Henry Paulson

Interesting Reading: Paulson's '06 Ethics Agreement And '08 Goldman Waiver

Justin Elliott | August 10, 2009, 6:01PM

Earlier today we told you about the near-constant phone contact between then-Treasury Secretary Henry Paulson and his successor as Goldman Sachs CEO, Lloyd Blankfein, during the height of the financial crisis last September.

Now, we've obtained from the Treasury Department Paulson's ethics agreement, in which he pledged not to participate in matters involving Goldman Sachs, and the waiver to that agreement granted by White House counsel Fred Fielding. You can read the agreement here and the waiver here.

Of the dozens of phone calls between Paulson and Blankfein, 26 occurred before Paulson requested and obtained a waiver to deal with matters relating to Goldman Sachs, the New York Times reported Sunday. The content of the calls is unknown. But two were the morning of Sept. 17, a day after the AIG bailout, which ultimately handed Goldman $13 billion of taxpayers' money -- before Paulson obtained the ethics waiver.

In Paulson's ethics agreement, written after President Bush plucked him from Goldman to be Treasury Secretary, all but two of eight pages mention Goldman. He concludes it by saying "these steps will ensure that I avoid even the appearance of a conflict of interest."

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Topics: AIG, Bailout, Goldman Sachs, Henry Paulson, Lloyd Blankfein

Henry Paulson

Co-Treasury Secretary Lloyd Blankfein? Paulson And Goldman Exec Talked 24 Times In Week Of AIG Bailout

Justin Elliott | August 10, 2009, 1:20PM

Blockbuster stuff from the New York Times Sunday on stunningly frequent contacts during the height of the financial crisis between Henry Paulson and his successor as CEO of Goldman Sachs, Lloyd Blankfein.

The then-Treasury Secretary and Blankfein spoke by phone two dozen times in one week in September 2008 when AIG was bailed out -- a deal that handed Goldman, a key counterparty of AIG, $13 billion in federal money.

Perhaps the most remarkable thing about the Times' account of the contacts between the two men, for which Paulson belatedly sought and received an ethics waiver, is that the phone calls were often coming from the Treasury Secretary.

In one day, Sept. 17, Paulson called Blankfein four times. Then after taking a call from President Bush in the evening, the Treasury Secretary called Blankfein yet again -- almost as if he felt obliged to keep the Goldman CEO constantly abreast of his progress. He spoke with Blankfein "far more" than with other executives, the Times reports.

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Topics: AIG, Bailout, Goldman Sachs, Henry Paulson, Lloyd Blankfein

AIG

Report: Senate Subpoenas Goldman, Deutsche Bank, On Subprime Statements

Zachary Roth | July 30, 2009, 4:42PM

Goldman Sachs and Deutsche Bank have received subpoenas from a Senate committee that's probing whether they committed fraud in connection to last year's financial collapse, the Wall Street Journal reports (sub. req.).

The Senate Permanent Subcommittee on Investigations, chaired by Carl Levin, is said to be looking into whether those firms, and perhaps others, had private doubts about the mortgage-backed securities they were putting together, despite their rosy public pronouncements about the complex products.

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Topics: AIG, Bailout, Financial Crisis, Goldman Sachs, Wall Street

AIG

Financial Crisis Panel Will Probe AIG Bailouts, Says Chair

Zachary Roth | July 22, 2009, 12:26PM

The man who will lead the special congressional effort to probe the causes of the financial crisis says his panel will also consider the government's response to the events of last fall -- including the controversial serial bailouts of AIG.

In an interview with TPMmuckraker, Phil Angelides, the former California treasurer who was recently named by Congress to chair the Financial Crisis Inquiry Commission, noted that the statute that created his panel required it to look not just at the financial institutions that failed, but also at those that would have failed but for massive government intervention. That means that "it's going to be hard not to touch on those issues," said Angelides, referring to the various AIG bailouts -- which some have portrayed as disingenuous backdoor efforts to save AIG counterparties like Goldman Sachs and Merrill Lynch from the consequences of their bad bets -- as well as other moves by the government to prevent a wider collapse of the financial sector.

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Topics: AIG, Bailout, Financial Crisis, Nancy Pelosi, Phil Angelides, Wall Street

AIG

AIG Chief Liddy To Step Down

Zachary Roth | May 21, 2009, 4:41PM

AIG CEO Ed Liddy, who was brought in by the government to try to stabilize the firm amid the financial crisis last fall, is going to step down.

It's unclear exactly why, and for how long the departure had been planned. Here's the key part of AIG's press release:

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Topics: AIG, Ed Liddy, Financial Crisis, Wall Street

AIG

AIG: Our CEO Didn't Know Enough To Testify About What He Testified About

Zachary Roth | May 13, 2009, 5:49PM

Is a cornered AIG now trying to cast doubt on a key part of CEO Ed Liddy's testimony? It sure looks that way...

In his testimony in March before Congress, Liddy was asked about the company's risk management practices concerning AIGFP, the unit of the firm that made those disastrous credit default swaps.

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Topics: AIG, Ed Liddy, Financial Crisis, Joseph Cassano, Martin Sullivan, Wall Street

AIG

How European! AIG Derivatives Traders Go On Strike

Moe Tkacik | May 13, 2009, 5:44PM

AIG CEO Ed Liddy's much-anticipated appearance in Congress today was... not really worth all the anticipation, in our humble opinion. Questions posed by members of the House Oversight Committee included "what is the address of AIG?", an inquiry into whether the company's value was reflected in its stock price, and the follow up to the first question "Is that in New York City?"

But today the blog ZeroHedge wonders something we'd like to see Ed Towns bring up next time: wherefore the apparent halt in the unwind of derivatives held by the money vortex called AIG Financial Products? Back in February the company was saying it had unwound 25% of its $2.7 trillion in notional exposure, which would leave it with 2.025 trillion in outstanding swaps. By March they said they had unwound another $400 billion and change. But in the two months since then, if Liddy's testimony today is accurate, the unit has only managed to offload $100 billion in additional exposure. What's to explain for the sudden halt? Did someone give up "unwinding complex trades" for Lent?

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Topics: AIG

AIG

Are AIG FP Employees Using Bailout Cash To Get Jobs Elsewhere? Looks Like It, Says AIG Source

Moe Tkacik | May 8, 2009, 4:00PM

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...

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Topics: AIG

AIG

Ashcroft Made Millions As Corporate Monitor, Sees Dire Need For More Corporate Monitoring

Zachary Roth | May 5, 2009, 3:19PM

You can say one thing for John Ashcroft: he's not short on chutzpah.

In an op-ed in today's New York Times, the former attorney general points out a thorny problem that the Justice Department may face as a result of the financial crisis: if there's evidence that a company that has received significant amounts of bailout money committed fraud or other financial crimes, how do the Feds prosecute that company, while still protecting the health of the company on behalf of taxpayers?

The answer, according to Ashcroft: deferred prosecution agreements.

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Topics: AIG, Bailout, Financial Crisis, John Ashcroft, Justice Department, Securities and Exchange Commission, Wall Street

AIG

AIG Subsidiary Explains "Timely" Decision To Pretend It Was Never Called "AIG"

Moe Tkacik | May 4, 2009, 6:38PM

"We are pleased to announce our decision to rebrand to a familiar name -- VALIC," begins a brochure titled, "Back to our roots" that was recently distributed to holders of policies with the Variable Life Insurance Company. Um, and guess what slightly more familiar name VALIC has decided to cast off? Yes, that would be everyone's favorite federally-funded money vortex the American International Group.

Possibly, and this is entirely idle speculation on our parts but, the fancy public relations firms the zombie insurer retained are known for running focus groups. Perhaps the feedback concluded that somehow the AIG name was a turnoff to people looking for a place to store their remaining life savings?

"We believe this decision is timely," the brochure goes on, adding that with its return to its more venerable brand it restores a name "that has represented more than a half a century of helping people plan for and enjoy a secure retirement"* and also sounds vaguely like the pickle brand, possibly to convey a sense of "preservation."

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Topics: AIG

AIG

AIG Sets Date For Liddy Testimony -- But Only Under Threat Of Subpoena

Zachary Roth | May 1, 2009, 11:45AM

AIG and the House Oversight committee have agreed to a date, May 13, on which the firm's CEO, Ed Liddy, will testify before the committee. But it looks like Liddy will be going to Washington kicking and screaming.

As we noted earlier this week, the committee invited Liddy to testify May 6, and told us that it expected to see him then. But today the Wall Street Journal reports (sub. req.) that that day "was scrapped because AIG is due to report its results for the first quarter the following day."

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Topics: AIG, Bailout, Ed Liddy, Financial Crisis, House Oversight, Wall Street

AIG

Feds Zeroing In On Cassano's Valuation Of Credit Default Swaps

Zachary Roth | April 29, 2009, 12:40PM

Yesterday we told you that federal investigators are now zeroing in on two other AIG staffers, in addition to Joseph Cassano, as part of their probe into potential criminal wrongdoing at AIG. But a report (sub. req.) in the Wall Street Journal, which confirmed that information, also began to flesh out the more interesting question of just what the Feds suspect Cassano and his crew may have done wrong.

We knew that that December 2007 presentation, at which Cassano and others reassured investors that everything was basically fine, was drawing particular scrutiny from investigators. But the Journal adds some meat to that bone.

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Topics: AIG, Financial Crisis, Joseph Cassano, Martin Sullivan, Wall Street

AIG

AIG's Sullivan: "Highly Unlikely" We'll Have To Pay Out On Credit Default Swaps

Zachary Roth | April 28, 2009, 6:22PM

We took another quick look at that press release that AIG released in November 2007 about its third quarter earnings -- which is now reportedly being looked at by federal investigators as evidence that the firm may have deliberately misled investors.

And here's one line that jumps out. The release quotes CEO Martin Sullivan saying:

AIGFP reported an operating loss in the quarter due principally to the unrealized market valuation loss related to its super senior credit default swap portfolio. Although GAAP requires that AIG recognize changes in valuation for these derivatives, AIG continues to believe that it is highly unlikely that AIGFP will be required to make any payments with respect to these derivatives. (our itals)

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Topics: AIG, Financial Crisis, Martin Sullivan, Wall Street

AIG

Report: Feds Probing Two Cassano Deputies

Zachary Roth | April 28, 2009, 1:02PM

CBS News has some new developments in the criminal probe into AIG...

We knew that Joe Cassano, the former head of AIG's Financial Products unit, was in investigators' crosshairs for potentially giving misleading public statements about AIGFP's position. But the network now reports that the Justice Department is also looking closely at two of his deputies -- Andrew Forster, an executive vice president, and Thomas Athan, a managing director -- for the same reason.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

Congress To DOJ And SEC: Hand Over AIG Docs Or We'll Subpoena Them

Zachary Roth | April 28, 2009, 10:21AM

Congress is upping the ante in its bid to get access to those insider reports on AIG compiled by a government monitor.

House Oversight chair Ed Towns, joined by ranking GOPer Darrell Issa, yesterday sent letters to the Justice Department and the SEC, threatening them with subpoenas if they don't hand over the information by this Thursday*.

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Topics: AIG, Bailout, Edolphus Towns, Financial Crisis, House Oversight, Justice Department, Securities and Exchange Commission, Wall Street

AIG

Congress To Ask Liddy: "What Caused The Downfall Of AIG?"

Zachary Roth | April 27, 2009, 10:22AM

AIG CEO Ed Liddy has already testified once before Congress about his firm's starring role in the financial crisis. But it looks like he'll soon be doing so again.

Last week, Rep. Ed Towns -- who chairs the House Oversight Committee, which is probing the causes of the crisis -- sent a letter to Liddy inviting him to appear May 6th. Among the topics that Towns intends to cover, according to the letter: "What caused the downfall of AIG?" and "what has AIG done with its Federal financial assistance?"

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Topics: AIG, Bailout, Ed Liddy, Edolphus Towns, Financial Crisis, House Oversight, Wall Street

BlackRock

Goldman Claims Trading Profit Had Nothing To Do With AIG; BlackRock Bond Chief Calls BS

Moe Tkacik | April 15, 2009, 3:39PM

On Monday afternoon Goldman Sachs posted a miserable first quarter for most of its typical investment banking divisions -- and a record $6.56 billion in revenue for its trading unit, giving the bank a net profit nearly double Wall Street expectations. Mere seconds into the question and answer session of yesterday's conference call with analysts, Guy Moszkowski of Merrill Lynch asked the question on everyone's lips: what did the $180 billion money vortex called AIG have to do with those numbers? Nothing, insisted chief financial officer David Viniar, who said the impact of the unwind for the quarter "rounded to zero" and later professing to Bloomberg he was "mystified" over the public fascination with the question.

Was Viniar lying? Yesterday we explained how Goldman appeared to have booked the cash flow from the bailout in its "orphan month" of December, making Viniar possibly technically truthful. But then Peter Fisher, who heads fixed income trading for the hedge fund BlackRock, all but accused Viniar of flat-out lying. With the seen-everything tone one might expect of the longtime central banker Fortune once described as "one of those behind-the-scenes guys who keep Wall Street from coming apart at the seams," Fisher told Bloomberg Surveillance host Tom Keane in an audio segment uploaded by the blog ZeroHedge that Goldman, as
rumored, had reaped huge "one-off" profits on the AIG unwind.

"So," Keane asked sarcastically, "did [Goldman] make those trading gains by taking the hide out of BlackRock?" That got a laugh, so Keane pressed:

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Topics: AIG, BlackRock, David Viniar, Goldman Sachs, Peter Fisher

AIG

Source: SEC (Unlike DOJ) Cooperating With Congress's Request For AIG Docs

Zachary Roth | April 15, 2009, 12:17PM

Earlier this morning, we reported that the Justice Department is dragging its heels on a demand from Congress to hand over information compiled by a highly placed government monitor at AIG.

But DOJ's recalcitrance is underlined by the approach of the SEC, which was also asked to turn over the monitor's information. According to a source on the House Oversight committee, the SEC has said it's complying with the request, and is expected to turn over the information shortly.

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Topics: AIG, Edolphus Towns, Financial Crisis, House Oversight, Justice Department, Securities and Exchange Commission, Wall Street

AIG

Justice Dragging Heels On Congress's Request For AIG Docs

Zachary Roth | April 15, 2009, 9:50AM

Last month, as we noted at the time, House Oversight committee chair Ed Towns formally asked the Justice Department for records kept by a government monitor, who since 2004 has had access to high-level internal deliberations at AIG.

But DOJ seems to be dragging its heels.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

AIG Responds On PR Expenses: We'll Give Congress What It Wants, And Then Some

Zachary Roth | April 15, 2009, 9:06AM

AIG has responded to the letter from Rep. Ed Towns requesting information about the company's PR expenses, that we first reported on yesterday -- and which has now been picked up by Reuters, Bloomberg, and ABC News, among others.

Here's the statement they sent us:

In more than 30 media appearances since the beginning of the year and elsewhere, Mr. Greenberg and his lawyers have made false and misleading statements about AIG, including his role in creating AIG Financial Products and its credit default swap business, as well as the circumstances surrounding his forced departure from AIG during an accounting fraud investigation. We look forward to providing Congressman Towns with background on why it has been necessary to correct these and other misstatements, which are both misleading to the American public and damaging to AIG and its ability to repay taxpayers.

This issue is not about AIG's corporate public relations expenditures, which are down sharply since last year. It is about correcting Mr. Greenberg's false and damaging statements.

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Topics: AIG, Bailout, Edolphus Towns, Financial Crisis, House Oversight, Wall Street

AIG

Congress Probing AIG Spin Shop

Zachary Roth | April 14, 2009, 12:57PM

Congress is demanding information from AIG about reports that the bailed-out insurance giant has four PR firms on its payroll -- and about its recent PR blitz aimed at discrediting former CEO Hank Greenberg.

In a letter sent this morning to AIG chief Ed Liddy and obtained exclusively by TPMmuckraker, House Oversight committee chair Ed Towns requests detailed information on AIG's PR expenses, specifically mentioning Hill & Knowlton, and Mark Penn's Burson-Marsteller, two high-priced experts in Washington spin that have signed on to represent the firm.

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Topics: AIG, Bailout, Edolphus Towns, Financial Crisis, House Oversight, Wall Street

AIG

AIG FP Chief: Taxpayer Ire Over Bonuses "Probably Hurt Taxpayers"

Moe Tkacik | April 13, 2009, 11:25AM

Last month AIG Financial Products head Gerry "Che" Pasciucco met with employees of the unit that took down the economy, and relayed a request from upper management that they return those controversial "retention bonuses," adding that he felt the request was tantamount to blackmail. But he was only thinking of us taxpayers, he tells today's Wall Street Journal, in a story that says 20 AIG FP employees -- not including the unashamed bonus keeper Jake DeSantis, who published his resignation letter in the New York Times -- had quit amid the controversy:

Mr. Pasciucco said that as a result of the bonus controversy, some employees' children were harassed, and some had clubs ask them to resign. "It doesn't surprise me that some senior people said, 'You know what, I've had enough,' " he said...Mr. Pasciucco says the controversy "hurt morale" and "stunned people such that our wind-down has slowed down." He added, "Taxpayers probably have been damaged."

But will we ever know how much we've been damaged? A Financial Times story about AIG FP's decision to "opt out" of a new International Swaps & Derivatives Association protocol signed by 2,000 derivatives market participant intended to to make the complex credit default swap business less "opaque" casts more doubt on that:

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Topics: AIG

Berkshire-Hathaway

Barney Frank Rousts Credit Rating Firm For...Being Too Negative?

Moe Tkacik | April 9, 2009, 5:14PM

Credit rating agencies are coming under fire from Congress again -- but this time it's for being too pessimistic. After Moody's issued an unprecedented across-the-board negative credit outlook on all American cities and towns yesterday, House Financial Services Committee Chairman Barney Frank issued his own negative assessment of Moody's, and scheduled a hearing to investigate:

I am troubled by the action of Moody's Investors Service to issue a negative outlook across the board on America's municipalities, which could raise the interest rates on cities and towns making it more expensive to borrow funds for infrastructure improvements.

On the face of it, this seems like a perverse round of messenger shooting. But last March, as cities and towns across the country started getting flooded with demands for huge payouts rooted in arcane details of "swap" contracts they'd inked with banks that managed their bond offerings, Frank discovered something truly perverse: the public sector was being scammed on multiple fronts by the investment banks underwriting their bond offerings -- and the profits directly fed the disastrous trade of risky mortgage-linked credit default swaps that hastened the financial meltdown.

The scheme started at the credit ratings agencies, which keep two sets of standards for grading corporate and municipal bonds -- and municipalities are held to a much higher standard, as Frank explained in a hearing using Moody's own data:

I will be giving out this chart, sectoral breakdown of Moody's rated issuers and defaulters, 1970 to 2000, general obligation bonds, there it is. Number of issuers 14,775. Number of defaults, 0.

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Topics: AIG, AMBAC, Barney Frank, Berkshire-Hathaway, Mel Watt, Moody's Investors Service, Muncipal bonds, Municipal finance

AIG

Warren: Fire Top Management At AIG and Citi

Zachary Roth | April 7, 2009, 5:25PM

We're late to this, but it looks like Elizabeth Warren, the Harvard Law professor who chairs the Congressional Oversight panel for the TARP funds, is upping the ante.

After several months of raising the alarm about the Treasury Department's failure to attach strings to the bailout funds, to little apparent effect, Warren will issue a hard-hitting report this week that broadly indicts the Obama administration's approach to the financial crisis, reported the British paper The Observer over the weekend.

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Topics: AIG, Bailout, Citigroup, Elizabeth Warren, Financial Crisis, Treasury Department, Wall Street

AIG

In Letter To Liddy, Lawmaker Probes AIG Risk Practices

Zachary Roth | April 3, 2009, 5:32PM

Investigators are starting to zero in on the crucial issue of how much access AIG's risk control team had to Joe Cassano's deals.

Earlier this week, we wrote about a December 2007 presentation in which AIG execs assured investors that the firm's risk control officers looked closely at the credit default swaps made by Cassano's financial products unit. But as we noted, those assurances were contradicted last month by AIG CEO Ed Liddy, who told Congress that Cassano limited the access of the risk control team to his unit. And there's additional evidence (sub. req.) supporting Liddy's claim.

And now it looks like one Democratic lawmaker is picking up on that same discrepancy.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

AIG's PR Blitz

Zachary Roth | April 3, 2009, 1:53PM

So as we reported yesterday, longtime AIG CEO Hank Greenberg went before Congress and placed the blame for the firm's collapse squarely on the execs who took over after he left in 2005 -- including on the crew currently at the helm, who Greeenberg said should be replaced.

But we've been struck by the ferocity of AIG's response to Greenberg, who's been skirmishing with the firm pretty much since he stepped down. Despite its awkward position as a ward of the state -- not to mention as the prime corporate face of the greed and recklessness that caused the financial crisis -- AIG has mounted an aggressive public-relations counter-offensive.

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Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Media, Wall Street

AIG

Greenberg To Kanjorski: "May I Finish?"

Zachary Roth | April 2, 2009, 2:56PM

Here's one more interesting extended exchange from Hank Greenberg's testimony, in which the former AIG honcho is being questioned by Rep. Paul Kanjorski about regulation of the firm's financial products unit London office, and about how AIG should be regulated going forward.

At one point, the witness, clearly not used to being ordered around, asks Kanjorski exasperatedly, "May I finish?" -- a request the congressman ignores.

Watch:

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Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street

AIG

Greenberg: Get Rid Of AIG Management

Zachary Roth | April 2, 2009, 2:19PM

More nuggets of news from Hank Greenberg's testimony before Congress....

Greenberg, with the prominent Washington lawyer David Boies at his side, declared that government efforts to rescue AIG -- taxpayers now own almost 80 percent of the insurance giant -- have failed. He said that that stake should be reduced to 15 percent, and that the company should be restructured, and current management should be removed.

Greenberg has been embroiled in legal wrangling with AIG almost since his 2005 departure from the firm, amid allegations of accounting improprieties.

He also quarreled with AIG's decision, apparently blessed by the government, to pay back in full its counter-parties on the credit default swaps.

It would have been more beneficial for the American taxpayer if the federal government had walled off AIG Financial Products...and provided guarantees to AIGFP's counterparties rather than putting up billions of dollars in cash collateral to those counterparties.

And asked by Rep. Rep. Elijah Cummings whether he took any responsibility for the firm's collapse, Greenberg replied flatly: "No I don't."

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Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Wall Street

AIG

Lawsuit: AIG Not Just Screwing Over Taxpayers Anymore

Moe Tkacik | April 2, 2009, 2:02PM

AIG has allegedly stopped paying many of its bills in spite of its $180 billion in bailout cash, and a lawsuit filed against the firm by a Pennsylvania real estate developer managing 16,800 apartments owned by the global real estate arm paints a disturbing portrait of goings-on at the failed insurer that give emphatic new meaning to the term "zombie bank."

In his complaint, King of Prussia, Pa. property developer Mitchell Morgan alleges numerous counts of fraud and breach of contract, and depicts AIG as an absentee landlord to its multibillion dollar real estate portfolio, halting maintenance and renovation fees to hundreds of properties and potentially deepening the real estate crash further, sabotaging its own investments at the expense of taxpayers. Striking a populist tone notable for an outspoken Republican who once hosted a Rick Santorum fundraiser featuring George W. Bush in his own (generously-sized) home, Morgan's suit paints a portrait of a company that manages largely by never returning phone calls and blaming the Fed for everything:

There are real-world consequences for AIG's financial irresponsibility and its failure to honor its commitments. Employees whose jobs depend on the project renovations will be faced with loss of jobs in an economy whose unemployment rate continues to rise dramatically... Unlike many of the large real estate transactions that were occurring at the time, the goal of this Limited Partnership was not to purchase and "condo convert" or "flip" the properties, but to renovate them and continue to rent them to low income and middle class families...Because of the failure to timely approve and fund the required capital contributions, the Partnership's vendors, if not paid on time, which will constitute an immediate event of default under the Partnership's loan agreements. To be clear, these are real loans, not federal bailout loans that can simply be restructured.

Morgan is far from the only partner AIG has stiffed, but thus far he appears to be the only one to have sued, perhaps because he remembers how the insurer ran things in the boom years.

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Topics: AIG

AIG

Greenberg: "We Had No Problem Controlling Cassano

Zachary Roth | April 2, 2009, 2:00PM

Asked about whether Joe Cassano was given a free hand at AIGFP, Hank Greenberg, the former AIG CEO who stepped down in 2005, told Congress:

I'm sorry if you can't believe it, but I'm telling you, we had no problem controlling Cassano.

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Topics: AIG, Financial Crisis, Hank Greenberg, Joseph Cassano, Wall Street

AIG

Greenberg To Taxpayers: Drop Dead

Zachary Roth | April 2, 2009, 11:43AM

Nice guy, that Hank Greenberg.

Here, Rep. Jason Chaffetz (R-UT) asks the former AIG CEO whether he'd be willing to use a separate company that Greenberg has stocks in to pay back taxpayers for AIG's bailout.

And Greenberg pretty much tells him to shove it.

Watch:

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Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Wall Street

AIG

Greenberg: AIGers "Got Greedy"

Zachary Roth | April 2, 2009, 10:35AM

Greenberg:

You don't have control, and you don't have management oversight, things can go wrong. And they did.

...

I think they got greedy. I think they wrote considerably more business than they should have.

Hard to argue with that. But it only happened after Greenberg left, of course.

Also: this is coming from the man whose net worth was rated by Forbes at $3.6 billion in 2004.

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Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street

AIG

Greenberg: Managers Failed (After I Left)

Zachary Roth | April 2, 2009, 10:30AM

From Hank Greenberg's testimony in front of Congress, which just started:

AIG's business model did not fail. Its managers did.

In 2005, Greenberg stepped down after a 37-year run as AIG's CEO.

We'll be following his testimony closely.

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Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street

AIG

Did More AIG Execs Mislead Investors About Risks?

Zachary Roth | April 1, 2009, 2:46PM

Yesterday, we told you about how several AIG execs reassured investors at a December 2007 presentation that company risk officers had closely scrutinized the transactions of the financial products unit -- the part of AIG that made those credit default swaps. And about how several pieces of evidence have surfaced in recent months that appear to contradict those claims.

This is serious business: US and British prosecutors are already investigating former AIGFP chief Joe Cassano, and, it appears, former AIG chief Martin Sullivan, for potentially painting an unduly rosy picture of the firm's exposure to the sub-prime crash -- and are said to be focusing on that December 2007 presentation in particular. So it's worth taking a moment to lay out what exactly we know here, and what it might amount to.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Did Risk Team Look At Cassano's Deals? AIG Execs Offer Contradictory Claims

Zachary Roth | March 31, 2009, 6:42PM

We've told you that the Feds are looking at that December 2007 presentation that Joe Cassano gave for investors, to determine whether he, along with AIG CEO Martin Sullivan, knowingly gave an unduly rosy picture of AIGFP's exposure to sub-prime losses.

But a review of that presentation suggests that a few other AIG execs may also have shaded the truth, to put it mildly, on a different question.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Cassano: CDOs Are "Money Good Assets"

Zachary Roth | March 31, 2009, 5:23PM

Earlier today, we picked out some fascinating-in-hindsight excerpts from a May 2007 presentation given by Joe Cassano, then the head of AIG's financial products unit.

Since then, we've been looking at a similar presentation (via Nexis) for investors given by Cassano and other AIG execs in December of that year. By that time, the collapse of the subprime housing market could no longer be downplayed, and Cassano's appears more anxious than ever to reassure clearly nervous investors about AIG's exposure to losses on its credit default swaps.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

James Thomas

How $2 Million In AIG FP Options Saved An IRS Attorney $145 Million In Taxes

Moe Tkacik | March 31, 2009, 4:54PM

As we are quickly coming to understand, AIG Financial Products was siphoning billions from tax coffers the old-fashioned way ages before the collateral calls began flooding in. Essentially, the same unregulated swaps and options contracts in which AIG FP "specialized" a.k.a. "did not understand" lay at the heart of many of the sham "partnerships" corporations and wealthy people use to obscure their capital gains. These partnerships are often referred to as "Son of Boss," we still do not know why, and the IRS has been shutting down them down for years, because it is usually abundantly clear that the rich people who bought said derivatives had no idea what the hell they were for beyond "generating artificial basis" or somesuch euphemism for "pretending they lost money to hide the fact that they actually raked it in." That said, most of the people with enough money to know about tax shelters are/have pretty decent lawyers, so sometimes they think up a pretty good excuse for having invested in a baffling combination of esoteric "swaps" and such. Last month, for instance, a Los Angeles judge struck down a Son of Boss partnership that had spared a pair of local real estate developers an accumulated tax bill of $145 million by investing $2 million in some obscure AIG credit default swaps. But one of the developers, former Sacramento Kings owner and former IRS attorney James Thomas, had a pretty genius alibi.

In 2001 they sought out an abusive tax shelter that has become known as "Son of BOSS." In the Son of BOSS scheme used by Thomas and Fox, they purchased an exotic form of a financial option that they claim would have protected them against a catastrophic decline in real estate values, which they feared in the immediate aftermath of the terrorist attacks of September 11.

A catastrophic decline in real estate values you say? How very "black swan"!*
The judge wasn't hearing it though.

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Topics: AIG, James Thomas

AIG

Joe Cassano, In His Own Words

Zachary Roth | March 31, 2009, 2:41PM

How did Joe Cassano -- the man who brought down AIG, and with it, perhaps the entire global financial system, with those disastrous credit default swaps -- talk about what his unit, AIG Financial Products, was up to?

We've been looking through a presentation that Cassano gave to a group of entrepreneurs and analysts in May 2007 -- just as the extent of the collapse of the sub-prime market was becoming clear. In his speech (accessed by Nexis), Cassano detailed AIGFP's various business lines, and, of course, painted a rosy picture of the unit's future earning potential.

The entire performance has an almost poignant quality, looked at in light of the tumult that would soon befall AIGFP. (Less than nine months later, it would announce Cassano's resignation after an $11.1 billion writedown of credit-default swaps.) But we've pulled out a few of Cassano's comments that day that are particularly noteworthy...

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Topics: AIG, Bailout, Financial Crisis, Joseph Cassano, Wall Street

AIG

Traders "Unwinding" AIG: "We Have Never Done As Big Or As Profitable Trades -- Ever"

Moe Tkacik | March 30, 2009, 5:28PM

What's it like, the laborious job of "unwinding" hundreds of thousands of mind-numbingly complex derivatives contracts amassed over the years by the inimitable AIG Financial Products? Ask the Wall Street investment banks to whom they've been farming out the work -- it's so painful and time-consuming it feels like the old days, especially the "massively profitable" part. An anonymous derivatives trader tells the blog Zero Hedge:

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".

Sort of undermines the notion that AIGFP employees needed retention bonuses so that the Great Unwinding might be an "orderly" and modest process conducted by cool heads and not, god forbid, subject to raids from ex-AIGers who'd left to trade against the company's book. Nah, they pretty much "threw in the towel," as Zero Hedge points out, and gave the "winners" on all those bad trades a chance to really earn their bonuses again.

But is the big payout the real shadowy force behind the recent runup in stock prices? Today's stock traders seem worried. Because even if reports that AIG FP has only unwound a quarter of its total trades are true, most investors agree the Treasury is too cash-strapped to do this forever.

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Topics: AIG, Goldman Sachs

AIG

AIG's Stiffed Business Partners Begin to Speak Out

Brian Beutler | March 30, 2009, 2:04PM

Last week we reported that the House Financial Services committee's ranking member, Rep. Spencer Bachus (R-AL) is asking chairman Barney Frank and the Treasury department to look into the cases of smaller U.S. banks that are allegedly being stiffed on their loans to an AIG subsidiary while its major CDS counterparties are paid off in full.

In a story that may shed some light on his complaint, the Wall Street Journal reports today on the cases of two businesses who partnered with AIG on real estate development projects and are now fighting to get AIG to contribute its share of cash to pay project expenses:

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Topics: AIG, Bailout