years ago at the very top. I got called every name in the book. I in fact said it would be “the worst real estate market since the great depression”. I’m sure if I tried, I could find some of my old “the bridge is washed out comments” here at FR.
And that said, we might just have one big upmove in r/e over the next couple years. Trouble is, inflation later will be a major head wind on r/e. Because people don’t buy houses with cash, they buy it with monthly payments...
Ok, now I’ve talked and typed too much, brain hurts...
Deflation was the problem in the 30s, not inflation. Hoover decided not to be the savior the others had been, and while he though people could survive a jump out the window, nobody at the leverage point of 29 could handle it, it was 20 floors, not two. By the time he realized the mistake, it was too late to stop the avalanche of destruction.
There were two stock market crashes in the 30s, not one. The up move from 32 to 37 was 400%, and trust me, that money was good stuff. Really good stuff I’d bet. Maybe make a dynasty for yossef.
The seeds of 29 were probably mostly planted in 1907. Are you familiar with what happened in 1907? If not, check it out. Tell you a whole lot about what we might be doing now, and what it will mean maybe 20 yrs from now.
In the summer of 1907, the American economy was showing signs of weakness as a number of business and Wall Street brokerages went bankrupt. In October, the respected Knickerbocker Trust in New York City and the ¹Westinghouse Electric Company both failed, touching off a series of events known as the Panic of 1907.
In the wake of the initial business collapses, stock market prices plummeted and depositors made a massive run on the nations banks. The U.S. Treasury pumped millions of dollars into weak banks in the hope of saving them, but the string of collapsed institutions lengthened.
As much as I hate the guy, he’s right.
bookmark for later.
You’re right, you were one of those ringing the bell a few years ago. I’ve followed your posts for a few years due to your economic and investment opinions which I’ve found to be pretty accurate.
Thanks for sharing your knowledge.