TPMMuckraker Wall Street: April 2009
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
Bank of America
Cuomo: Paulson Kept SEC Out Of The Loop On B Of A
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (10)Topics: Andrew Cuomo, Bailout, Bank of America, Financial Crisis, Merrill Lynch, Securities and Exchange Commission, Treasury Department, Wall Street
Bailout
Bailout Fraud Prosecutor Nets First Catch
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (9)Topics: Bailout, Financial Crisis, Neil Barofsky, Securities and Exchange Commission, Treasury Department, Wall Street
Bailout
Eilzabeth Warren On Daily Show
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:
| The Daily Show With Jon Stewart | M - Th 11p / 10c | |||
| Elizabeth Warren Pt. 1 | ||||
| ||||
And here's part 2:
| The Daily Show With Jon Stewart | M - Th 11p / 10c | |||
| Elizabeth Warren Pt. 2 | ||||
| ||||
Topics: Bailout, Elizabeth Warren, Financial Crisis, Wall Street
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
Bailout
SEC Reviewing Whether B of A Broke Law On Merrill Bonuses
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: Bailout, Bank of America, Financial Crisis, Mary Schapiro, Merrill Lynch, Securities and Exchange Commission, Wall Street
Bernard Madoff
WaPo's Kurtz Takes No Position On NYT's Merkin/Madoff Op-Ed
One final note on the great New York Times Merkin/Madoff op-ed disclosure brouhaha, which we've written about here and here.
The Washington Post's Howard Kurtz covered the controversy in today's column. Here's the entirety of what he wrote:
When the New York Times published a March 21 op-ed column sympathetic to a "quintessential nice guy" -- stock swindler Bernie Madoff -- contributing writer Daphne Merkin noted that she had "a sibling who did business with him."PERMALINK | COMMENTS | RECOMMEND RECOMMEND (3)That turned out to be J. Ezra Merkin, former chairman of GMAC, now accused by New York authorities of defrauding clients by funneling more than $2 billion of their money to Madoff. Was the vague "sibling" reference really enough?
Ombudsman Clark Hoyt wrote yesterday that many readers thought "the disclosure was so limited as to be disingenuous," but Op-Ed Editor David Shipley defended it, saying that paper approached Merkin "in some respect because of her brother."
Topics: Bernard Madoff, Financial Crisis, Media, Wall Street
Bernard Madoff
Report: Shana Madoff Contacted Prison Consultant
A female relative of Bernard Madoff -- identified by the New York Post as Madoff's niece, Shana Madoff -- called a "federal prison consultant" to ask how much jail time she might be facing, the consultant told TPMmuckraker.
Larry Levine -- a former federal prisoner who now runs a company, Wall Street Prison Consultants, that gives advice to future inmates on how to survive prison time and win an early release -- said that a woman had called him about three weeks ago, saying that she might face conspiracy charges. At first, said Levine, the woman was hesitant to divulge any specific information, but, when pressed by Levine, said that she was a relative of Bernard Madoff, explained the basics of her situation, and asked how much jail time she might be facing. "No money changed hands," said Levine, describing the call as "exploratory".
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (17)Topics: Bernard Madoff, Securities and Exchange Commission, Wall Street
Wall Street
Wells Fargo's Rise From The Dead Redeems Sins Of All Banks, Says TIME Columnist
"More Quickly Than It Began, The Banking Crisis Is Over" declares longtime financial journalist Douglas McIntyre in a column posted this morning on the TIME website. Well miracles of miracles! Noting yesterday's news from Wells Fargo that the bank made more than twice analysts' projections during the first quarter and the positive buzz about the progress of the Treasury Department "stress tests" being run to assess banks' abilities to withstand further economic downturns, he wonders why the heck they're bothering to run "stress tests" at all. Isn't it obvious we're out of the woods?
Oddly absent from the discussion of how well Wells Fargo did is why the government was in the midst of testing bank balance sheets at all. The experts at the Treasury had been thrown off the scent and consequently had missed the fact that there was not need to test what is already working well. The same holds true for the Geithner plan to take toxic assets off bank balance sheets. It is academic now. What banks are earning from the difference between the cost of capital and the income from lending is now great enough for the banking system to be self-sustaining again.Hallelujah, but: zombie banks don't rise from the dead every day. On CNBC this morning CEO Howard Atkins credited Wachovia, the bank it hastily acquired in the thick of the panic of '08, for bringing the good news. And indeed, an analyst tells Forbes the Wachovia deal has been much more auspicious than experts initially expected, when Wells told analysts it anticipated writing down $10 billion in bad and "non-performing" loans held by Wachovia; thus far, they've only had to write down $77 million.
There's probably a very good reason for that, according to mortgage blogger Ken Watson -- the Financial Accounting Standards Board just relaxed mark-to-market accounting restrictions, meaning Wells can value those loans a bit more creatively than before.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: Douglas McIntyre, Wall Street, Wells Fargo, stress tests
Bailout
Conflicted Sununu: The Real Problem Is That CEO Pay Limits Are Too Tough
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (5)Topics: Bailout, Financial Crisis, John Sununu, Treasury Department, Wall Street
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
Bernard Madoff
Times Editor: Lack Of Disclosure On Merkin Op-Ed Is No Big Deal
Here's another one to add to the growing list of "newspapers acting badly"...
Late last month, the New York Times published an op-ed by Daphne Merkin, a contributing writer to the Times Magazine, on the Bernie Madoff mess. The curious premise of the piece seemed to be that Madoff's "victims" (the quote marks are Merkin's) aren't really blameless, since "no one was holding a gun to anyone's head, saying sign up with Mr. Madoff or else."
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (37)Topics: Bernard Madoff, Financial Crisis, Media, Wall Street
Bernard Madoff
Madoff Associate Who Ran Feeder Fund Is Charged With Fraud
The high-profile proprietor of a second feeder fund has been charged in connection with Bernie Madoff's multi-billion dollar Ponzi scheme.
A civil fraud lawsuit filed by New York Attorney General Andrew Cuomo charges Ezra Merkin, the former chairman of GMAC, and a prominent Madoff associate and New York philanthropist, with "betraying hundreds of investors" by placing billions with Madoff without their knowledge, reports the Wall Street Journal.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: Andrew Cuomo, Bernard Madoff, Financial Crisis, 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
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
Bernard Madoff
Madoff Feeder Fund Charged With Ignoring Red Flags
We're a little late to this, thanks to some developments in other areas, but Fairfield Greenwich, the feeder fund that placed much of its assets with Bernie Madoff, was sued Tuesday by the state of Massachusetts, for defrauding its customers.
Secretary of State William Galvin claims that Fairfield, the largest of several feeder funds that funnelled investors to Madoff, failed to conduct due diligence as it promised. For instance, Galvin alleges, Fairfield didn't question Madoff about his unusual trading strategy, or about the fact that he hadn't hired an outside firm to handle record-keeping.
Topics: Bernard Madoff, Financial Crisis, Securities and Exchange Commission, 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
AIG
Greenberg: Managers Failed (After I Left)
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (1)Topics: AIG, Financial Crisis, Hank Greenberg, Wall Street
Charles Millard
Failure Of Oversight On Risky Investment Scheme?
A bit more on the Charles Millard affair.
Earlier today, we reported that lawmakers had, in a letter, warned Millard, the former head of the government agency that guarantees workers' pensions, that his planned strategy to shift the agency's investments from bonds to stocks to jeopardize its ability to meet its obligations, and had laid out some guidelines he should adhere to ensure a cautious approach. Millard, of course, made the shift anyway, apparently just in time to absorb major losses for the Pension Benefit Guaranty Corporation as the stock market tanked last fall.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (8)Topics: Charles Millard, Financial Crisis, Wall Street
AIG
Did More AIG Execs Mislead Investors About Risks?
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.
PERMALINK | COMMENTS | RECOMMEND RECOMMEND (2)Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street
Charles Millard
Lawmakers Warned Millard About Risky Investment Scheme
Remember Charles Millard, who we told you about earlier this week?
He was the Bush-appointed head of the government agency that guarantees workers' pensions, who made the genius decision to switch the agency's investments from conservative bonds to risky stocks -- right before the stock market tanked. The result: the Pension Benefit Guaranty Corporation's stock-related investments were down 23 percent as of September -- the up-to-date figure is believed to be much higher -- putting in grave doubt its ability to cover the expected losses in private pension funds that the market slump has already caused.
Topics: Charles Millard, Financial Crisis, Wall Street
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