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Another must-read from Gretchen Morgenson:
At A.I.G., Good Luck Following the Money
WE return this week to the subject of the American International Group, the giant insurer that has received $170 billion in taxpayer guarantees, because the clamor over its rescue continues to grow. Of concern to those on both Capitol Hill and Main Street is the secrecy surrounding the $50 billion funneled to A.I.G.’s counterparties since it nearly collapsed last fall.
Now that we live in bailout nation, why does the A.I.G. rescue rub so many the wrong way? Here is a hypothesis: Even as investors, employees, communities and taxpayers have been battered by the crippled financial system, A.I.G.’s counterparties were saved from losses on deals they struck with the insurer.
Add the fact that the government has resisted revealing these companies’ identities or how much federal money they received, and it’s easy to see why resentment boils. As a result of the A.I.G. rescue, taxpayers own almost 80 percent of the company. (Friday evening, as this column was going to press, rumors were swirling that A.I.G. might be releasing a list of all of its counterparties.)
Representative Carolyn B. Maloney, Democrat of New York, said she had twice asked for a full accounting from Ben S. Bernanke, the chairman of the Federal Reserve, which arranged the A.I.G. rescue. She has not received it.[...]
6 Comments
Thanks for pointing out this article. This is a prime example of the government talking transparency but not doing transparency.
You have to ask yourself why they are hiding behind the “proprietary” fig leaf in this case. The TARP loans to banks have also lacked a lot of transaparency but at least we know who received the loans and how much those loans were for. On how the money was used, not so much. But with AIG we do not know even this minimal information. So is the nasty secret that so many of the counterparties are foreign banks? And that this money has done exactly zilch good for the US economy? Where are the hedge funds in all of this?
Not only should both Geithner and Bernanke be fired over this, a criminal investigation should be begun into how the whole AIG bailout has been managed. Zero transparency means zero accountability.
BTW I think the key paragraph is this one:
Yep, I watched the Senate hearing last week, and, if you can believe it, found myself cheering for Richard Shelby, when he asked the same question.
He asked why they didn’t just say that the government would stand behind the Credit Default Swaps, if there was a default.
Fed Vice-Chairman/Wall Street flunky Donald Kohn didn’t have an answer for him.
Kohn said that none of the CDOs that were bought at par from the counterparities had defaulted (they were all the AAA tranche — the last to take losses). However their market price was significantly below par value.
And they want their “contractually obligated” bonuses? You know, I say, let that go to trial. Let’s see if there is anyone on a jury who would like to honor that contract.
At this point, the bonus money has two purposes:
1) keeping potential whistleblowers silent; and
2) maintaining control of client account relationships (that would largely follow any departing account managers who would be snapped up by competitors for their client lists).
AIG et. al. will continue to fight for this ”leverage” on their future prospects.
That Geithner et. al. are complicit is no surprise. Things aren’t bad enough yet to break the conspiracy.
I expect time will fix that. Or eventually, riots in the street.
And there’s a third route: many intelligent investors/clients will have nothing to do with the AIGs ever again. I don’t see how the ’brand’ can survive all this as an attractive service provider.
Madsen has the skinny on AIG, and reader has a good point re silencing whistleblowers, of several varieties…
March 2, 2009 — AIG’s new $30 billion handout to protect a U.S. intelligence operation
This just in from our intrepid source in Asia:
Maybe with now the Third Bailout, it’s time to ask the hard questions about AIG.
The third bailout fund for AIG of 30 billion US dollars makes that insurance company the largest corporate recipient of federal funds, according to Bloomberg, which calculates its debt to the government at 70 billion dollars. AIG requested the third tranche, claiming that it could find no buyers for its Asian insurance operation, AIA.
This is patently untrue. In fact, China Life has shown strong interest in purchasing AIA’s (AIG’s Asian unit) assets in the Greater China region but, insurance industry insiders say, was rebuffed by AIG’s asking price, which was astronomical considering the company’s heavy debt burden. The transfer of AIA to the federal government, probably to protect sensitive private data that cannot be shared with foreign companies without igniting a major scandal, confirms suspicions long held about the ‘revolving door’ between AIG executives and the US intelligence agents.
Intelligence agencies in Japan, Indonesia and China have long suspected that AIG and its Asian unit, AIA, were heavily used as cover for placement of NOC agents, eavesdropping operations and for collecting private data unrelated to insurance matters on their nationals.
The links between the American International Group and the U.S. intelligence establishment were disguised by less than a fig leaf. This former CEO and chairman Maurice “Hank” Greenberg, who promotes himself as old China hand was a longtime member of the National Intelligence Council and adviser to the National Economic Council. Kenneth Starr’s uncle, Cornelius Vander Starr, was also a top executive with the far-flung insurance company.
Beijing has kept a hawk eye on AIG’s data collecting on Chinese citizens, which got a boost by hiring exiled Chinese dissidents following the Tiananmen incident. In more recent times, the new AIG tower on the posh downtown Hong Kong waterfront raised eyebrows for its fortress-like design and antennas spouting peeking out from its angular upper floors.
Considering the estimated 60 billion in losses sustained by AIG thus far, the Obama administration has an obligation to disclose to both investors and taxpayers the extent of US intelligence manipulation of the insurance company – and whether Agency officials were involved in diverting funds from the company to finance ‘black operations’ or to line their own pockets. Did the Agency-based executives run AIG into the ground by funneling corporate funds into covert operations outside of congressional authority? Or were billions simply spend on slush funds?
In Hong Kong, NOCs in AIG were known to lead the high life in vast and expensive expat apartments, wining and dining in tycoon-level restaurants and clubs, and keeping prostitutes on the AIA payroll disguised as insurance brokers. To local Hong Kongers who have a strong belief in ‘feng shui’, there was a dread of AIA since its first headquarters (still used as a back office) has windows shaped like coffins.