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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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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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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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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Steve Rattner

Talk Of Intensified Investigation As Rattner Resigns

Rachel Slajda | July 14, 2009, 1:27PM

Steve Rattner may be leaving his post as the head of Obama's auto task force because of an intensifying investigation into wrongdoing by the private equity firm he co-founded.

Anonymous sources say the investigation into Quadrangle Group LLC has intensified in recent weeks, according to Reuters and the New York Times, which may have lead to his stepping down.

New York Attorney General Andrew Cuomo is leading the probe into whether Quadrangle paid middlemen to win state pension business. From the Times:

Mr. Rattner, according to people close to the investigation, arranged for his investment firm to pay $1.1 million to an agent who helped Quadrangle obtain New York pension business. The agent who received most of that money has been indicted and accused of selling access to the pension fund, but neither Mr. Rattner nor Quadrangle is expected to face criminal charges, according to people close to the matter.

Rattner left Quadrangle in order to work on the task force, and a source said he won't return now. His post on the task force is being taken over by Ron Bloom, but the Treasury Department hasn't said when the change goes into effect.

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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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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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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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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Bank of America

Cuomo: Paulson Kept SEC Out Of The Loop On B Of A

Zachary Roth | April 23, 2009, 12:19PM

New York Attorney General Andrew Cuomo has just released documents from his investigation into Bank of America, its receipt of government money, and those billions in bonuses that went to Merrill Lynch executives.

Here's one quick nugget we found: It looks like then-Treasury Secretary Hank Paulson didn't keep the SEC -- whose role, of course, is to protect investors -- informed on the government's intense December 2008 discussions with B of A about Merrill's losses, and possible government assistance for B of A.

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Bailout

Bailout Fraud Prosecutor Nets First Catch

Zachary Roth | April 22, 2009, 1:41PM

In an interview with The Hill published yesterday, Neil Barofsky, the inspector general for the bailout, said that he was pursuing 20 criminal and civil investigations into potential fraud in the TARP program.

And it looks like at least one has now paid off.

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Bailout

Eilzabeth Warren On Daily Show

Zachary Roth | April 16, 2009, 1:01PM

Last night, Elizabeth Warren, the Harvard Law professor who chairs the Congressional Oversight Panel for the bailout, talked to Jon Stewart on the The Daily Show.

Here's part 1:

And here's part 2:

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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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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Bailout

SEC Reviewing Whether B of A Broke Law On Merrill Bonuses

Zachary Roth | April 14, 2009, 11:37AM

Ever since AIG's bonus shenanigans exploded onto the national scene last month, Merrill Lynch's own outrageous payouts have kind of gotten short shrift. We've felt this was unfair to the Thundering Herd, since at an around $3.6 billion, its bonuses dwarfed those of AIG. Granted, its role in bringing down the financial system may not have been quite as central as that of AIG's financial products unit, but it's not like Merrill, which needed rescuing last fall by Bank of America, was squeaky clean. Where's the respect?

But luckily, the Merrill bonuses are back. The SEC is looking at whether Bank of America broke the law by not disclosing, in filings last year, the fact that it was planning to pay those bonuses, reports the Washington Post.

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Bailout

Conflicted Sununu: The Real Problem Is That CEO Pay Limits Are Too Tough

Zachary Roth | April 8, 2009, 3:00PM

Yesterday, the panel overseeing bailout spending on behalf of Congress issued its latest hard-hitting report, which criticized the Treasury Department's approach to the program and called for top execs at major banks to be fired.

But perhaps the most interesting thing about the report is the "alternative view" that accompanied it, from Republican panel member John Sununu.

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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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Bailout

Congress To Probe Geithner's "Special Purpose" Plan To Skirt Pay Caps On Bankers

Moe Tkacik | April 7, 2009, 2:53PM

Yesterday we puzzled over the mixed messages we were hearing from Obama officials over the veracity of a Washington Post report that it was using Enron-style "special purpose vehicles" to undermine executive pay restrictions on bailed out banks: senior adviser David Axelrod sheepishly defended the strategy on one Sunday talk show, while Tim Geithner denied it altogether on another. But newly-promoted House Oversight Chairman Ed Towns is getting to the bottom of it, reports the Post today, in a story that sheds some much-needed light on the conflicting stories: the strategy began with the Treasury Department's $1 trillion consumer and business lending initiative, which is in part an expansion of the Federal Reserve's Term Asset-Backed Securities Loan Facility, which is open to the American subsidiaries of foreign banks, which Treasury presumably wants to participate in the programs without having to deal with the added diplomatic headache of subjecting foreign bankers to rules designed to satisfy American voters. Unsurprisingly, not everyone in Congress is opposed to that.

A senior House aide said he agreed with the Treasury's policy and that he believed a recent vote by the House on another piece of executive compensation legislation showed that Congress did not intend the restrictions to apply to firms that did not receive direct capital injections. The aide spoke on condition of anonymity because he was not authorized to comment.

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Tim Geithner

Is The White House Helping Bailed Out Banks Skirt Pay Caps? Depends What Channel You're Watching

Moe Tkacik | April 6, 2009, 3:22PM

On Saturday the Washington Post reported that the administration was doling out federal bailout money via "special purpose vehicles" to help banks skirt restrictions on the funds imposed by Congress -- including, naturally, limitations on executive pay. In a move a former Justice Department attorney equated to "money laundering," the story further specified that the White House had concluded that the conditions ought not to apply in "at least three out of five initiatives funded by the rescue package."

The story quoted Treasury spokesman Andrew Williams defending the strategy, and on Sunday senior Obama adviser David Axelrod, despite his reported distaste for Treasury's lenience on the banks, went on Fox News Sunday and towed the Treasury line when Chris Wallace brought up the report.

But a bit later the same morning on Face the Nation the policy seemed to have changed -- if you believed Treasury Secretary Tim Geithner's unequivocal denial to CBS's Bob Schieffer that any such plan compensation-restriction avoidance plan existed:

Transcripts after the jump:

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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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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."

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:

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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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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Bailout

Bush Bailout Architect Lands On His Feet -- Helping Private Clients Adjust To Brave New World Of Finance

Zachary Roth | March 30, 2009, 1:29PM

We should have seen this one coming -- government officials who helped respond to the financial crisis, now cashing in by helping private sector clients "navigate the new world of finance."

That's what David Nason, a former assistant treasury secretary under Hank Paulson will be doing for clients of Promontary Financial Group, which he's joining as a managing director, reports the Wall Street Journal (sub. req.). Nason, who had a major hand in drawing up Treasury's bailout plan last fall, "is expected to advise big financial institutions on everything from how to participate in the government's rescue programs to meeting regulatory requirements."

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John Sununu

Have Oversight Panelists Complained About Sununu's Conflict? Sounds Like It...

Zachary Roth | March 27, 2009, 5:21PM

Remember that little conflict of interest problem for John Sununu that we revealed last month?

The former New Hampshire GOP senator, who sits on the Congressional Oversight Panel that monitors the TARP funds, was recently named to the board of a firm that's a subsidiary of Bank of New York Mellon -- which not only got TARP money itself, but also administers the program for the Treasury Department.

Sununu insisted to the Associated Press, which picked up on our report, that this really wasn't a conflict. But it looks like at least some of Sununu's fellow panel members disagree.

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AIG

Taibbi To AIG-er DeSantis: "Be A Man And Deal With It"

Zachary Roth | March 27, 2009, 4:41PM

Some Friday afternoon catharsis ...

In one of those perfect matches of writer and subject, Matt Taibbi responds to that op-ed writing AIG-er Jake DeSantis -- and says all the things you'd probably forget to say if you ever ran into deSantis, but then would think of in the shower when it was too late.

AIG

Did Cassano Shut Out AIG Risk Officers?

Zachary Roth | March 27, 2009, 1:38PM

Did AIG's entire risk management team fall down on the job? Or, like the firm's auditors, were they prevented from doing it?

Yesterday we told you about Bob Lewis, AIG's chief risk officer, who still has his job despite a rather obvious failure to ensure that the firm wasn't taking on an unmanageable level of risk.

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Bailout

Lawmakers Call On Bailout IG To Probe AIG Counter-Party Payments

Zachary Roth | March 27, 2009, 11:45AM

The effort to get to the bottom of those payments by AIG to its counter-parties is heating up.

Earlier this week, we noted that several different efforts to investigate that question. Now, reports the New York Times, Rep. Elijah Cummings (D-MD) has sent a letter, signed by 26 other House Democrats, to Neal Barofsky, the inspector general for the TARP funds, calling on him to probe the matter.

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Bailout

Lawsuits: Lewis, B of A, Misled Shareholders On Merrill Deal

Zachary Roth | March 25, 2009, 5:26PM

This is just the headache that beleaguered Bank of America CEO Ken Lewis needs...

It looks like B of A is facing legal woes as a result of its hastily arranged deal to buy Merrill Lynch last fall, and its subsequent statements about Merrill's finances.

The Wall Street Journal reports (sub. req.):

Five public pension funds are seeking lead status in a class-action suit against Bank of America Corp., alleging that the nation's largest bank by assets made "untrue statements" in the run-up to its purchase of Merrill Lynch & Co. and did not disclose material information to shareholders.

The funds claim to have lost $274 million on their Bank of America investments between July 21, 2008 and Jan. 20, 2009.

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AIG

Is Probe Of AIG Bailout, Payments To Counter-Parties, In The Offing?

Zachary Roth | March 25, 2009, 2:48PM

Is the momentum building for an investigation into the real beneficiaries of AIG's latest bailout?

Earlier this month, the Treasury Department announced it was rescuing the fallen insurance giant yet again, bringing the total amount of taxpayer assistance given to the firm since last September to $170 billion. It soon became clear that much of that money -- over $49 billion, to be exact -- was going right through AIG to the counter-parties on its credit default swaps, both American banks like Goldman Sachs, and foreign ones like DeutscheBank.

Defenders of the move have argued that not giving the counter-parties this indirect bailout would have risked a wider financial collapse.

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