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  1. #1

    Default AIG meltdown and bailout

    I would be interested in hearing what some of you think of this article. I'll fully admit some of it go's over my head. From what I can make out some of these guys should be locked up.


    It's eight pages but well worth the read.

  2. #2
    GumbyLearner's Avatar
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    Default Re: AIG meltdown and bailout


    Here's a link that you may find interesting

    Cheers for this link though. A colorful read compared to most financial commentators that's for sure. Unusual for Rolling Stone too.

    I'm surprised they didn't include a link to Sid Vicious and Johnny Lydon's Sex Pistol classic Anarchy in the UK.
    Would seem apt since there were no rules to govern these scumbags.

    At first I couldn't read the article but if you want to view the article click here ----> http://www.rollingstone.com/politics...e_big_takeover

    The Big Takeover
    Rolling Stone - March 19, 2009

    From page 4 of 8 ..Discussing the activities of Financial Products Head Cassano at AIG

    Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm a grinning, laissez-faire ideologue from Texas had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. For years, Washington had kept a watchful eye on the nation's banks. Ever since the Great Depression, commercial banks those that kept money on deposit for individuals and businesses had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, also prevented banks of any kind from getting into the insurance business.

    But in the late Nineties, a few years before Cassano took over AIGFP, all that changed. The Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more "business-friendly." Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

    The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks which, thanks to Gramm, were now competing directly with investment banks for customers were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.

    The blanket exemption meant that Joe Cassano could now sell as many CDS contracts as he wanted, building up as huge a position as he wanted, without anyone in government saying a word. "You have to remember, investment banks aren't in the business of making huge directional bets," says the government source involved in the AIG bailout. When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."

    In the biggest joke of all, Cassano's wheeling and dealing was regulated by the Office of Thrift Supervision, an agency that would prove to be defiantly uninterested in keeping watch over his operations. How a behemoth like AIG came to be regulated by the little-known and relatively small OTS is yet another triumph of the deregulatory instinct. Under another law passed in 1999, certain kinds of holding companies could choose the OTS as their regulator, provided they owned one or more thrifts (better known as savings-and-loans). Because the OTS was viewed as more compliant than the Fed or the Securities and Exchange Commission, companies rushed to reclassify themselves as thrifts. In 1999, AIG purchased a thrift in Delaware and managed to get approval for OTS regulation of its entire operation.

    Making matters even more hilarious, AIGFP a London-based subsidiary of an American insurance company ought to have been regulated by one of Europe's more stringent regulators, like Britain's Financial Services Authority. But the OTS managed to convince the Europeans that it had the muscle to regulate these giant companies. By 2007, the EU had conferred legitimacy to OTS supervision of three mammoth firms GE, AIG and Ameriprise.

    That same year, as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff and this despite the fact that it was the primary regulator for the world's largest insurer!

    I suppose when you can have one guy auditing Made-off there is nothing wrong with having a tiny appendage of Government regulating AIG also.

  3. #3
    GumbyLearner's Avatar
    Join Date
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    Default Re: AIG meltdown and bailout


    Here is another link you might be interested

    CDO Powerpoint SubPrime Primer
    A Powerpoint presentation explaining the mortgage mess.


  4. #4

    Thumbs up Re: AIG meltdown and bailout

    Geithner, Paulson named in $200 billion lawsuit
    AIG-related case claims they violated shareholders constitutional rights

    Posted: April 10, 2009
    10:45 pm Eastern

    2009 WorldNetDaily

    A $200 billion lawsuit filed on behalf of shareholders of American International Group has been amended to include Treasury Secretary Tim Geithner, former Treasury Secretary Henry Paulson and former Securities and Exchange Commission Chairman Christopher Cox as defendants.

    The case, filed earlier by a public interest law firm, Freedom Watch USA, is on behalf of shareholders of AIG who have watched the value of the company plummet by some $214 billion.

    The class action lawsuit filed in federal court in Los Angeles is a "wide reaching" claim that will do what Congress cannot, said Freedom Watch USA founder Larry Klayman.

    "The American people, not the compromised ruling elite in Washington, D.C., have begun a second American Revolution to take the country back from the con men on Wall Street, and on Pennsylvania Avenue who under successive administrations played a central role in the meltdown of the U.S. financial system and economy," Klayman said.

    The amended complaint now alleges that the additional defendants violated the constitutional rights of the shareholders by denying them the right to their property, the shares themselves.

    "The inspiration for this amendment was information disclosed by University of Missouri professor William K. Black on the Bill Moyers' PBS television show last Friday, where he implicated these government officials in a massive cover up of the banking scandal, mostly for the benefit of Goldman Sachs, the former employer of both Paulson and Geithner, in which they held a significant financial interest," Klayman reported.

    "As for Cox, his reckless and intentionally impotent oversight at the SEC is the basis for the claim against him," he said.

    Klayman noted that under precedent established by the U.S. Supreme Court, U.S. vs. Bivens, the defendants can be named as individuals, as well as officials.

    Klayman also decried the apparent attempt by AIG CEO Edward Liddy to avoid being served with the original lawsuit.

    On at least three occasions already, he has "run," telling AIG security not to allow process servers into his office suite, Klayman said.

    "This is an absolute disgrace," said Klayman. "It shows the complete lack of respect AIG and its directors have for the Rule of Law. Liddy can run but he cannot hide. It's only a matter of time before he and his co-horts, along with Geithner, Paulson and Cox, will be held accountable by the American people, not compromised politicians in Washington, D.C., like Barney Frank Chairman of the House Financial Services Committee, who yesterday refused to answer a legitimate question from a Harvard student who inquired why he and his committee failed to oversee the banking scandal."

    The complaint alleges the defendants "jointly and severally, have seriously undermined and damaged AIG's financial health and valuable past reputation by systematically causing and/or permitting the company to engage in a litany of highly risky, detrimental and reckless business dealings . that have caused the company to verge on bankruptcy and which have required in excess of $190 billion dollars to date of government provided monies to prevent total company failure."

    The action seeks judgments against defendants "for the amount of damages sustained by the shareholders as a result of the defendants' breaches of fiduciary duties, gross mismanagement and waste of corporate assets, causing a descrease in shareholders equity in an amount in excess of $200 billion dollars."

    "Freedom Watch will not rest until justice is done and it won't come from the Obama administration, bent on deceiving the U.S. taxpayer that it intends to clean up this corruption, all the while lining the pockets of its friends at AIG with government bailout money, who gave handsomely to have the president elected," said Klayman.

    The lawsuit alleges the defendants, also including Richard Holbrooke and Martin Feldstein of the Obama administration, have caused the company's value in 1990 to drop from "approximately $217 billion dollars" to today's estimated $3.5 billion, "a net decline of $214.5 billion based on the market capitalization rate formula."

    AIG used "financially unsound" credit default swap derivative contracts and collateralized debt obligations to expose the company to "enormous risk," the suit says.

    "After AIG posted a record breaking $62 billion dollar loss for the 4th quarter of 2008, the defendants, each and every one of them, incredibly paid out $165 million dollars in bonuses to its executives in March of 2009 and $55 million dollars in December of 2008 for this poor performance, and also paid out dividends when this was not reasonable or warranted under the circumstances," Klayman's case alleges.

    Klayman said 400 workers each received between $1,000 and $6.5 million, and seven executives in the unit responsible for many of the losses each got more than $3 million.

    "The bonuses were allegedly for retention, in part, and also performance based, but it has become clear that this was not the reason for the bonuses; rather looting of shareholder and government assets was the motivation," the case alleges.

    It continues, "During this time of unprecedented wealth destruction for AIG shareholders, each of the defendants were compensated generously by way of handsome salaries and exorbitant bonuses and dividends, among other benefits and perks, despite their misconduct."

    WND recently reported a poll indicated three in four Americans want members of Congress to return money they got from AIG for their political campaigns.

    The poll from The O'Leary Report by Brad O'Leary and Zogby International showed 73 percent of Americans think politicians, including President Obama and Sen. Chris Dodd, D-Conn., should not have profited from AIG and should return the money.

    Obama and Dodd were the top recipients of campaign largesse from AIG over the past two years, with Obama getting $104,332 and Dodd taking in $103,900. Others received money, too, but in smaller amounts. All together, AIG donated $644,218 to federal politicians.

    According to the Washington Post, Federal Reserve Chairman Ben Bernanke recently confirmed that he had wanted to sue AIG to stop the company from paying out about $165 million in bonuses, but Fed lawyers advised against the litigation.

    AIG CEO Edward Liddy told Congress last week that the Fed signed off on the bonuses before they became public. The company also has said some of the employees have promised to return the bonuses voluntarily.



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