Stubborn Financial Culture – AIG and “Hank” Greenberg
Maurice “Hank” Greenberg is heading a new corporation, C.V. Starr & Co, Inc. This is important because Hank is the man who led A.I.G. to the heights of our recent and still impacting recession on the wheels of massive CDO securitization and CDS contracts. If you’ve forgotten, the Bush administration agreed to bail out A.I.G. in September 2008 to the tune of $85 billion which was then re-negotiated by that administration in November to a $40 billion disbursement from the TARP with another $60 line of credit from the Federal Reserve. By March of 2009 the Obama administration had increased the bailout to A.I.G. up to $150 billion and A.I.G. wrote down some $60 billion in a first quarter loss.
If you remember news footage of people walking into the corporate offices only to walk out with cardboard boxes of personal items then that was A.I.G.
Now, “Hank” has moved on to C.V. Starr & Co, Inc. and he’s apparently looking to make some of the same business deals that helped underwrite the most colossal failure of capitalism ever. He’s hired 13 former A.I.G. employees away (as of this writing) but C.V. Starr does not, as yet, have a financial products division (the group that handles the securitization of asset backed debt or CDO’s).
So if you’re not used to how this affects you and me here’s the kicker. “Hank” sets up securitized items (CDO’s) which he then leverages to the hilt via Credit Default Swaps (CDS’s), thus generating opaque layers of legal securities that mask the inherent risk of catastrophic failure the instant that broker-dealers stop lending to one another and start asking questions about the underlying value of the things we’re investing in. He gets booted by his board of directors, we bail out A.I.G. (a company that appeared to be one of the wealthiest in the whole world) and get stuck with $150 billion investment that’s worth almost nothing. Meanwhile, A.I.G.’s “braintrust” jumps ship, takes enormous signing bonuses from “Hank,” C.V. Starr & Co, Inc and any number of other insurers/investment banks and the odds that A.I.G. isn’t going to be worthless or that we’ll ever see our $150 billion again is totally gone.
Just thought I’d share with you that the folks who orchestrated this aren’t chastised nor chagrined at it; they’re simply moving on to other companies so that they can do it all over again.
