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Are AIG FP Employees Using Bailout Cash To Get Jobs Elsewhere? Looks Like It, Says AIG Source
Remember the rumors that AIG Financial Products had "thrown in the towel," handing over massive portfolios of derivatives to the trading desks of major investment banks to unwind in a process that gave the beleaguered banking sector a profitable first quarter?
We first heard them back in March from the blog Zero Hedge. Then, sure enough, the banks began reporting first quarter earnings that for the most part beat expectations -- all thanks to record and near-record revenues for their trading operations.
Then the fixed income chief at the hedge fund BlackRock essentially confirmed the story to Bloomberg Radio in a wry interview we partially transcribed.
And now we've heard from an anonymous executive at AIG who is "familiar" with AIG FP...
Our source says it "is becoming assumed throughout the industry that AIG FP finding new ways to roll over" -- which is to say, using bailout money to offer counterparties on its trades generous terms in closing out its contracts with the massive issuer of credit default swaps and other exotic derivatives options. While he did not want to name names or go into detail about any specific transactions, he said we should watch for signs of AIG FP employees being rewarded for their generosity with jobs working for their old counterparties under eyebrow-raising terms -- "like if you have a noncompete," the source explained, "and you go to a competing firm doing something far below you for an extreme salary."
An exodus of employees at AIG Financial Products has already threatened to cost taxpayers hundreds of billions more dollars. And to think some executives might be hastening their departure from the zombie insurer by squandering billions of taxpayer dollars is...while perhaps unsurprising, still a little nuts.
"The staggering thing," our source says, "is the size of these deals."
Josh
Zachary
um.....justice department.....you there?
May 8, 2009 5:20 PM | Reply | Permalink
Why is Geithner Sec. of the Treasury? Please explain. He should have had that place under the control of the US government and all of them should be doing the best work of their lives under threat of being prosecuted for the previous work they did to destroy our economy. Geithner is nothing but an enabler for further theft from the treasury. It's obscene.
May 8, 2009 5:28 PM | Reply | Permalink
It's how the Master Of The Universe operate -- it's dog-eat-dog; and they feel they do so deserve advantages no one else in America will receive -- because, well... because. And, who's going to stop them? We don't need to know any more.
And, Timmeh is one of them. Right to the core. As to why the President chose him -- you'll have to ask him, but I suspect it was a sop to the Street and the Banksters. In Timmeh, they'd be dealing with one of their own.
And, Obama isn't radical enough to burn a corrupt financial system down to the bedrock and start over.
Now... we'd better move along. We don't belong in this neighborhood.
May 8, 2009 6:27 PM | Reply | Permalink
Pres. Obama's and Geithener's actions and reactions are very disturbing and inconsistent with many of the Obama attributes and writings that led me to support him.
I sure as hell hope that there are things Pres. Obama is doing under the radar to rein in this sector of our economy. Unfortunately, the MSM is pretty much avoiding the realities just like Iraq, torture, strangling of our 4th Amendment rights and the run up to the present banking and financial extortion/hijacking.
We may not be able to recover from the next round of exotic financial transactions foisted upon us by the international commercial/investment banking gurus that led us into the present situation.
If we don't as a government get a good handle on the regulatory side of things, we are probably just pissin the Treasury away.
Sadly, I think Obama and Geithner understand this too.
Let's try the Audacity of burning the corrupt financial system down to the bedrock and starting over (credit to JVN above).
May 9, 2009 10:34 AM | Reply | Permalink
I have never understood why taxpayers have to bailout the banks to free up credits to stimulate the economy. Why not make loans directly and let the financial institutions face the consequences of their greed? Of course the feds would have to set up branches all over the country, but this would create jobs, and would fall under government spending.
Instead, the feds are bailing the banks so that the banks would make loans again. This is a sadomasochist relationship. The feds are submissives who would rather surrender controls to their dominants the bankers. And not any dominant would do. Dominants have to be the most sadistic self-centered people on the face of the earth, whose mistreatments of their submissives reafirm the S&M relationship. Have you ever wondered why the CEO of GM was forced to resign while the people in FP division of AIG still have jobs and are giving themselves big bonuses? In BDSM relationships, the submissives like to be mistreated. Why are the feds behaving like submissives?
May 9, 2009 10:43 AM | Reply | Permalink
It seems AIG is only acting as an elected politician in America.
From the Cities, Counties to Washington politicians role over for the rich and powerful in this same way.
Why do we not complain when the politicians act like AIG?
May 9, 2009 7:13 PM | Reply | Permalink
Why is anyone surprised at this? They got their salaries, they got their retention bonuses, their stock isn't worth anything, and they're playing with someone else's money. So why should they do an even halfway decent job? Sure, there's that minor detail called fiduciary responsibly, and that other minor detail about unlawful conversion, but laws are for little people...
I think we need to think up some much more imaginative ways to line up the interests of AIGFP's staff with those of their owners.
May 10, 2009 8:29 PM | Reply | Permalink
This is an extremely minor point, but just so you know, you don't "issue" a credit default swap. You either sell or write a credit default swap.
Also, it's unreasonable to expect AIG to unwind its CDS portfolio at market prices. Everyone in the world knows that AIGFP is unwinding its derivatives portfolio. Imagine that you work on a CDS desk at an investment bank, and AIGFP calls you up and asks for quotes on several large CDS unwinds. Knowing that the AIGFP trader is under strict orders to unwind his positions, would you offer him fair market prices? Of course not. He doesn't have the option of keeping his CDS positions open if he doesn't like the unwind price. He has to take pretty much whatever price you offer him. It's not his fault, it's just the situation.
May 16, 2009 1:33 AM | Reply | Permalink