Tag: AIG

Poor Hank Greenberg, the ultra wealthy former CEO of American International Group (AIG), has a sad. As the largest shareholder, he thinks that SIG shareholders got a raw deal when the government saved the company with more than $180 billion in cash. He believes the bailout cost shareholders, like himself, tens of billions of dollars. Unlike the banks, the government set down rules for the loan that forced the company to pay back Wall Street firms.

The trial has a cast of characters reminiscent of the congressional bailout hearings with testimony from former chair of the Federal Reserve, former Treasury Secretaries Timothy Geitner and Henry Paulson.

Secrets of the bailout, exposed: Why you should be watching the AIG trial

By David Dayen, Salon

To this day, information on the banks’ heist and how it went down is pathetically scant. That’s about to change now

The AIG bailout trial began in Washington last week. This is a case where one ruthless, reckless corporate CEO, AIG’s former chieftain Hank Greenberg, argues that his company wasn’t treated as well during the bailout as those of other ruthless, reckless corporate CEOs. So there’s no real rooting interest for anyone with at least one foot planted in reality.

But as I wrote recently, regardless of the outcome, this trial should matter to every American. In fact, just in its first week, we’ve learned a lot of new information about how the bailout architects- then-Treasury Secretary Henry Paulson, ex-Federal Reserve chair Ben Bernanke, and former president of the New York Fed Timothy Geithner – conducted themselves amid the chaos of the financial crisis. And it doesn’t reflect well on any of them, with concealed information, bait-and-switches, and favorites played among financial institutions. As these three prepare to take the stand this week in the case, we should be pleased to finally have this debate about the bailout in public. [..]

We all know the adage that history gets written by the winners. In this case, a very rigid narrative of the bailouts took hold, featuring the swashbuckling actions of governmental leaders who made the hard choices necessary to save the financial system. But because of one ornery ex-CEO, we’re getting another draft of that history, one that displays the bailout as chaotic, selective and in many cases one where laws got thrown out the window and raw power ruled.

As the taxpaying public who fronted the money for all this activity, we should get to know the truth. And the next time the country is faced with such a situation, policy-makers should think twice before heading down the same path, mindful that their dirty laundry will eventually get aired.

POSTSCRIPT: Henry Paulson testified Monday in the trial, confirming the disparate treatment of AIG relative to banks like Citigroup, but saying that circumstances warranted it because those banks were more essential to keeping the financial system afloat. He said that the government had to treat AIG harshly to win political support. (Of course, the government didn’t treat AIG that harshly, gifting them a carryover tax benefit worth $35 billion and letting their executives take bonuses in 2009.) Paulson also acknowledged the private bid for AIG from China Investment Corporation, but asserted that they wouldn’t have followed through on the bid without a government guarantee, even though, he admitted, he never talked to the Chinese.

The best is Jon Stewart’s chastizing Breenberg for being a cry baby.

It would be funny, if it weren’t so ridiculously pathetic.

Cross posted from The Stars Hollow Gazette

Besides the $700 billion from TARP and $17.7 trillion from the Federal Reserve the “Too Big To Fail” financial entities are still getting bailouts with tax payer dollars via tax breaks on losses. 90% of the insurance giant, American International Group Inc.’s (AIG), fourth quarter profits from 2011 were “because of an inappropriate tax break the government-owned insurance company continues to receive, according to four former members of the watchdog panel that oversaw the financial crisis bailouts“:

The break allows AIG to count its past net operating losses against future taxes. That amounts to a “stealth bailout” of a company that received about $125 billion in taxpayer money, said the former appointees to the Congressional Oversight Panel for the $700 billion Troubled Asset Relief Program.

“It’s been more than three years since AIG lost its reckless bet on mortgage-backed securities, yet today AIG continues to get special tax breaks that last quarter accounted for 90% of its profits,” the panel’s former chairwoman, Elizabeth Warren, told reporters Monday on a conference call. “We think it’s time for Congress to end the special tax break.”

Warren, who is running as a Democrat for the U.S. Senate in Massachusetts, was joined by former panel members Damon Silvers, Mark McWatters and Kenneth Troske in saying the tax break gives the illusion of significant profitability at the company.

The profits benefit AIG’s private stockholders and allow the company to pay higher executive compensation, the TARP panel members said.

“By doing it this way….billions of dollars leak out to the benefits of private parties, who really should not be benefiting from public policy in this way,” Silvers said.

The special tax exemption that AIG and other struggling companies received allows it to deduct its past losses against future tax bills thus showing a net profit. It allowed for AIG to hand out generous executive compensation and benefit private shareholders.

Just last week, Matt Stoller at naked capitalism reported that almost half the banks that had paid back TARP did so with funds from other government programs:

The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”. Here’s the GAO, with a report out today.

   As of January 31, 2012, 341 institutions had exited CPP, almost half by repaying CPP with funds from other federal programs. Institutions continue to exit CPP, but the number of institutions missing scheduled dividend or interest payments has increased.

Much of the government-supplied TARP funding (to small banks) was replaced by the Small Business Lending Fund passed in 2010, which Republicans called “TARP 2.0″.  The larger banks, however, where much of the bank-based credit creation in the economy takes place, didn’t use this program.  Instead, they got an implicit subsidy of between $6B (pdf) and $300B a year from the widespread belief that the government will not let their bondholders lose money…

You can take a stand with Ms. Warren and sign her petition:

For all those who had been hoping for swift but fair judicial treatment for criminal bank actions … dont hold your breath. “The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision have spent the past few days completing the settlements with some of the largest U.S. banks, including Bank of America Corp, Wells Fargo & Co, JPMorgan Chase and Citigroup Inc. The pacts would resolve only part of a large probe involving a group of 50 state attorneys general and about a dozen federal agencies.” But don’t worry, banks won’t actually have to part with even one dollar:

For all the “investigations” into criminal behavior by the largest Wall Street banks it is Main Street that has felt the pain. According to the NYT some 6.7 million homes have already been lost in the housing bust, and another 3.3 million will be lost through 2012. According to Zillow a staggering $9 trillion in home equity has been lost since the real estate market peaked in June 2006.

Caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the savings and loan crises in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.

A lawsuit filed against the SEC over the Madoff ponzi scheme was ruled on Tuesday. The suit alleged that the SEC had been repeatedly tipped off to the Madoff situation and flat-out failed to address it.

In any event, a federal judge on Tuesday dismissed the suit, which alleged the SEC had acted with “gross negligence.” U.S. District Judge Laura Swain ruled that the plaintiffs had failed to “identify any specific, mandatory duty that the SEC violated.”

Nevertheless, Swain excoriated the SEC, calling its behavior “sloppy,” “uninformed,” and “irresponsible.”  That said, continued Swain, “that the conduct in question defied common sense and reeked of incompetency does not indicate that any formal, specific, mandatory policy was ‘likely’ violated.”

It has become all to apparent that in todays Washington, Wall Street environment that being a bumbling idiot, even to the point of criminal will only get you a “strongly” worded reprimand and, quite possibly, a promotion.  

As campaigns and volunteers hone their final electoral messages, the best flier I’ve seen asks a simple question — “Will They Get What They’re Paying For?”  Created by the Washington State Labor Council, and proudly bearing their name, not that of some shadowy front group, it portrays a check from the US Chamber of Commerce to Republican Washington State Senate candidate Dino Rossi. Notes in the memo field remind us of Rossi’s positions: Lower minimum wage, repeal Wall Street reform, offshore U.S. jobs. Below the check is a field of corporate logos: BP, Fox, JPMorganChase, Walmart, AIG, Philip Morris, Citigroup, Pfizer, McDonalds, Comcast, AT&T and more.  The relatively conventional back contrasts Rossi and Senator Patty Murray on key economic issues, stating “Dino Rossi works for them. Senator Patty Murray works for us.”

It has been announced that House Oversight Committee Will Hold Hearing On Geithner/NY Fed/AIG Scandal

Ed Towns, the chairman of the House Oversight and Government Reform Committee, just announced that he would hold hearings into the emails that show how the New York Federal Reserve delayed disclosure of AIG counter-party payments, hiding public information from federal regulators. The statement is below.

Towns wants to hold the hearing the week of January 18, and has invited Treasury Secretary Geithner to testify.

The question is did Geithner’s New York Fed Ordered AIG to Violate Securities Law in 2008

Yves Smith over at Naked Capitalism commented on a report from Bloomberg News that just about made my eyes pop out of my head. Evidently, Darrell Issa got his hands on some 2008 emails between AIG and Tim Geithner’s New York Federal Reserve, wherein the NY Fed orders AIG to make material misstatements on SEC filings:

Bloomberg reports:

   The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

   snip

   AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

Pete DeFazio Slams Tim Geithner & Larry Summers  (TheYoungTurks)



http://www.youtube.com/watch?v…

Is it finally Time to Bail Out — MAIN Street ?

Wall Street HAS gotten all their Trillion Dollar Bail Out $$$$$$$$$$$$$

AND so far NOT much of it has Trickled Down to Main Street — Where it’s Most Needed!

Something ‘s got to give — and Soon!

Before Small Town America, (and Metro-America) rolls up the welcome mat, and fades into history.

We have been told that Wall Street Investment firms are “Too big to Fail” — But that does NOT Mean they are “Too Big for Accountability”!

The Question boils down to,

Who Does the Congress Represent anyways —

The American People, or the Global Bankers (and their Lobbyists) ?

And Will the People bother to care about Wall Street Regulation this time around?

Since I’m assuming we will, here’s some essential background on the Wall Street Meltdown mess:

Credit Default Swap (CDS)

What Does Credit Default Swap (CDS) Mean?

A swap designed to transfer the credit exposure of fixed income products between parties.

http://www.investopedia.com/te…

CDS’s are an easy way to transfer Credit Risk — Check!