AIG

“People are angry because they want to blame somebody else. They don’t take responsibility for their own goddamn lives. ‘I’ve never been promoted, because they don’t like me and there were these guys at AIG, look at them they have free lunches and EZ Pass and look at me I don’t get a free lunch.’ These people make me nuts. Get off your goddamn ass and do something. That’s what the people at AIG did, They picked up their asses and went to work.” [Pressler, related]

After the Great Auto CEO Debacle of 2008, the government had put its foot down on private-jet use by CEOs of TARP-supported companies, and when these onerous restrictions threatened to thwart his ability to make his granddaughter’s birthday party in Chicago, he exploded. “I said to Jim, ‘Here is the deal,’ ” he recalls. “ ‘I’m going to go and see my granddaughter, and I’m going to take that plane and shove it up your fucking ass. And everyone else’s ass. You are going to break my banana over this shit?’ ” [NYM]

  • 11 Sep 2012 at 11:34 AM

How Much Did The Government Make On AIG, Anyway?

AIG priced a giant stock offering last night at $32.50, making the government rich. A really really simple question you could ask about AIG is “how’s the government doing?” and I Googled around for the answer yesterday and got increasingly frustrated, then angry, then drunk. Why can’t someone tell me that? The answer has to do I think with competing interests and secrecy and embarrassment and innumeracy both real and tactical, and I could write a book about it but won’t.1 Instead, I will just tell you how the government is doing on AIG, and then you will know.2

  • The government has gotten back $12.3 $15 billion more than it put into AIG so far, plus it has about $10bn $8 billion worth of AIG shares left over. (This is what the government says too, to within rounding error.) [Update: revised for greenshoe exercise.]
  • So, great!
  • Its IRR is 3.2% 3.9%, or 5.7% if you assume it sold the remaining AIG shares today (which: it didn’t).
  • If you assume the government’s cost of capital for the bailout was 3.04%, or roughly 5-year Treasury rates as of the time they signed on to this almost 5-year bailout, then the government’s made an economic profit (returns in excess of cost of capital) of $600 million $3 billion, or $9.9 billion including the remaining AIG shares.
  • If you assume the appropriate discount rate for the bailout was 12%, or roughly what AIG’s initial Fed credit facility paid, then the government has undercharged AIG by about $26.3 $24.6 billion, or $19.7 billion including the remaining shares.
  • Neither is a good assumption.3
  • The end.

Here’s a chart:

Here is the math. Here is a footnote with sources, caveats, instructions for correcting errors, etc.4 Read more »

The three directors who oversee risk at JPMorgan Chase include a museum head who sat on American International Group Inc.’s governance committee in 2008, the grandson of a billionaire and the chief executive officer of a company that makes flight controls and work boots. What the risk committee of the biggest U.S. lender lacks, and what the five next largest competitors have, are directors who worked at a bank or as financial risk managers. The only member with any Wall Street experience, James Crown, hasn’t been employed in the industry for more than 25 years…The committee, which met seven times last year and hasn’t changed its composition since 2008, approves the bank’s risk- appetite policy and oversees the chief risk officer, according to the company’s April 4 proxy statement. [Bloomberg]

What were AIG employees doing in April 2008? Carelessly writing CDS on enormous quantities of mortgage-backed securities and (allegedly) laying the groundwork for being sued over “racist [and sizeist] taunts,” apparently. Read more »

  • 14 Feb 2012 at 12:46 PM

Presenting: Executive Bitches

For Valentine’s Day this year, Fortune put together a slideshow of various executives, analysts, fund managers, and disgraced AIG CEOs posing with their one true loves– their dogs. For the big names who missed the deadline to submit photos, fear not– this feature is clearly going to become an annual thing. For those already mentally directing a photoshoot of yourself and Jamie the Younger, maybe running down Park Ave or shooting hoops at the Garden, you might first consider looking to this year’s pioneering efforts for inspiration.


For instance, in addition to putting your love for each other on display, why not use the opportunity to showcase your credentials, as “Fortune All-Star Analyst” Mike Mayo does here? Read more »

There’s a juicy pile of something going on over on Maiden Lane. Once upon a time, Goldman Sachs murdered AIG and stuffed its corpse with tons of shall we say “troubled” residential mortgage-backed securities. Like a cursed diamond, those securities then bounced around among owners who came to bad ends and ended up in a thing called “Maiden Lane II,” owned by the New York Fed and managed by BlackRock, with a mandate to sell them off over time at prices that “represent good value for the public.”

One day, Credit Suisse came to BlackRock with reverse inquiry for those Maiden Lane II bonds. The Fed via BlackRock solicited bids from five banks, CS, Goldman, Barclays, RBS and Morgan Stanley. The banks conducted some pre-bidding price discovery with their clients, though they were sworn to secrecy and had to get the clients to sign nondisclosure agreements before they could solicit them. Eventually the banks put in bids and Goldman won and bought the bonds, and is now selling them rather nonchalantly to clients, keeping most of them overnight after buying them from the Fed.

A simple story, but it raises two interlinked things to worry about:
(1) Why are you giving all those wonderful wonderful bonds to Goldman, huh NY Fed? HUH?
(2) Why are you keeping all those deadly deadly bonds on your balance sheet, huh Goldman? HUH?

For the first one, Bloomberg says: Read more »