Posts Tagged ‘AIG’

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Seven years after the global financial crash, we’re still in the midst of a full-scale war of finance.

On one side of the Atlantic, U.S. Court of Claims Judge Thomas Wheeler found that former AIG head Hank Greenberg was indeed correct in claiming the government overstepped its legal boundaries in its “unduly harsh treatment of AIG in comparison to other institutions” that was “misguided and had no legitimate purpose.” The ruling basically confirmed the Fed’s right to create a gigantic bailout of Wall Street but denied its ability to actually determine the use of the funds by the “taking of equity” in essentially worthless financial institutions like AIG.

Finance thus continues to win the war in the United States.

And, as Ambrose Evans-­Pritchard [ht: sw] explains, finance is engaged in all-out war in Europe.

Rarely in modern times have we witnessed such a display of petulance and bad judgment by those supposed to be in charge of global financial stability, and by those who set the tone for the Western world.

The spectacle is astonishing. The European Central Bank, the EMU bail­out fund, and the International Monetary Fund, among others, are lashing out in fury against an elected government that refuses to do what it is told. They entirely duck their own responsibility for five years of policy blunders that have led to this impasse.

They want to see these rebel Klephts hanged from the columns of the Parthenon – or impaled as Ottoman forces preferred, deeming them bandits ­ even if they degrade their own institutions in the process.

The European Central Bank is actively inciting a bank run in Greece and threatening to throw that country out of the euro zone if it resists the demands of the creditors, represented by the troika, without ever seriously considering the proposals put forward by the democratically elected Syriza government.

The truth is that the creditor power structure never even looked at the Greek proposals. They never entertained the possibility of tearing up their own stale, discredited, legalistic, fatuous Troika script.

The decision was made from the outset to demand strict enforcement of the terms agreed in the original Memorandum, which even the last conservative pro­Troika government was unable to implement ­ regardless of whether it makes any sense, or actually increases the chance that Germany and other lenders will recoup their money.

At best, it is bureaucratic inertia, a prime exhibit of why the EU has become unworkable, almost genetically incapable of recognising and correcting its own errors.

At worst, it is nasty, bullying, insistence on ritual capitulation for the sake of it.

The troika, in other words, is acting like a unified debt collector, and is willing to go so far as to threaten to topple a democratically elected government to set an example that, in Greece and elsewhere in Europe, finance is willing to do anything and everything to win the war.

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Special mention

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Wall Street hold ‘em

Posted: 10 December 2012 in Uncategorized
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The series continues with the Nine of Clubs: Joe Cassano.

Joseph J. Cassano was a prominent insurance executive at the American Insurance Group (AIG) Financial Products Division from 1987 until February 2008.

Cassano sold billions of CDOs without any collateral backing them up. This type of insurance had been deregulated by Senator Phill Gramm’s Commodity Futures Modernization Act of 2000 during the Clinton Presidency. This legislation included the infamous “Enron loophole” that exempted oil and energy transactions from regulation. This fueled the ENRON debacle.

Cassano received $280 million in cash and $34 million in bonuses during his career at AIG. He remained on the payroll even after U.S taxpayers were asked to provide AIG with $85 billion to correct his divisions errors.  When the financial crisis boomeranged in 2008, AIG could not pay insurance money to investment banks for their collapsing derivative products. Joseph Cassano was a major player in this financial meltdown.

Here’s Barry Ritholtz’s overall assessment of Tim Geithner’s bailout of AIG:

The Federal Reserve Bank of New York, in a desperate headlong rush to rescue American International Group, screwed the pooch.

Ritholtz bases his analysis on the the most recent audit from the Office of the Special Inspector General (SIG) for the Troubled Asset Relief Program.

Andrew Leonard tries to be more sanguine but ends up in the same place:

OK. I’m wrong, again. It is embarassing [sic] and pathetic. The Fed was played for patsies. And it was Tim Geithner’s Fed.

Elizabeth Warren, a contemporary Leonard Horner (the hero of volume 1 of Capital, whose “services to the English working class will never be forgotten”), has done more than anyone else in revealing how TARP involved taxpayers’ subsidizing billions in investor profits with little oversight or results, especially for those at the bottom. Her own way of putting it:

Look, it saved the top of the system. It helped stabilize it, but not so much for families who are hard hit down on the ground, the real economy. We said, in effect, at the top, there’s really not any pain in return for taxpayer support. Not so much so when it comes to folks at the bottom. We said wait a year, we’ll get there, we’ll do what we can.

The way I think of it is: they say something like “Give me your money, investors and I’m going to Las Vegas and put it all on red 22. And if red 22 comes in — woo! we are RICH. If red 22 doesn’t come in, don’t worry because the taxpayers will pay you back the money you invested.”