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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.
CIT sets John Thain's salary at $6 million a year
CIT Group Inc said its new Chief Executive John Thain will get an annual base salary of $6 million, most of which is in stock, and a bonus of up to another $1.5 million, in a nod to compensation practices popularized by the Obama administration's pay czar. 2010 02 08 18:02
Hartford Off 4% On Weak '10 View
2010 02 08 16:33
Hancock Named Executive VP at AIG
2010 02 08 16:27
AIG hires KeyCorp exec to oversee finance, risk
American International Group Inc on Monday named a KeyCorp vice chairman and financial services veteran to a newly created post overseeing finance, risk and investments. 2010 02 08 10:26
KeyCorp's Peter Hancock Accepts Position at AIG
CLEVELAND, Feb. 8 /PRNewswire-FirstCall/ -- KeyCorp (NYSE: KEY) today announced that Peter D. Hancock, vice chair responsible for Key's national banking business groups, has resigned from the 2010 02 08 07:10
AIG Names Peter D. Hancock Executive Vice President, Finance, Risk, and Investments
American International Group, Inc. (AIG) today announced that Peter D. Hancock will join AIG as Executive Vice President, Finance, Risk, and Investments. In this new position, reporting to AIG 2010 02 08 07:00
Debt Threat: Weekend Reading
Concerns about sovereign debt have the global markets on edge. 2010 02 07 16:05
MSN Money News - AIG
News about American International Group Inc
Does Life Insurance Cover Death During Surgery?
Courts at odds over whether hospital mishaps are accidents.
Transcript: Lou Dobbs
Radio host Lou Dobbs discusses areas of the markets that need work, including the reintroduction of Glass Steagall.
Blame Ken
Suit says former Bank of America chief Ken Lewis kept his board in the dark about disastrous deal to buy Merrill Lynch.
The World's Top Sports Brands
The Forbes Fab 40 values the most powerful names in sports.
Time To Get Angry About AIG Again
With AIG paying out nearly $100 million in contractually required retention bonuses, here come more howls of protest.
Investors Celebrate Rupert Murdoch
After hours: News Corp and GT Solar Shares soar; Met Life and Verisign fall.
Rally Continues As Wall Street Cheers Housing
An increase in home sales and corporate profits help stocks regain momentum. MetLife stumbles over increased claims.
Is Wall Street Hopelessly Conflicted?
Volcker urges Senate to take aim at the conflicts of interest inherent in proprietary trading.
Get Briefed: Sen. Ted Kaufman
The Delaware senator inquires about dark pools, sponsored access and high-frequency trading.
AIG: The Secret's Out (Again)
American International Group made public on Friday the most secret --and controversial document--of the bailout.
Do We Really Want A Political Fed?
It's got populist appeal, but it would be wrong.
Sen. Kaufman Wants Transparency
Delaware Sen. Ted Kaufman is probing the equities markets.
Bill Gross Channels Johnny Cash
Pimco's bond manager warns of mounting U.S. debt.
Highlights Of The AIG Hearing
A Fed alibi is shredded, Geithner gets pounded and details about the derivatives at the heart of the controversy are revealed.
BlackRock Earnings Energized By Acquisition
Asset management firm missed Q4 estimates but nearly quadrupled profits after buying Barclays unit.
Fed Stays Put With Bernanke Under Fire
Central bank on hold in latest monetary policy meeting amid tensions over chief's reappointment.
Geithner Defends AIG Rescue
The Treasury Secretary has a tough time explaining why they paid the AIG counterparties in full and why that wasn't immediately disclosed
Street Looks To Washington
Investors focus on the Fed's meeting and Tim Geithner's testimony on the bailout of AIG.
Stocks Drift During AIG Bailout Hearing
Geithner, Paulson get the third degree from House panel over insurer rescue.
Obama And Volcker Vs. Wall Street
The huge man stomped out inflation for three decades of investors and workers. Wall Street should be worried about Paul Volcker.
Quiet Start As Wall Street Looks To Washington
From Geithner being grilled at the AIG bailout hearing to the President's State of the Union, Wednesday is a busy day in the capital.
So Wrong
John Lanchester's ''I.O.U.''
Did Goldman Benefit The Most From AIG Bailout?
Goldman's AIG-related holdings were worth 40 cents on the dollar. UBS, another counterparty, had securities worth 71 cents on the dollar. Who benefited more by the Fed's decision to pay off counterparties at par?
Block That Bonus!: More From The Fed's Secret AIG Files
The New York Fed's outside counsel scrambles to kill what could have been an embarrassing public disclosure by AIG.
Paulson to Testify at AIG Hearing on Wednesday
Former Treasury Secretary and former Goldman chief will testify about AIG's $180 billion federal bailout and how bank counterparties, Goldman included, wound up being paid in full for their swaps exposure.
Forbes.com: aig
The latest Forbes.com news on the ticker aig.
China's CIC gives breakdown of U.S. equity stakes (Reuters)
China Investment Corp , the country's $300 billion sovereign wealth fund, has made its biggest U.S. equity bets in natural resources and financial stocks.
Cramer's Stop Trading! Is Goldman the Root of All Evil? (2/8/10) (at Seeking Alpha)
Bonus taxes have fat chance of passing in Congress (at CNNMoney.com)
Some lawmakers want to tax banker bonuses into oblivion. Fat chance that will ever happen.
Financial Risk Severely Mispriced (at Seeking Alpha)
Why I Trust Casinos More Than Banks (at Seeking Alpha)
David Weidner's Writing on the Wall: Wall Street's latest contagion goes global (at MarketWatch)
The world's regulators seem to have caught the case of amnesia that swept over Wall Street in the past six months, writes David Weidner.
[$$] Hancock Named Executive VP at AIG (at The Wall Street Journal Online)
Filing reveals Chinese wealth fund's exposure (at FT.com)
China Investment Corporation, the Chinese sovereign wealth fund, is using exchange-traded funds to take positions on sectors ranging from healthcare to gold, according to a filing with the US Securities and Exchange Commission.
Does Life Insurance Cover Death During Surgery? (at Forbes.com)
CIT sets John Thain's salary at $6 million a year (Reuters)
CIT Group Inc said its new Chief Executive John Thain will get an annual base salary of $6 million, most of which is in stock, and a bonus of up to another $1.5 million, in a nod to compensation practices popularized by the Obama administration's pay czar.
UPDATE - CIT sets John Thain's salary at $6 million a year (at Reuters)
Hartford Off 4% On Weak '10 View (at Barrons.com)
BREAKINGVIEWS-Fading crisis should galvanize bank boards (at Reuters)
CIT To Prepay $750M of Debt (at Barrons.com)
Cramer: Will CIT Regret Hiring Thain? (at CNBC)
A.I.G. Hires Finance Veteran to Oversee Risk (at The New York Times)
[$$] AIG Wilts in the Media Spotlight (at RealMoney by TheStreet.com)
John Thain's challenge to rebuild CIT Group post-bankruptcy (at Fortune)
The former Merrill Lynch CEO is being asked to work his magic again, this time on small business lender CIT.
China Stock Picks Are No Road Map to U.S. Domination (at The Wall Street Journal Online)
Wielding Iron Checkbook to Shape Cultural L.A. (at The New York Times)
Yahoo! Finance: AIG News
Latest Financial News for AMER INTL GROUP NEW
Testy Conflict With Goldman Helped Push A.I.G. to Edge
The bank’s demands for billions of dollars from the insurer bled it of cash, which the government later provided.
Seeking Ways to Remake the Banking System
$100 Million Bonus Plan at A.I.G. Draws Fire
The giant insurer and recipient of the biggest government bailout in history agreed to cut its next round of bonuses by $20 million.
Risky Trading Wasn’t Just on the Fringe at A.I.G.
The conventional wisdom was that risky derivatives from a London unit brought down A.I.G. But a Delaware division was gambling as well.
Drawing Fire, Geithner Backs Rescue of A.I.G.
In questioning, Treasury Secretary Timothy F. Geithner said the A.I.G. bailout helped prevent a depression.
Two at Fed Had Doubts Over Payout by A.I.G.
After rescuing the American International Group with a loan, federal officials rejected forcing trading partners to return $30 billion they had received from A.I.G.
A.I.G.’s Big Debt to U.S. Taxpayers
The company, despite billions in aid from the government, will need several factors to break favorably in order to repay the assistance.
A.I.G. Unit May Be Sold to MetLife
The deal, if it goes through, would help pay off $9 billion of A.I.G.’s rescue debt to the government.
Fed Advice to A.I.G. Scrutinized
Revelations that the government stopped A.I.G. from releasing bailout details called in to question whether the information had to be disclosed under federal securities law.
What’s a Bailed-Out Banker Really Worth?
Kenneth Feinberg, Washington’s pay czar, has grappled more than anyone with the question of how much to pay executives at failed companies.
A Top A.I.G. Executive Quits Over Pay Limits
A top executive at the American International Group has resigned because of salary limits imposed by the Obama administration’s compensation overseer, the company said on Wednesday.
Pay Increase for Executive of A.I.G. Is Allowed
The executive, who was not named, has been granted more than a $4 million increase by the Obama administration’s pay adviser.
Show Us the E-Mail
Before releasing its regulatory clutches, the government should force American International Group to reveal the records showing how its business went bad.
Credit Downgrade at A.I.G.’s Aircraft Leasing Unit
The credit rating of the American International Group’s aircraft leasing business was cut to junk on Friday amid concern that it would lose vital access to money as a result of A.I.G.’s own restructuring.
A.I.G. Said to Plan Hong Kong Listing for Unit
Analysts say the listing could raise as much as $20 billion, which would make it one of the largest public stock offerings in history.
NYT > American International Group Inc.
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 mount and in November the Treasury announced a new rescue package that brought the total cost to $150 billion.
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.
On March 1, 2009, the federal government agreed to provide an additional $30 billion to A.I.G. and loosen the terms of its huge loan to the insurer, even as the insurance giant reported a $61.7 billion loss, the biggest quarterly loss in history.
The intervention would be the fourth time the United States has had to help the giant insurer avert bankruptcy. The government already owns nearly 80 percent of the A.I.G.’s holding company as a result of earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.
By July 2009, when the bailout bill had reached $182 billion, an examination of state regulatory filings revealed more bad news. The dozens of insurance companies that make up A.I.G. showed signs of considerable weakness even after their corporate parent got the biggest bailout in history. In September 2009, the Government Accountability Office said that the bailouts had stabilized A.I.G., but that it was not clear the government would ever recoup its money.
In December the company, after dropping "A.I.G." from its sales brochures in June, leapfrogged its competitors and reclaimed a title it held for many years before its bailout — the top seller of fixed annuities to bank customers. The contracts are being offered under the names of two subsidiaries, Western National Life and First SunAmerica. The booming annuity sales are a bright spot for American International Group, which must raise cash to pay back the federal government.
Yet even as the biggest banks repay their government debt in what is being heralded as a successful rescue program, A.I.G. looks increasingly like a long-term ward of the state.
State insurance regulators have said repeatedly that A.I.G.'s core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives. But state regulatory filings show that A.I.G.'s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other's stocks; borrowing from each other's investment portfolios; and guaranteeing each other's insurance policies. Many of the insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella. This practice may have put billions more at risk.
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 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.
He said that some had already volunteered to give back 100 percent. He did not provide any details, and resisted releasing the names of those who had received the bonuses, 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 the company agreed to cut employee bonuses by $20 million and is expected to distribute about $100 million. But the reductions may not be enough to appease the company's critics, who do not accept the company's 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, he announced his resignation, after ten grueling months on a job he had taken as a form of public service. He said the job was too big and complex as currently designed.
The A.I.G. board named Robert H. Benmosche, a former head of MetLife, to be the new chief executive. Mr. Benmosche took over from Mr. Liddy on Aug. 10. He is also a director, but is not chairman.
Once a Booming Company
The company’s complex structure and aggressive approach reflects 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 offer 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.
A.I.G.’s problems rest in its London-based financial products unit, part of its financial services group, which is 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 have fallen, the value of the underlying mortgages has declined, and A.I.G. has had to reduce the value of the securities on its books.
The company’s distress followed an unusual period of turmoil at the company. 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.