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What Enron & WorldCom Can Teach Us About Goldman & AIG
Arianna Huffington
Newsweek's latest cover story declares that The Great Recession is over. A Merrill Lynch report concurs, saying, 'The recession is over... We are bullish on global equities.' Goldman Sachs is placing riskier bets on the market than it did before the financial meltdown (and setting aside huge amounts of money to pay its executives). The problem is ...
Smoke Billowing Out of Our Economic Mount Vesuvius
Arianna Huffington
There is currently plenty of alarming smoke pouring out of our economic Vesuvius, but it is being dismissed. Don't worry about economic tremors, we're told, our financial system is back on track, the bailout worked and we'll start our slow but steady climb to recovery. But warning signs are all around us ...
The AIG Bailout:
European Free Riding Enters New Realm
Chris Thomas
American International Group Inc. (NYSE: AIG) used over $90 billion in federal aid to pay out foreign and domestic banks, some of which received United States government bailouts as well. Some of the biggest recipients of AIG money were Goldman Sachs at $12.9 billion, and three European banks -- France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. Other names on the list included such stalwarts as Rabobank and Lloyds, which is now state owned.
There is no way of knowing exactly how much Europe has received until the Fed stops acting like the National Security Agency. No wonder Fed Vice Chairman Kohn refused to release to Congress the names of all of AIG's counterparties in his recent testimony.
AIG Hires Citi for AIA IPO
2010 07 30 08:48
UPDATE 1-Citi to join top underwriters in AIA IPO -sources
2010 07 30 06:49
AIG set to add Citi as top underwriter for AIA IPO -sources
2010 07 30 05:13
10 Most-Shorted S&P 500 Stocks
Mylan, Sears and Diamond Offshore rank among the 10 most-shorted S&P 500 stocks, based on percentage of float sold short. 2010 07 30 05:01
MetLife posts Q2 earnings of $1.5 billion, beating Street
NEW YORK (Reuters) - MetLife Inc , the biggest U.S. life insurance company, posted a second-quarter profit of $1.53 billion, helped by higher premium revenue from sales domestically and abroad. 2010 07 29 18:43
MetLife Swings to Better-Than-Expected Profit
2010 07 29 17:10
SEC No Longer Obliged to Respond to Press, Says Fox
2010 07 28 18:00
Inside The Forbes 400
What it takes to make this year's list of the wealthiest Americans. 2010 07 28 17:14
MSN Money News - AIG
News about American International Group Inc
Stop Focusing On Your Core Business
It has become the fast track to oblivion.
Billionaire Anschutz Loses Big Tax Case
Tax Court decision, if upheld, could cost other rich folks and CEOs a bundle, too.
Fin Reg Wouldn't Have Defused Bear Stearns Time Bomb
The raison d'etre of the financial reform legislation signed into law by President Obama Wednesday is preventing "too big to fail." In reality,�Fin Reg may not prevent the next big bank failure, run on the bank or contagion among institutions and toxic asset prices. In fact, I think it may in some cases accelerate all [...]
Too Big to Trust
Repairing the economy is hard enough; restoring trust in government is even harder.
AIG Names Big Cheese In Asia
American International Group appoints a new head of its Asian Insurance unit.
An Epidemic Of Failing To Manage Growth
It has hobbled companies from Toyota to BP to Starbucks to Dell. Here are three basic steps to take to save your own company from it.
Financial Reform That Isn't
Dodd-Frank's 2,315-page bill won't prevent another meltdown, but will leave collateral damage in its wake.
Berkowitz Stays Bullish On Battered Financials
Fairholme Funds' Bruce Berkowitz takes 11% stake in MBIA, ups AIG holding to 24%.
Bank Bailouts Revisited
Financial reform is likely to ding the sector's earnings for the next few years, even as the Treasury reaps a windfall from a number of firms that have repaid taxpayer dollars.
The Assault On Enterprise
Buried in some documents recently released by a congressional panel is this: One of the government's conditions of the bailout was that AIG forfeit its right to sue its assorted counterparties over any monkey business in the mortgage securities AIG insured.
Warren Buffett's Buy American Report Card
In October 2008 the Oracle of Omaha told investors to buy the red, white and blue. How's that workin' out?
Fictitious Financial Reform
The upcoming overhaul won't address key problems that caused the crisis.
Financial Reform Bill Will Shaft Consumers
Once again lawyers and lobbyists have succeeded in watering down financial reform. Consumers will be the big losers.
Criminalizing Capitalism
The U.S. Supreme Court's ruling on Jeffrey Skilling should be a wake-up call for federal prosecutors.
What About BP's Victims?
They won't be left with much if the oil company is taken over by the government.
Playing The Market Like Pebble Beach
You must pick your spots when it pays to be aggressive and when, like now, a conservative approach works best.
Juicy and Junky High Yield ETFs
Many investors crave yield or cash payouts. Junk bond ETFs fit the bill, but be sure to invest with your eyes open.
Why BP Will Pay Obama's Escrow Fund
BP has balked at handing over billions to a third-party, but after tonight's speech does it have much of a choice?
The Government's Peculiar Assault On Profits
Why further fining oil companies and airlines will do more harm than good.
Bulls Cower As Week Ends With A Whimper
A less-than-thrilling jobs report sparks a major Friday selloff.
Warren Buffett On Credit Ratings
Buffett and Moody's CEO on credit ratings and financial crisis.
AIG In Flux After Prudential Backs Off AIA Buy
U.K. insurance firm finally put the kibosh its ill-fated bid for Asian insurance business, killing a deal that could have put more than $30 billion in AIG's coffers.
Stocks Extend Gains In Late-Day Trading
Strong auto sales in May and a better-than-expected reading on pending home sales in April lead stocks higher.
Street Maintains Rally On Housing Data
A better-than-expected reading on pending home sales in April lead stocks higher.
Prudential Says Sayonara To AIG Deal
UK-based insurer scraps offer for firm's Asian life insurance business.
Forbes.com: aig
The latest Forbes.com news on the ticker aig.
Investor pressure to oust Pru execs waning-sources (at Reuters)
Bear Stearns bailout back in the black (at Fortune)
TheÃÂ Fed crawled back above water on a controversial loan it made to keep Bear Stearns brieflyÃÂ afloat. The New York Fed said Thursday afternoon that the Bear Stearns assets serving as collateral on a controversial 2008 bailout loan are currently worth $29.4 billion.
[$$] AIG Hires Citi for AIA IPO (at The Wall Street Journal)
Norris: In Basel, Eternal Work In Progress (at New York Times)
Wall Street Breakfast: Must-Know News (at Seeking Alpha)
AIG set to add Citi as top underwriter for AIA IPO -sources (at Reuters)
10 Most-Shorted S&P 500 Stocks (at TheStreet.com)
[$$] MetLife Swings to Better-Than-Expected Profit (at The Wall Street Journal)
New Potential for A.I.G. Deals (at New York Times)
Fed reports paper profit on Bear and AIG bail-outs (at Financial Times)
The US public's hope of getting repaid for the bail-outs of Bear Stearns BSC and AIGin the financial crisis increased on Thursday after the Federal Reserve reported a paper profit for the first time on all the holdings of securities bought from the companies.
MetLife posts Q2 earnings of $1.5 billion, beating Street (Reuters)
MetLife Inc , the biggest U.S. life insurance company, posted a second-quarter profit of $1.53 billion, helped by higher premium revenue from sales domestically and abroad.
UPDATE - MetLife posts Q2 earnings of $1.5 bln, beats Street (at Reuters)
Bill Gross Peers Into the Toilet of the World Economy (at The Wall Street Journal)
MET, PRU Subpoenaed by NY AG: Pocketed Profit at Survivors' Expense (at Barron's Online)
Goldman's Profanity Ban Misses the Point (at The Wall Street Journal)
'Fast Money' Portfolios of the Week (at TheStreet.com)
[$$] Fairholme Manager Likes U.S. Financials (at The Wall Street Journal)
SEC No Longer Obliged to Respond to Press, Says Fox (at Barron's Online)
Federal Report Faults Banks on Huge Bonuses (at New York Times)
UPDATE - Pakistan plane crashes, all 152 on board dead (at Reuters)
Yahoo! Finance: AIG News
Latest Financial News for American International Group, I
Documents Back Goldman’s Contentions on A.I.G.
Documents released by the Senate Finance Committee show Goldman Sachs had hedged against losses to A.I.G. and that the Fed was aware of it.
Federal Report Faults Banks on Huge Bonuses
Report from Kenneth R Feinberg, Obama administration's executive compensation monitor, will name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid; group includes giants like Goldman Sachs, JPMorgan Chase and American International Group as well as smaller lenders; report points to companies that paid huge amounts or used haphazard criteria for awarding bonuses; singles out Citigroup as biggest offender; ...
A.I.G. Failure Would Have Cost Goldman Sachs, Documents Show
Goldman had contended that credit insurance it bought from financial institutions would have protected it.
New Potential for A.I.G. Deals
With the replacement of A.I.G.’s chief executive for Asia, an I.P.O. and a possible merger with Prudential of Britain appear much more likely.
A.I.G. Is Said to Be Hiring Mark Tucker to Lead A.I.A. Unit
The American International Group plans to name Mark Tucker, former head of Prudential of Britain, to lead the Asian life insurance subsidiary known as A.I.A.
A.I.G. to Pay $725 Million to Settle a Fraud Case in Ohio
The settlement would resolve claims of fraud laid out in a class-action suit led by three Ohio pension funds.
A.I.G. Chairman Resigns After Clashes With Chief
Harvey Golub resigned amid continued bickering with A.I.G.’s chief executive, Robert H. Benmosche.
DEALBOOK; Paulson Likes What He Sees In Overhaul
Andrew Ross Sorkin Dealbook column; former Treasury secretary Henry M Paulson gives his views on Dodd-Frank Wall Street Reform and Consumer Protection Act; says provision of bill known as resolution authority, which enables government to unwind failing investment bank or insurance company in orderly way while avoiding bankruptcy, would have been helpful in cases during his tenure such as collapse of Lehman Brothers and American International Group; sees legislation's creation of systemic risk c...
Crisis Panel Hears of Goldman Push for A.I.G. Cash
The head of an investigative panel said Goldman Sachs was “by far the most aggressive” in its collateral demands before A.I.G.’s near collapse.
Inside the U.S. Bailout of A.I.G.: Extra Forgiveness for Big Banks
American International Group executives and shareholders are asking, in light of Securities and Exchange Commission's civil fraud suit against Goldman Sachs for possibly misrepresenting mortgage deal to investors, whether AIG may have been misled by Goldman into insuring mortgage deals that Goldman and others may have known were flawed; when federal government rescued AIG from collapse in fall of 2008 after it was brought to its knees as result of making too many risky, outsize financial bets a...
In U.S. Bailout of A.I.G., Forgiveness for Big Banks
Federal regulators ignored recommendations to force banks that did business with A.I.G. to accept losses.
The Derivatives Endgame
Congress is set to begin public debate on the regulation of derivatives, arguably the most important issue for big banks and the public.
S.E.C. Accuses ICP Asset Management of Fraud
The case against ICP Asset Management involves a new type of target for regulators in their pursuit of wrongdoing in the mortgage market.
Add Government to the List of ‘Fat Cats’
President Obama’s populist attacks on industry seem to be getting little traction. Americans might include the government itself on the list of offenders.
A.I.G. Needs A.I.A. Deal Soon
The credibility of the chief executive of A.I.G. was damaged by the failure of Prudential of Britain to buy its Asian unit. He needs to execute Plan B to restore it.
NYT > American International Group Inc.
Overview
American International Group was the largest insurance company in the United States before it suddenly collapsed in September 2008 under the weight of bad bets it made insuring mortgage-backed securities. The company was bailed out by the Federal Reserve, but even after an initial infusion of $85 billion, losses continued to grow. The later rescue packages brought the total to $182 billion, making it the biggest federal bailout in United States history.
Much of A.I.G., an assortment of businesses that run the gamut from aircraft leasing to life insurance for Indians to retirement plans for elementary-school teachers, remained profitable. But that could not offset losses, primarily from one London-based unit, that reached $25 billion for the third quarter of 2008. Given A.I.G.’s size and the complexity of its deals, federal officials decided that a bailout was preferable to the havoc in international markets that would likely follow bankruptcy.
The losses continued into mid-2009, as the bailout swelled to $182 billion. But by the spring of 2010, the company had reclaimed its old title — top seller of fixed annuities. The company repaid $51 billion of the government's money, but it was uncertain that the government would ever recoup its money.
In a sign of the troubles that had dogged AIG before its collapse, the company in July 2010 agreed to pay $725 million to three Ohio pension funds to settle claims of accounting fraud, stock manipulation and bid-rigging. The state's attorney general, Richard Cordray, said it was the 10th largest securities class-action settlement in United States history.
Once a Booming Company
A.I.G.'s complicated structure and aggressive approach reflected the determination of the man who built A.I.G., Maurice R. Greenberg, to create a global empire operating in complementary businesses. Not even the company's annual reports to shareholders or its regulatory filings offered a chart of its complex corporate structure.
Though its name is American, the company is rooted in Asia. According to company lore, its founder, Cornelius Vander Starr, a World War I veteran, traveled to Asia with only 300 Japanese yen (less than $3 today) in his pocket and started the firm in Shanghai in 1919. With a partner, he sold marine and fire insurance and expanded rapidly throughout the Philippines, Indonesia and China by hiring locals as agents and managers, a business strategy A.I.G. uses today. Nearly half of A.I.G.'s 116,000 direct employees — about 62,000 people — are in Asia.
Mr. Greenberg, who joined A.I.G. in 1960, focused on making giant commercial deals, increasing the company's share of the life insurance business and writing what were, decades ago, unusual types of coverage, like insurance against kidnapping and protection from suits against a company's officers and directors.
The company's distress followed an unusual period of turmoil. Early in 2005, questions arose about financial transactions that had the effect of making the company's earnings look better. Mr. Greenberg resigned as chief executive after regulators sent a wave of subpoenas to A.I.G.; eventually it restated earnings covering a five-year period.
In July 2010, the company agreed to pay $725 million to three Ohio pension funds to settle six-year-old claims of accounting fraud, stock manipulation and bid-rigging. Taken together with earlier settlements, A.I.G. will ladle out more than $1 billion to Ohio investors, money that will go to firefighters, teachers, librarians and other pensioners. The company said it would raise $550 million of the sum through a new public offering, to avoid drawing on taxpayer funds.
Exposure Connected to Home Loans
A.I.G.'s problems rested in its London-based financial products unit, part of its financial services group, which was exposed to securities tied to the value of home loans.
The financial products group sold credit-default swaps, complex financial contracts allowing buyers to insure securities backed by mortgages. As home values fell, the value of the underlying mortgages declined, and A.I.G. had to reduce the value of the securities on its books.
In September 2008, after A.I.G. failed to get a bank loan to avoid bankruptcy, the Federal Reserve agreed to an $85 billion bailout of the insurance giant. The decision marked the most radical intervention in private business in the central bank's history. The total cost of the taxpayer bailout has since ballooned to $182 billion.
Big Bonus Payments and a Change at the Top
A.I.G. became the target of widespread outrage after it was revealed on March 15, 2009, that it had paid $165 million in bonuses two days before, including some to members of the trading unit that had caused its collapse. President Obama ordered the Treasury to see if the payments could be blocked or recovered.
On March 18, at a highly charged Congressional hearing, Edward M. Liddy, A.I.G.’s chairman and chief executive at the time, said he had asked employees making more than $100,000 a year who had shared in the bonus payout to give half the money back, reflecting the public and political disgust at the idea of rewarding the same people who had helped drive the company and the economy into distress. Mr. Liddy said that some had already volunteered to give it all back but resisted releasing the names, saying some employees had received death threats.
On March 19, spurred on by a tidal wave of public anger, the House of Representatives voted 328 to 93 to get back most of the money by levying a 90 percent tax on bonuses paid by any company accepting more than $5 billion in bailout funds. But almost all the A.I.G. bonuses were returned, leaving little left to tax.
In early 2010, A.I.G. agreed to cut employee bonuses by $20 million and would distribute about $100 million. But the reductions may not be enough to appease the company's critics, who do not accept its argument that it has to honor contracts established before its government bailout. A.I.G. first promised the retention bonuses to keep people working at its financial products unit, which traded in the derivatives that imploded in September 2008, leading to the biggest government bailout in history.
Mr. Liddy was installed by the Federal Reserve when it rescued A.I.G. in September 2008 at a salary of $1 a year. In August 2009, after 10 grueling months on a job he had taken as a form of public service, he announced his resignation, saying the job was too big and too complex as currently designed. Robert H. Benmosche, a former head of MetLife, succeeded Mr. Liddy that month.
Congressional Oversight Report
In June 2010, the Congressional Oversight Panel, a body charged with reviewing the state of financial markets and the regulators that monitor them, published a 337-page report on the A.I.G. bailout. It concluded that the Federal Reserve Bank of New York did not give enough consideration to alternatives before sinking more and more taxpayer money into A.I.G. "It is hard to escape the conclusion that F.R.B.N.Y. was just 'going through the motions,' " the report said.
One of the regulators' most controversial decisions was awarding the banks that were A.I.G.'s trading partners 100 cents on the dollar to unwind debt insurance they had bought from the firm. Critics have questioned why the government did not try to wring more concessions from the banks, which would have saved taxpayers billions of dollars.
Timothy Geithner, who is now the Treasury secretary, has repeatedly said that as steward of the New York Fed, he had no choice but to pay A.I.G.'s trading partners in full.
But two entirely different solutions to A.I.G.'s problems were presented to Fed officials by three of its outside advisers, according to the documents. Under those plans, the banks would have had to accept what the advisers described as "deep concessions" of as much as about 10 percent on their contracts or they might have had to return about $30 billion that A.I.G. had paid them before the bailout. Had either of these plans been implemented, A.I.G. may have been left in a far better financial position than it is today, with taxpayers at less risk and banks forced to swallow bigger losses.
Even if the waiver was warranted, experts say it unfairly handcuffed A.I.G. and has undermined the financial interests of taxpayers. If, for example, the banks misled the A.I.G. about the mortgage securities it insured, taxpayer money could be recouped from the banks through lawsuits.
Relationship with Goldman
After making too many risky, outsize financial bets and paying billions of dollars in claims to Goldman and other banks, A.I.G. has few options in getting money back from Goldman, which many at A.I.G. contend misled the company into insuring flawed mortgage deals. But as part of the bailout deal in the fall of 2008, the insurer was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the pre-crisis years.
The A.I.G. waiver and other material were released in May by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2008 when it forced Chrysler's lenders to take losses when the government bailed out the auto giant.
As a Congressional commission convened hearings on June 30, 2010, exploring the A.I.G. bailout and Goldman's relationship with the insurer, the release of 500 pages of documents by the Financial Crisis Inquiry Commission show how Goldman's aggressive and repeated demands for billions in cash from A.I.G. drove the insurer to the brink of failure in September 2008.
For more than a year before the government bailed out A.I.G., Goldman demanded cash from the insurer, based on Goldman's lower valuations of mortgage securities. A.I.G. battled Goldman in an epic dispute but ultimately surrendered and sent much of the requested money.
Joseph J. Cassano, the former chief executive of the unit that insured the mortgage securities, told the inquiry commission on June 30 that he had fought back against demands for cash from banks like Goldman until his retirement from A.I.G. in March 2008.
When Mr. Cassano left, A.I.G. had put up $3 billion to shore up deterioration in mortgage securities; six months later, A.I.G. had transferred $7 billion to Goldman.
The market for mortgage securities was declining during this period, but the commission documents indicate that Goldman's demands were far more aggressive than that of other banks.
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