AIG Sanity

Who is on Wait Wait Don't tell Me -- Right Now!!!

This is a very useful and appropriate commentary on AIG and the media mob frenzy. The Dart Arts of Rovian Politics seem to have gone mainstream in the media. Thank you for this commentary. .................

http://thefiresidepost.com/2009/03/21/rovian-media-applying-the-dark-arts-to-aig/

Congressional hearings are supposed to illuminate not excoriate. Some committees feeding off public anger have become kangaroo courts. Targeting families at home and school is beyond the pale. Attacking Bernanke and Geithner will serve no practical purpose. We need to look ahead at the 99% of money lent to the system and see how that is monitored. Let Cuomo and the DOJ focus on the 1%. The bill passed by Congress will go down in flames once it is tested in the Courts.

Memo to MSM: I watched 25 minutes of Pres Obama's exchange with Leno. The unfortunate remark took all of 5 seconds. And the twits seized on that. Congresscritters: please note.

Someone should remind Joe Nocera that you can't light a bonfire then wag your finger at others when they add gasoline.
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http://www.nytimes.com/2009/02/28/business/28nocera.html?pagewanted=1
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I don't doubt this bit of conventional wisdom; after the calamity that followed the fall of Lehman Brothers, which was far less enmeshed in the global financial system than A.I.G., who would dare allow the world's biggest insurer to fail? Who would want to take that risk? But that doesn't mean we should feel resigned about what is happening at A.I.G. In fact, we should be furious. More than even Citi or Merrill, A.I.G. is ground zero for the practices that led the financial system to ruin.

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http://executivesuite.blogs.nytimes.com/2009/02/27/is-aig-the-worst-of-them-all/
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My column this week is an attempt to unravel, and explain, some of A.I.G.'s seamier practices. It may be easier to get outraged at Merrill's bonuses, or Lehman's bankruptcy, or Bank of America's idiotic deal-making. But you ought to put aside at least a little anger for A.I.G. No company has cost you, the taxpayer, more money. And no company deserves it less.

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Its truly amazing to see how members of the media takes no responsibility for inciting populist outrage. Instead they gin up all this rage and then condemn lawmakers for having to respond to it. When you tell everyone to be "furious" and "angry" at AIG what in the phuck did Nocera would think would happen when word of these bonuses came out? Oh let me guys, he is going to pull a Jim Cramer and say he was just doing his job. Give me a break.

I thought Obama made the case fairly well on Leno. The point of the bailout -- the only point of the bailout -- is to protect the financial system, and the only real point of protecting the system is to get banks lending again. The bailout needs to be judged against that.
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The real scandal is that AIG is paying its creditors 100 cents on the dollar. The creditors should have been asked to eat some of the cost. Mind you that was the fault of the Fed last year.

Also: Members of Congress grandstanding during a hearing? I'm shocked!

You are missing the invisible glue to everything. Who earned over 18 million dollars as an investment banker in under 2 years while also ushering in a gargantuan sale to ex-Goldman executives? Rahm Emanuael. Who is the gatekeeper between all the executive and the President? Rahm. Who knows how legislating works well enough to cover or orchestrate a mystery between the executive and legislative branches of government that a senator, fed chairman, the president, and the fed wouldn't know exact details of what has happened? Research Rahm next article you try to explain the financial restructuring problems of AIG, investment banks, hedge funds and treasury. Tried to post on Joe Nocera's article too.

Rahm is the missing piece in understanding how all this is being pieced together, how it is all coming together in its understanding and presentation within and from the administration.

I don't think that this is an honest examination, actually.
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It basically serves Joe Nocera very well to seize the high ground of advocating order and "calm", but it's dishonest.
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When he says:
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Or how about those efforts to publicize names of individual executives who received bonuses — efforts championed by Attorney General Andrew Cuomo of New York and Barney Frank, chairman of the House Financial Services Committee. To what end?
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, I guess he can't even imagine that the end would be "public shame".
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My real guess is that he can and does imagine exactly what public anger and public shame accomplish, but doesn't think very highly of the American public.
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This is not to take away some of the excellent points Nocera does make with respect to nationalization or regulation, but his final point --Richard Shelby's advice that we need a commission to study the problem for the next two years-- is almost absurd on its face, given that he's also highlighted that AIG is now effectively a government money laundering operation for Goldman Sachs under the current regulations.
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It seems that Nocera is much more afraid of the potential negative consequences of public action than he is of the real negative consequences of financiers' actions on us.
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Calm down? Not on your life, Joe Nocera. Not now, when its apparent to everyone just how necessary it is to recreate our financial playing field so that it doesn't necessarily favor plutocratic reward at plebian risk.

mpk999 are you really Jane Hamsher?

Stuart - Isn't it just barely possible that people are right even when they are "self-serving?" Would you demand that people are only to be trusted when they are speaking counter to self-interest?
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SGwhite - Oh really? Wouldn't you wag your finger at someone who poured gasoline on a bonfire?
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I'm feeling particularly prickly because this mess is just so disgusting at every level. I'd like us to follow our own self-interst which is to restore a little sanity to the discussion. I think Nocera's column does that.
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Last night Larry King started out the program with an examination of Obama's Special Olympics gaffette (thanks JK). "Tim Shriver strikes back!"
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joyomama - I caught Joe N on "wait wait" too!

kathy
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If I set the bonfire in the first place, hell no.

Everyone should think on something long and hard. Matt Taibbi and others have recently come out with articles explaining in great detail how the AIG debacle happened. Thats great and believe me I feel better informed for it, however why did it take till now to get these facts out into the public domain? AIG went under last September after all . Did it really take 5 or six months to figure out CDOs and CDSs are? Of course not. But instead of doing that kind of substantive reporting, financial journalists like Nocera instead focused on who were the worst offenders and who you should focus your anger on and how much money we were giving the banks and whether we should nationalize or not. Just about every story was intended to spark outrage at the "greed and corruption on Wall Street" without ever clearly defining what those terms meant. There definitely wasn't much of an effort before now to differentiate between the bad actors and the employees of these countries who were just doing their job. So excuse me if I am not impressed with Nocera, who just a month ago was ginning up rage against AIG, now imploring everyone to calm down. Whether some of the points he raises are true or not is beside my point. He helped create an atmosphere in this country of all this populist rage against Wall Street which in turn put pressure on both the White House and the Congress to act. If he isn't happy with what is going on then perhaps Nocera should think about that the next time he writes a column directing his readers to be angry and furious at the same people he is now saying shouldn't be villified.

no, but I tried to comment her @huffington only to end up on her own small blog, which i'd never seen before this week. I think she is thinking right, but missing a goal. A bit too conspirisy obsessed and sounds a little too parinoid (although, sounding paranoid will get you more readers online i suppose).

I am a dem, and actually a giant Rahm fan for years now. But his selection for COS, I thought was brilliant except for my uncomfortableness with his banking history. When I tried to look up his banking history and connections, I didnt find a lot of information in google and have no reason/time to research it. What I did find were bosses, boards, and players between his firm, a large chicago firm, new york firm sold to, politicians, and some general information on some deals he profited from. Then this AIG bonuses and mysteries event started happening and I got this deja-vu nervousness about it. Dodd didn't know when someone typed in the date "loophole" for bonuses? The administration didn't know details the day this broke, but Obama and Axelrod clearly thought at first this was a distraction that could blow over. Why would the upper circle of the administration seem to think this could blow over without scrutiny?

I am terrified, as us wussy-liberals tend to be by nature, of dems being in power and doing corrupt, shady, or anything that gives conservatives the perfectly valid criticism of corruption and large government. Why can't once we are in power, we actually build respect from the people instead of walking into the open arms of a big-machine corruption stereotype? Republicans learned from dems and they get it, they can whine and stick around without backlash if they pull david vitter and airport bathroom scandals while we have murthas and dodds and money-in-freezers setting up the president to look like the leader of corrupt theives instead of horny ones. That pisses me off more than anything. Dems are incredibly organized and well-researched in exploiting republican governing sins but instinctively look for clouds and defensive posturing around our own integrability questionable members. see:Daschele. Not only should dems show a strong honesty, transparency, and integrity, but dems need to show they can prune internally before trimming neighbor's trees.

I'm always smacked down hard anywhere i try to express support to democrats but call for basic integrity.

The honest thing no one wants to say is that Democrats obviously made a calculated political decision to try not to piss off self-proclaimed capitalists. They tried to avoid an accusation war with conservatives by sacrificing what is right for what was demanded by wall street supporters. There was no "consideration for the contracts" argument, it was clearly done to avoid being called socialists by conservatives and it blew up in their face. I said all along, do whats right. We know whats right. I don't care about getting the bonuses back or the the money spent - we'd get more money back by pulling back 1 brigade of troops from overseas. Government would find a different way to 'waste' the money. We are getting more money back from states refusing parts of the stimulus. Its time to find out who in government is not doing the right thing for the people. The only purpose of government is to protect us, the people. Protect us from other countries and threats, protect us from each other, protect us from business, science, religion. Otherwise, we're all capitalists and have every right to do whatever to get as much as we want to pursue in our pursuit of happiness. When the government isn't protecting us, we have an open government in order to find out why. We the people were not protected from whatever was happening in the banking, investment, and insurance world. Who in government is responsible for deliberately weakening a protection of our money being used to fix AIG, to protect us from an industry failure? Dodd says it was treasury. I'm saying, point your attention to Rahm.

And, by the way, this bill was thousands of pages. It was not typed up on a typewriter or written by hand. Doesn't every single word-composition software program out there have version tracking, check-in and check-out systems, and reversion copies? It should be an hour's work for any half-competent tech person to look at the electronic document and revert back to see the exact user that actually typed in the february date to Dodd's amendment. This is clearly a mystery because someone doesn't want anyone to know.

sgwhite - But I've set bonfires on many occasions (I was a summer camp director for a while) and I would have been mighty unhappy if someone crashed the party with gasoline, or ignored my safety instructions. Gasoline and bonfires don't mix. But that doesn't mean you can't have bonfires. just saying. Different point of view, apparently, or different experiences with bonfires.

I meant to say "...'s excessives and oppression."

*protect us from each other, protect us from business, science, religion = business's excessives, science's excessives, religion's excessives, and business's oppression, science's oppression, and religion's excessives, [in order to be free men]. And yes, the seperation of powers and federalism is the mechanic to protect us from government's oppression and excessives. Tried to shorten my post and that line read very wrong to me without that clarification.

Are we allowed to get angry now?

How about now?

Please do, SZ. I can't get rid of the feeling I have that both the DOJ and the FBI should be working hard at finding out whether crimes have been committed. I heard Pres Obama say that the shenanigans were legal. I am not so sure. Cuomo may be on to something. But a couple of grand juries may be in order. Any legal eagles among our commenters with a point of view?

Here's Tim Geithner's "plan":
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Toxic Asset Plan Foresees Big Subsidies for Investors
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...because bonuses weren't enough to get our financier class feeling confident enough to put down their squash rackets, and get into the office to make some loans.
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Can we say "Rumsfeld" now?

John Cole describes Geithner's bank bailout plan:
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If this were a medical emergency, it appears it would look something like this:
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The Illness- reckless and irresponsible betting led to huge losses
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The Diagnosis- Insufficient gambling.
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The Cure- a Trillion dollar stack of chips provided by the
house.
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The Prognosis- We are so screwed.
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There also a good exchange between Erin Burnett (Pox and Friends International Super Star) and Mark Haines of CNBC with Rep Brad Sherman at dailybail.com. Pointed.

bitterpill
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I am not legal expert but I think the point you might be missing is that the system was so screwed up that no crimes even had to be committed for all of this to happen. Now I am still sifting through all of the information from various sources about AIG but here is one thing that most agree on, Cassano didn't lie to anybody or misrepresent anything to anyone except for maybe internally to his own bosses. The problem was that he could be honest and still game the system. What I mean is this, the rules changed which used to govern how much leveraging a bank could engage in. So if a bank made a 30 dollar play and only had 1 dollar in assets to back the play it was perfectly legal. Then the rules changed where these banks and other entities could basically invent vehicles to use to do this leveraging with. In effect that put a stick of dynamite in one hand and a cigarette lighter in the other. I admit that Taibbi's article went most in depth on this but it seems pretty clear that although the moves Cassano made were crazy and to a certain extent immoral, by the time he made them the system had been greased to the point where it was still fine and legal. And even the declarations about how much money AIG actually had indeed indicated that they were playing with funny money. So you see this is why I am pissed and have no faith in any "financial journalists". This wasn't really a mystery, everybody involved knew what was going on even if they didn't really grasp to what extent. But NOBODY was reporting on it until AFTER the system imploded. And thats what Jon Stewart was talking about when he nailed Jim Cramer.

Thanks SGW: I have no quarrel with the President's argument that it was legal. But I am thinking about misrepresentation. I am not good at this legal stuff, but I have this nagging feeling that misrepresentation has some legal consequences. Same with the false documentation on the mortgages. Has anyone been charged on the scams in that field? From what you say I am inclined to begin this way: if no laws were broken because AIG was engaged in legal activities then what laws governed those deals. What about contract law? I don't want to appear to be quibbling, SGW. Nor do I want to sound obtuse ( altho" I won't complain if I come across as one!). But contract law must have been used in the CDSs. Surrely misrepresentation was involved. Unless of course deceitful practices were ok. If AIG issued a contract which it knew it could not cover what did it do?

bitterpill8:
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That's a beautiful, incredible defense of why bonuses matter by Representative Brad Sherman.
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I'd ask Joe Nocera to watch that exchange ( http://plus.cnbc.com/rssvideosearch/action/player/id/1067075944/code/cnbcplayershare ), and to tell us whether or not Congress is "out of control".
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I'd like Joe Nocera to actually refute Congressman Sherman, instead of the emails held out by AIG's CEO Libby.

bitterpill
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Again I am no legal expert so feel free to disagree with my take but the point I was making is that at least with AIG (but I am sure with many other Wall Street firms) the players all knew what was going on. They didn't have to lie. Basically the CDOs were away to bundle bad assets with good assets and then sell them off and people were buying them fully knowing this but thinking that the bad assets, in this case bad mortgages, would never go belly up at the same time so they could still profit on the "good" assets. Taibbi says this is what made them attractive to "conservative" investors because it seemed like SOMETHING in the bundle would always make money without a lot of risk. Boy were they wrong. I hope they find something to convict the Cassano guy on but it doesn't seem like he ever did anything that they could charge him with.
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Now on the actual mortgages I do believe there have been some lawsuits brought over those. I know the NAACP just brought a lawsuit the other day but its more based on the fact that the companies were offering subprime mortgages rather than traditional mortgages to minorities who had the same credit worthiness as white customers who were offered the traditional mortgages. I think there will be some recriminations for that activity eventually but I doubt any jail time will be involved unless its for the worker bees, not the big wigs.
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In the end what needs to happen is that the regulation and the regulators need a huge overhaul. If we could have kept all these big banks smaller we would have never had this systemic problem. And if we had clearer guidlines on who was supposed to be providing oversight on what then maybe the smallish OTC wouldn't have been the one not looking over AIG's shoulder.