TPMMuckraker AIG
Darrell Issa
No Let Up: Darrell Issa's Tireless Quest For Scandal
Rep. Darrell Issa (R-CA)
Remember the 1990s, when Newt Gingrich, Dan Burton and co. managed to create a steady stream of outrage by playing up every Clinton administration "scandal," no matter how minor? Or how about the last years of the Bush administration, when Rep. Henry Waxman (D-CA) seemed to function as a one-man investigative machine, making sure that no Bush administration wrong-doing went unexamined?
Today that role is being played by Rep. Darrell Issa (R-CA), the ranking Republican on the House Oversight committee. But despite the steady stream of made-to-order conspiracy theories coming from Fox News and the Tea Party crowd, it's a much harder job. That's largely because Issa's party is in the minority, so he doesn't have the power to compel testimony or subpoena documents. And it's perhaps also because, though the Obama administration is far from squeaky clean, Issa just hasn't had the kind of material to work with that his predecessors did.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (6)Topics: ACORN, AIG, AmeriCorps, Barack Obama, Census, DNC , Darrell Issa, Fox News, Gerald Walpin, Goldman Sachs, Google, Henry Waxman, House Oversight and Government Reform Committee, Joe Sestak, Kevin Johnson, Mary Schapiro, Newt Gingrich, Republican National Committee, Securities and Exchange Commission, Tea Parties, Timothy Geithner
James Cole
Report: AIG Monitor To Get DOJ Number 2 Post
Attorney James Cole
The corporate lawyer who acted as the Justice Department's inside man at AIG is reportedly set to take the number two spot at DOJ.
James Cole, an attorney with Bryan Cave, was placed as a government monitor inside AIG -- reporting back to DOJ and SEC -- as part of a 2004 deferred prosecution agreement after AIG had been charged with helping a client, PNC Bank, avoid taxes. AIG also paid an $80 million fine as part of that deal.
Topics: AIG, David Ogden, Eric Holder, James Cole, Justice Department
Joseph Cassano
Report: AIG Probe Likely Wrapping Up Without Criminal Charges
Former AIG Financial Products chief Joseph Cassano
The federal probe into the circumstances that triggered the near-collapse of AIG in 2008 has "hit a brick wall," unnamed sources have told CBS News.
Joseph Cassano, the AIG exec at the center of the probe, will sit down next week with DOJ lawyers, in what will likely bring an end to the investigation. Cassano is former head of AIG Financial Products, the unit of the company responsible for the disastrous credit-default swaps that led to the firm being bailed out to the tune of $180 billion.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: AIG, Bailout, Financial Crisis, Joseph Cassano, Justice Department, Wall Street
AIG
AIG Paying Bonuses To Unit That Helped Trigger Crisis
American International Group (AIG) office
It's hard to blame people for tuning out the periodic reports of bailed out financial firms still paying huge bonuses to their staff. After all, there's only so much outrage a person can summon over the long haul.
But here's one that's worth a fresh round: AIG, the bailed-out insurance behemoth whose lavish "retention payments" triggered the first round of fury last year, plans more payments this month, worth $100 million, reports the Washington Post. And this week, the employees scheduled to cash in are from the firm's financial products division. That's the unit whose dodgy credit default swaps triggered the billion dollar losses that led to the financial crisis, and subsequent bailout, in the first place.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (3)Topics: AIG, Bailout, Financial Crisis, Joseph Cassano
Timothy Geithner
NY Fed: Geithner Wasn't Involved In AIG Disclosures Issues
Treasury Secretary Timothy F. Geithner
The New York Fed says Tim Geithner wasn't involved in the New York Fed's late 2008 effort to press AIG to avoid disclosing information about its bailout funds.
A Fed lawyer said in a statement:
Topics: AIG, Bailout, Federal Reserve, Timothy Geithner, Treasury Department
Barney Frank
Frank Supports Hearings On Fed-AIG Emails
Treasury Secretary Timothy F. Geithner
Momentum is building for hearings on what Tim Geithner knew and when he knew it about the New York Fed's effort to press AIG to keep secret details of its massive federal bailout.
Rep. Barney Frank (D-MA), who chairs the House Financial Services committee, told BusinessWeek: "To the extent that there were problems in that AIG situation, we have taken steps to prevent their occurrence."
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (6)Topics: AIG, Bailout, Barney Frank, Federal Reserve, Goldman Sachs, Merrill Lynch, Timothy Geithner, Treasury Department, Wall Street
AIG
Emails: Fed Pressed AIG To Keep Bailout Details Under Wraps
Treasury Secretary Timothy F. Geithner
The New York Fed pressured AIG in late 2008 to withhold from the public details about its massive and controversial payments to counter-parties, according to emails obtained by Bloomberg News. At the time, Timothy Geithner, now the Treasury Secretary, was New York Fed chair.
The federal government was heavily criticized last year for what some lawmakers have called a "backdoor bailout" of several large banks. It spent $182 billion all told to bail out AIG, but directed that the troubled insurance giant use those funds to pay back its counter-parties -- including Goldman Sachs, Merrill Lynch, DeutscheBank, and other major banks -- with whom it had engaged in credit default swaps.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (9)Topics: AIG, Bailout, Darrell Issa, Federal Reserve, House Oversight, Timothy Geithner, Treasury Department
Neel Kashkari
Former Bailout Czar Signs On With Firm That Helped Run Bailout
Neel Kashkari
What a difference a day makes.
On Sunday, we learned from a florid Washington Post profile that Neel Kashkari, the Treasury Department's one-time bailout czar, is now Thoreau-ing it up in the Northern California woods. (Sample line: "The moon hits his stubble, which is six days old.") But the very next day, the investment behemoth PIMCO announced that it had hired Kashkari as a managing director and the head of new investment initiatives.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)Topics: AIG, Bailout, Federal Reserve, Financial Crisis, Goldman Sachs, Henry Paulson, Neel Kashkari, Treasury Department, Wall Street
Henry Paulson
Interesting Reading: Paulson's '06 Ethics Agreement And '08 Goldman Waiver
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."
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (6)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
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (9)Topics: AIG, Bailout, Goldman Sachs, Henry Paulson, Lloyd Blankfein
AIG
Report: Senate Subpoenas Goldman, Deutsche Bank, On Subprime Statements
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (7)Topics: AIG, Bailout, Financial Crisis, Goldman Sachs, Wall Street
AIG
Financial Crisis Panel Will Probe AIG Bailouts, Says Chair
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (6)Topics: AIG, Bailout, Financial Crisis, Nancy Pelosi, Phil Angelides, Wall Street
AIG
AIG Chief Liddy To Step Down
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:
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: AIG, Ed Liddy, Financial Crisis, Wall Street
AIG
AIG: Our CEO Didn't Know Enough To Testify About What He Testified About
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.
Topics: AIG, Ed Liddy, Financial Crisis, Joseph Cassano, Martin Sullivan, Wall Street
AIG
How European! AIG Derivatives Traders Go On Strike
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?
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (0)Topics: AIG
AIG
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...
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (17)Topics: AIG
AIG
Ashcroft Made Millions As Corporate Monitor, Sees Dire Need For More Corporate Monitoring
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (8)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"
"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."
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (3)Topics: AIG
AIG
AIG Sets Date For Liddy Testimony -- But Only Under Threat Of Subpoena
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."
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: AIG, Bailout, Ed Liddy, Financial Crisis, House Oversight, Wall Street
AIG
Feds Zeroing In On Cassano's Valuation Of Credit Default Swaps
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (5)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
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)PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)
Topics: AIG, Financial Crisis, Martin Sullivan, Wall Street
AIG
Report: Feds Probing Two Cassano Deputies
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (5)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
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*.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)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?"
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?"
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)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
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:
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (8)Topics: AIG, BlackRock, David Viniar, Goldman Sachs, Peter Fisher
AIG
Source: SEC (Unlike DOJ) Cooperating With Congress's Request For AIG Docs
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)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
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)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
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.PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)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.
Topics: AIG, Bailout, Edolphus Towns, Financial Crisis, House Oversight, Wall Street
AIG
Congress Probing AIG Spin Shop
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (7)Topics: AIG, Bailout, Edolphus Towns, Financial Crisis, House Oversight, Wall Street
AIG
AIG FP Chief: Taxpayer Ire Over Bonuses "Probably Hurt Taxpayers"
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: PERMALINK | COMMENTS | RECOMMEND RECOMMEND (7)
Topics: AIG
Berkshire-Hathaway
Barney Frank Rousts Credit Rating Firm For...Being Too Negative?
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.PERMALINK | COMMENTS | RECOMMEND RECOMMEND (5)
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
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (34)Topics: AIG, Bailout, Citigroup, Elizabeth Warren, Financial Crisis, Treasury Department, Wall Street
AIG
In Letter To Liddy, Lawmaker Probes AIG Risk Practices
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.
Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street
AIG
AIG's PR Blitz
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (12)Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Media, Wall Street
AIG
Greenberg To Kanjorski: "May I Finish?"
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:
Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street
AIG
Greenberg: Get Rid Of AIG Management
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."
Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Wall Street
AIG
Lawsuit: AIG Not Just Screwing Over Taxpayers Anymore
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. PERMALINK | COMMENTS | RECOMMEND RECOMMEND (9)
Topics: AIG
AIG
Greenberg: "We Had No Problem Controlling Cassano
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.PERMALINK | COMMENTS | RECOMMEND RECOMMEND (4)
Topics: AIG, Financial Crisis, Hank Greenberg, Joseph Cassano, Wall Street
AIG
Greenberg To Taxpayers: Drop Dead
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:
Topics: AIG, Bailout, Financial Crisis, Hank Greenberg, Wall Street
AIG
Greenberg: AIGers "Got Greedy"
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street
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