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American International
Group
"Today's agreement settles the indisputable fact
that Mr. Greenberg has denied for 12 years: that Mr. Greenberg orchestrated two
transactions that fundamentally misrepresented AIG's finances." - New York
state Attorney General Eric Schneiderman, February 12, 2017
"AIG, in addition to being one of the largest
providers of traditional lines of insurance, was
a leading participant in the
market for credit default swaps, instruments that are linked to corporate
loan rates.
In the aftermath of the
Lehman Brothers
bankruptcy and the Fannie
and Freddie takeover, AIG was exposed to significant
CDS losses . " - Mark
Jickling
"Under the Paulson Plan,
the government would buy mortgages
and mortgage-backed securities for more than they are worth.
Among
the companies that most vigorously pushed the idea were the American
International Group and Freddie
Mac.
The Federal Reserve and the Treasury think that the prices
have fallen too far.
The goal is to recapitalize the banking system by
placing a floor under the prices of securities that never should have been
issued." - Floyd Norris
2005 Greenberg is ousted amid an accounting
scandal.
$1.6 billion fine and criminal charges for multiple
executives.
Financial statements are restated from 2000 through
2003.
2008 "Moral hazard" is a term
commonly applied to financial contracts, under which
one party is obliged to pay
another money if a specified event occurs.
Moral hazard refers
to situations in which the very existence of the contract
alters the behavior of one
party increasing the
probability of the event's occurrence or
the size of the monetary
payoff based on that event, or both.
Joseph Cassano of American International Group is
"highly confident they will realize no losses" on the credit default swap
portfolios less than three months before they post more than $11 billion in
losses.
September 16,
2008
"Between July and September of 2008, AIG spent more than $2
million to lobby Congress, the
Treasury Department,
the Federal Reserve and the White House." - Ben
Protes
American International Group, an insurance corporation, receives
an $85 billion infusion from the Federal Reserve for an 80% non-voting equity
stake.
AIG, the 18th-largest publically traded corporation on Earth, is
delisted from the Dow Jones
Industrial Average on September 22, 2008.
The AIG family of
corporations, the largest
underwriter of commercial and industrial insurance, held at this time a
$447 billion portfolio of
credit default
swap contracts.
"Now AIG's
solvency and liquidity
is in our national interest.
It operates in 130 countries.
There's no entity like it in the world.
It serves many, many
purposes for the US.
So to have AIG go down would be very negative to
the US' interest, and business in those countries.
They won't
understand our government let this happen to it.
I think it would
undermine the credibility
of our own government.
When you're starting to unwind counterparty
transactions worldwide in a incorporation the size of AIG, it will take about
ten years to do.
What was happening was
../../economics.html#fungible">short sellers would short AIG stock, so that
would make the stock go down.
And because of the stock going
down they would have to put up more collateral on their credit default swap
business.
The governor of New York has worked with the insurance
department to modify the regulations permitting AIG subsidiaries to move up
about $20 billion of excess assets as a means of helping.
On the
regulatory front, other than a bridge loan, that's all they need." - Maurice R.
Greenberg, September 17, 2008, Council of Foreign
Relations
Maurice
Raymond "Hank" Greenberg, previous chairman and controlling owner of AIG
insurance, manager of the third largest capital investment pool in the world,
was floated as a possible CIA Director in 1995.
Former A.I.G. Executives Reach Settlement in Accounting Fraud
Case
January 2009 Three
trustees, Jill Considine (NY Fed, Depository Trust & Clearing Corp., Ambac
Financial Group Inc.), Chester Feldberg (NY Fed, Barclays Americas) and Douglas
Foshee (NY Fed, Halliburton & El Paso Corp.), are appointed to control AIG
by the New York Federal Reserve Bank to oversee
the federal
government 77.9% equity stake.
The New York Fed retains the right
to remove the trustee.
New York Fed President William Dudley worked
until 2007 as the chief economist for Goldman Sachs.
Stephen
Friedman, who resigned as New York Fed chairman May 7, was once CEO of Goldman
Sachs.
JP Morgan
Chase CEO Jamie
Dimon and Richard Carrion, chairman and CEO of Banco Popular de Puerto
Rico, are also on the New York Fed board, along with
General Electric CEO Jeffrey
Immelt.
May 2009 The US Treasury loans $182.5
billion to American International Group to pay off
credit default swap
contracts.
The following banks received bailout funds through AIG on
defaulting securties:
Deutsche Bank AG ($5.4
billion), Société Générale ( $11 billion),
Goldman Sachs
($8.1 billion), Citadel Investment Group, Calyon, Barclays,
Bank of America, Merril
Lynch, Union Bank of
Switzerland, DZ Bank, Bank of Montreal, Rabobank, Royal Bank of Scotland,
HSBC and
Barclays.
"Few
observers outside Wall Street understand that the hundreds of billions of
dollars pumped into by the Federal Reserve of New York and Treasury, funds used
to keep the creditors from a default, has been used to fund the payout at face
value of credit default swap
contracts or "CDS," insurance written by AIG against senior traunches of
collateralized debt
obligations.
The Paulson/Geithner model for dealing with
troubled financial
institutions such as AIG with net
unfunded obligations
to pay CDS contracts seems to be to
simply provide the needed
liquidity and hope for the best.
Until we rid the markets of
CDS, there will be no
restoring investor confidence in
financial institutions." - Chris Whalen
American International Group had four public
relations firms on its payroll - Kekst & Company, Sard Verbinnen,
Hill & Knowlton and
Burson-Marsteller
- in addition to its own PR staff.
On a conference call, AIG chief
restructuring officer Paula Reynolds quipped that it might be 'better to go to
jail' than have to deal with the intricacies of securities laws.
Michael Weisskopf reports that Sard Verbinnen & Co.
"helps to structure statements on the bailout, Kekst & Co.
focuses on sales of assets
to pay back federal loans, Burson-Marsteller handles controversial issues and
Hill & Knowlton
fields inquiries from Capitol Hill and prepares congressional testimony for
corporation officials."
AIG pays $218 million in bonuses.
73 AIG
employees are paid over $1 million each.
Defense contractors in
Iraq were required to buy life
and casualty coverage for their workers.
AIG estimated the cost of
insurance would be $73.1 million from 2003 to 2006 but charged
Kellogg, Brown & Root
nearly four times that amount $284.3 million.
"The
Federal Reserve is buying
an insurance corporation?
Where exactly is that covered in the Federal Reserve Act?
The
banking industry just bought the world's largest insurance incorporation, and
they used taxpayer money to do it.
The Federal Reserve is a private
corporation owned by member banks.
The Federal Reserve returns the
interest on the bonds it "monetizes" to the government after deducting
operating costs and a 6% guaranteed return for bank shareholders.
The
upshot is the American
people will be paying
interest to the banks to bailout the banks from their own follies!" - Ellen
Hodgson Brown
"We are mortgaging the future of our children and
grandchildren at record rates, and that is not only an issue of fiscal
irresponsibility, it's an issue of immorality." - David Walker,
former Comptroller General of the US
"Recovery will fail unless we break
the financial oligarchy that is blocking essential reform." - Simon Johnson,
former chief economist at the International Monetary Fund |
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