The Fed is funny. Not Bernanke-funny but getting there. That whole controversy about them pushing AIG not to disclose some information, especially regarding its counterparties and how much money they got? Well, it wasn’t that they refused to make the appropriate disclosures, but rather that they were trying to be accurate, hence edited some data. Oh, and also, blame it on the lawyers.
Some have also suggested that the FRBNY pressured AIG not to make required disclosures about material elements of the Maiden Lane III transactions, including that the counterparties received par value. This is also incorrect. It appears that this assertion is based, at least in part, on a misreading of emails among lawyers for the FRBNY and AIG.
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Ah Bernanke and his perfect sense of timing. Ben decided to play nice today and wrote a letter to GAO Acting Comptroller Gene Dodaro to let him know that the Fed would “welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG.”
Even though he’s on the verge of losing patience, because the Fed “has also provided significant information about its lending actions regarding AIG to the Congress in testimony and correspondence, to the GAO in connection with its original report in September 2009, and to other oversight bodies such as the Special Inspector General for the Troubled Asset Relief Program,” Ben pledged that he will “make available to the GAO all records and personnel necessary to conduct this review.”
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Yael will be guest-contributing to DealBreaker for the next couple weeks. She’s worked as an editor for Investment Dealers’ Digest and Dow Jones. Welcome her!
Maybe AIG and Blankfein should just team up to do God’s work, because each week brings more proof that the bailed out giant mess of a company works in mysterious ways. AIG is trying to work out a plan to repay only $26 million out of the $45 million in 2009 bonuses it said it would return, by paying 2010 retention bonuses early if employees agree to have them cut by 10% to 15%, according to reports today.
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Remember that story yesterday, about how then NY Fed Chair Tim Geithner and his staff maybe instructed AIG to keep its payments to banks hush-hush, as backed up by emails? Never happened, says New York Fed’s general counsel. He has no idea what any of you are talking about. In fact, he’s never even heard of this Tim Geithner guy. What’s he like?
“Matters of AIG securities law disclosure were not brought to the attention of the president of the Federal Reserve Bank of New York,” Thomas Baxter, the New York Fed’s general counsel, said in a statement.
The U.S. Treasury and White House also have said Geithner was not involved in any e-mailed discussions between New York Fed and AIG lawyers over disclosures of the insurer’s payments to banks.
NY Fed: Geithner not involved in AIG disclosures [Reuters]
Since taking over AIG in August, Bobby Benmosche has not minced words about the fact that one of the insurer’s greatest impediment to success are the “crazies” in Washington. He’s also promised to protect his employees from these insane people, at any cost, by sticking government officials in a little locked room and doing unspeakable things to them. Things financial services hacks like yourselves should never have to hear about. For those of you thinking perhaps this Benmosche guy’s all talk or that he doesn’t actually have the pair to go through with giving Tim Geithner a crew cut, he’s got one thing to say to you:
In the ensuing weeks, [of his first day on the job] Mr. Benmosche traveled around the nation meeting hundreds of AIG employees. In August, at a reception prior to a dinner with 20 or so executives at an AIG life-insurance unit in Houston, Mr. Benmosche said “my b — are bigger than the government’s,” apparently to make the point that he wasn’t easily intimidated, say two people familiar with the matter.
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So, remember those $165 million in retention bonuses paid to AIGFP employees that a lot of people got their panties in a bunch over earlier this year? So much so that the recipients were guilted into giving the money back? For the most part, they never did (only about $19 million has been forked over). Some of the staff decided to leave the company, and take their cash with them. Others are said to be holding on to it until they receive more color on how badly the Compensation Cop might screw them. We actually don’t really care what their reason is for not living up to the promise, because there’s a much more serious issue to be addressed. That issue is Andrew Cuomo. Back when this whole thing went down, you’ll recall, Andy nearly gave himself a hernia shouting in public about how he was going to bust open the knee-caps of anyone who didn’t turn over their bonus to him, ASAP. He also threatened to reveal their names if things his demands weren’t met. Now? He could give give a rat’s ass.
When the controversy erupted in March, Cuomo agreed to keep the employees’ identities secret as long as a significant share of the money was returned to the company. Some of them said his demand amounted to blackmail. But AIG officials said at the time that at least 18 of firm’s top 25 executives had agreed to return at least some of their bonus money. “We are deeply gratified that a vast majority of FP’s senior leadership have expressed a willingness to forsake their recent retention payments,” the company said.
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This Robert Benmosche is a pretty sharp guy. He thinks that an insurance company should insure things, even if that means that Tim Geithner & Co. are going to have to wait longer for their money.
AIG has put the kibosh on plans to rid itself of Chartis, its property and casualty unit, which it has spent the last eight months preparing for sale. It even renamed it for the purpose, to get rid of that awful Hank Greenberg smell.
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“AIG continues to make good on its commitment to pay the American people back,” the one-time insurance giant and current liquidation special’s CEO said today. Its customers may be a different story.
AIG announced that it has reduced its debt to the federal government by $25 billion–it now owes slightly less than $100 billion–giving the New York Fed big preferred stakes in a pair of subsidiaries it plans to sell off in the not-too-distant future. Another piece of AIG is also set to go, with a bid on its way for the insurer’s aviation-leasing business, International Lease Finance Corp.
Peachy. Too bad things are not going as well as planned at the firm’s flagship insurance business, renamed Chartis to help eliminate that awful Hank Greenberg smell. Seems it may be looking at a $12 billion shortfall, which makes AIG’s proclamations of the soundness of its insurance business sound, to this untrained ear, rather like a lie.
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Timothy Geithner honed his spinelessness chops long before he got to the Treasury Dept., according to a new report.
Well, not that long before. It came a year ago, when Timmy headed the New York Fed and gave AIG’s counterparties a $25 billion bailout. So says a report from the special inspector general for the Troubled Asset Relief Program, who works for none other than Tim Geithner.
It seems Tim doesn’t have the stomach for hard-nosed negotiation. According to the report, his New York Fed gave the counterparties to AIG’s credit-default swaps just about everything they wanted without much of a fight. When Goldman Sachs, Merrill Lynch and the French banking regulator–on behalf of Société Générale and Calyon–refused to even consider accepting a discount on the trades, Tim and friends raised the white flag and agreed to fund AIG’s repurchase of the CDS–at par, despite the fact that many of the mortgages underlying the securities had gone into default.
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Update: Fuck the below and headline above: CNBC reports that Bob has sent a memo to employees promising he’ll never leave them.
Obviously it goes without saying that we sincerely hope Bobby B’s threat to walk out of AIG and never come back was just that. Hopefully the board will coax him down from the ledge and Ken Feinberg, understanding that no one else has the panache to get the job, will lift these silly compensation restrictions, and give ‘Mosche the room to work. We need Bobby AIG if only so that he can taunt Andrew Cuomo into a fistfight, and tell us how he really feels about the “crazies in Washington.” Yes, he could do all this from one of his finely appointed bathrooms in Croatia, but a slightly loftier perch would be nice. But: it’s possible he might actually have been serious when he said he’s “had enough of this” and so we must prepare ourselves. Deal Journal reports that the following AIG board members are possibilities:
- Douglas Steenland, the former Northwest Airlines Corp. chief executive
- Robert “Steve” Miller, the former CEO of Delphi Corp,
- Arthur Martinez, the former CEO of Sears, Roebuck & Co.
- Harvey Golub, the former CEO of American Express Co.
But they might not care for the gig. So, let’s add a few more names to the short list. Ken Lewis will need work soon but I think they stopped letting AIG employees booze on the job a few months ago. Hank Greenberg? I’m thinking he’d love that and it would spare him the effort of making AIG: The Sequel. Who else?
AIG’s Benmosche Is A Drama Queen [The Deal]