AIG

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 »

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 »

  • 17 Oct 2011 at 5:52 PM

Sorry, AIG’s Not Sorry For Partying

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]

White collar criminals have had a rough couple of weeks, with judges ignoring important facts like Danielle Chiesi’s insider trading being caused by a deep need to stop her boss from “belittling her understanding of the financial numbers” and Donald Longueuil’s only insider trading on the job, never in his personal life. But there’s finally some good news today, as a federal appeals court reversed five convictions for a reinsurance fraud at AIG. Unlike in Chiesi’s and Longueuil’s cases, the court today looked at the bigger picture and understood that you can’t blame a few small-time book-cookers for all of the terrible things at AIG.

Also, no one connected with AIG in any way is going to jail any time soon.
Read more »

In a video accompanying a 40-page slide show describing AIG’s attributes, businesses and financial goals, Chief Executive Robert Benmosche said “there is no more crisis” for the bailed-out insurance company, which now has “lots of growth opportunities,” in his view. Alluding to recent tensions over the size and potential price of the stock offering that AIG and the U.S. Department of the Treasury launched this week, Mr. Benmosche said in the video: “Our sense is we have an incredible valuation opportunity here and we’re just not going to give it away. “If we don’t get the value today, then we’re going to get the value tomorrow… We’re not going to give 100% of the value away and sell it too cheap,” Mr. Benmosche said. [WSJ]

  • 15 Apr 2011 at 12:00 PM

Fatal Risk: The Re-Education Of Goldman Sachs

The following excerpt is from Fatal Risk: A Cautionary Tale Of AIG’s Corporate Suicide, a new book by investigative reporter Roddy Boyd.

The role of Goldman Sachs in AIG’s saga had its roots in a little- remarked-upon series of promotions involving a pair of managers known as the “J. Aron guys” taking control of Goldman’s Fixed- Income, Commodities, and Currency unit in the late 1990s. Gary Cohn and Lloyd Blankfein, veterans of Goldman’s sharp-elbowed commodities trading operation, saw a need to do things differently. Read more »

Lloyd Blankfein running AIG. Read more »