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 »
Things AIG Employees Say: “Make sure you grab a bite to eat before this one does! He’s been known to clean out a Danish platter!”By Bess Levin
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?
Remember a couple of months ago when former AIG CEO and current dog fancier Hank Greenberg sued the government for $25 billion because it had stolen AIG from him? We all had a good giggle at that but some people think he wasn’t entirely crazy. One of those people is friend of Dealbreaker and Stanford GSB student Ed Couch, who feels Hank’s pain but also has some doubts about his lawyers’ efforts on the case. We pass along his views on the complaint in case you are (1) Hank’s lawyers (give Ed a call!), (2) particularly keen on Hank getting or not getting, as the case may be, his deserved or undeserved $25bn from AIG’s government captors, or (3) just generally interested in the wonky mechanics of equity-linked voting and exchange procedures, which YOU DAMN SURE KNOW I AM but the rest of you can keep your own counsel. Here’s Ed: Read more »
The complaint in Hank Greenberg’s lawsuit against America is now online, and strange and entertaining in equal measures. I’m pretty sure Occupy Wall Street will be interested to hear his theory that the Constitution allows Fed bailouts of struggling financial institutions, but requires those bailouts to be much gentler than the one handed to AIG.
There is some sensible stuff here. Greenberg’s suit makes good use of the SIGTARP report finding that the government didn’t exactly conduct hard-nosed negotiations with AIG’s CDS counterparties. Instead, it bought off the assets covered by CDS at par (even though some of the counterparties might have accepted a haircut), tore up the CDS contracts, and waived any claims AIG might have against those counterparties. And the description of how the government avoided and ignored legal requirements to get a shareholder vote to authorize new shares for the government, and kind of maybe lied about it a bit in disclosure documents, is kind of interesting for shareholder-voting nerds, of whom there are about five and I am one.
But that’s all just a political smoke screen: lots of people are good and mad that the government funneled too much money through AIG to Goldman Sachs or Deutsche Bank or whatever, but pretty much zero of them think that money should have gone to Hank Greenberg instead. And lying in disclosure documents, like insider trading, isn’t a crime if the government does it.
Greenberg’s case really boils down to two claims. First is the constitutional argument that the bailout-in-exchange-for-equity was unconstitutional because “everyone else got a no strings attached bailout, so we should have gotten one too.” And “everyone” included “Libya”:
Throughout the global financial crisis, the Government allowed many domestic and foreign institutions access to the discount window. … [D]iscount window loans peaked at about $110 billion at the end of October 2008. Foreign banks borrowed approximately 70% of that amount; for example Dexia SA of Belgium borrowed about $33 billion; Dublin-based Depfa Bank, Plc, subsequently taken over by the German government, received approximately $25 billion; Bank of Scotland borrowed $11 billion; and Arab Banking Corp., 29% owned by the Libyan Central Bank at the time, received 73 different loans. Wachovia also borrowed $15 billion, and numerous investment banks were also granted access. At no time did the Federal Reserve Board require that it be given control of, or an equity stake in, these institutions. … If AIG had been given similar access to the Federal Reserve’s discount window or other sources of liquidity like these other institutions, AIG would easily have met its liquidity needs.
Well, okay. Maybe! The legal theory of “the constitution requires that anything you give to Libyans you have to give to me” is a bit untested – if true, I am planning to assert my Constitutional right to call down air strikes on my enemies (who are legion). Read more »
Hank Greenberg Estimates If The Government Had Minded Its Own Damn Business Back In ’08, AIG Would’ve Been At Least $25 Billion Ahead Right NowBy Bess Levin
Remember September 2008? Remember how American International Group was doing in September 2008? Kind of not so hot? Maybe needed the government to front it some cash to the tune of $85 billion? Maybe needed even more money after that, even though they swore they just needed that one hit, just to get them by? Maybe would’ve been- how to say this?- fucked, if not thrown a bone? Well Hank Greenberg’s been thinking about September 2008, for a while now, and what he’s concluded is that as an AIG shareholder, he was screwed, big time. And, the window of opportunity for apologies being long closed, he figures the only way he can be made to feel better about the situation is for the US to cough up $25 billion. At least. Read more »
American International Group Inc, the insurer majority owned by the U.S. after a 2008 bailout, is hosting an event at a California facility that advertises “the amenities of an ultra luxury hotel.” The American General unit assembled about 65 people who distribute its products for a two-and-a-half-day stay this week at the Resort at Pelican Hill in Newport Beach, California, said Larry Mark, a spokesman for AIG’s life insurance division. Nine AIG managers were also sent to the resort to make presentations, Mark said in a e-mail. He declined to say the cost of the event for the insurer…“We are back to the business of being in business and we’re in the marketplace competing,” said Mark. [Bloomberg]
Remember when the Treasury bailed out AIG and the bailout money was funneled to foreign and/or mollusk counterparties and everyone freaked out? Those were good times. Less good for banks is today, when, in addition to the world ending, AIG started to sue to get some of that money back. Read more »