Greenberg Calls AIG Bailout A "Failure"
Former AIG CEO Maurice "Hank" Greenberg told a House Oversight and Government Reform Committee Thursday that the government bailout of AIG is a failure.
In a prepared statement, Greenberg said:
"That plan has failed. A successful liquidation is impossible in the present economic climate since buyers for AIG assets at fair prices simply do not exist at this time. Fire-sale prices will bring taxpayers, who now own almost 80 percent of AIG, only pennies on the dollar for their investment in AIG.
"Since the day the treasury announced its plan to liquidate AIG, value has been destroyed because AIG's people and their relationships — AIG's business — are leaving. The evidence is overwhelming and indisputable that the American taxpayer is an investor in a steadily diminishing asset."
Greenberg came to Congress with a 10-point plan to fix and rebuild AIG.
He advocated reducing government ownership in AIG, splitting off the Financial Products division and asking the banks who received billions in payments from AIG, due to the bad bets of the Financial Products division, to return some of the money in exchange for equity in the company.
Greenberg also reiterated his denial for any wrongdoing on his part in the financial fiasco. He blamed the management who succeeded him after his resignation, as the result of fraud charges, from the company on March 14, 2005. He said the Financial Product group went off on a "tangent," and in nine months booked more than double the amount of contracts for financial products, of lower quality, than it had in the past seven years.
"You would have thought that somebody should have called a halt until it regained its AAA rating and would slow down materially or discontinue," he said. The lowering of AIG's credit rating triggered the payouts to financial institutions that brought down the company.
"AIG did not have a solvency problem, it has a liquidity problem," Greenberg added.
AIG's current management issued a statement contesting the 83-year-old Greenberg's claim of innocence.
"Given that Hank Greenberg led AIG into the credit default swap business, has repeatedly refused to testify under oath about a transaction he initiated when he was still AIG's CEO, and is being investigated by the SEC and the Justice Department, we don't understand how he can be viewed as having any credibility on any AIG issue."
Daniel Farber is Editor-in-Chief of CBSNews.com
Geithner On Ousting CEOs, Reviving Economy
(AP Photo/Susan Walsh)
In an interview with CBS Evening News anchor Katie Couric, Geithner acknowledged the government has had to do "exceptional things" – citing AIG as well as Fannie Mae and Freddie Mac.
"We have changed management aboard," he said. "And where we've done that, we've done it because we thought that was necessary to make sure these institutions emerge stronger in the future."
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White House May Seek "Controlled Bankruptcy" For GM
4904291The Obama administration is weighing a "controlled bankruptcy" for General Motors Corp. if the floundering auto giant cannot meet government standards for viability by June 1, The New York Times reports Wednesday.
The move would fall somewhere between a prepackaged bankruptcy and a potentially chaotic legal battle between the company and creditors. It would involve persuading only some creditors to agree to a plan that would split the company into two pieces, sources familiar with the discussions told the Times.
In most prepackaged bankruptcies, all the creditors must agree terms, but the White House may circumvent that by financing the sales using taxpayer money, reports the paper.
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The move would fall somewhere between a prepackaged bankruptcy and a potentially chaotic legal battle between the company and creditors. It would involve persuading only some creditors to agree to a plan that would split the company into two pieces, sources familiar with the discussions told the Times.
In most prepackaged bankruptcies, all the creditors must agree terms, but the White House may circumvent that by financing the sales using taxpayer money, reports the paper.
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Judge Orders Asset Freeze On Madoff Relatives
(CBS)
According to Reuters, a Connecticut judge has issued a temporary restraining order freezing the assets of Madoff's wife, brother and sons, and other executives who worked in the Madoff firm.
Madoff said that he acted alone and so far only one other person (a Madoff accountant) has been charged in connection with the fraud. But prosecutors have confirmed to CBS News that Madoff relatives and associates are under investigation.
The restraining order comes in response to a lawsuit filed by the city of Fairfield, Conn.'s pension fund and is in effect until April 13. Madoff's brother Peter Madoff already agreed to have some of his assets frozen in December, according to his lawyer.
Geithner Takes His Show To Europe
(AP)
The reception to the Geithner's plans was mixed, but at least the stock market had an up week. As Geithner keeps repeating, the country's economic problems are unprecedented and complex, and require some risk on the part of the government and taxpayers.
"We're not going to get through this unless we [are] willing to take risk again," Geithner said during an appearance on "Meet the Press" on Sunday. "You know, the financials took too much risk. The great danger for us now is they're going to take too little risk, they're not going to take a chance on a viable business or a family that wants to put their kids through college."
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France Threatens G20 Walkout
(AP Photo/Gerard Cerles)
French Finance Minister Christine Lagarde said French President Nicolas Sarkozy won't sign onto an agreement if it does not include more stringent global financial regulation than either the United States or the United Kingdom want.
The G20 is seen as a crucial opportunity for world leaders to coalesce around a coordinated strategy for dealing with the economic crisis, a prospect threatened by the prospect of France walking away from the table.
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Sen. Corker: Obama's Auto Plan Sets "Dangerous Precedent"
Appearing on CBS News' The Early Show, Republican Sen. Bob Corker of Tennessee said that the Obama administration's demands of General Motors and Chrysler set "a dangerous precedent."
"I think for all of us who believe in free enterprise, this is the crossing of a major threshold, and it actually should send a chill to people all across the country," Corker said.
"You know, we have become numb to all the bailouts that are taking place," he added. "And yet yesterday this administration decided that they know best as it relates to this industry - they're going to be making decisions about which plants close, which plants stay open."
You can watch the full interview below:
"I think for all of us who believe in free enterprise, this is the crossing of a major threshold, and it actually should send a chill to people all across the country," Corker said.
"You know, we have become numb to all the bailouts that are taking place," he added. "And yet yesterday this administration decided that they know best as it relates to this industry - they're going to be making decisions about which plants close, which plants stay open."
You can watch the full interview below:
New GM CEO: "We Need To Do More"
With all the anger across the country about taxpayer bailouts, President Obama stood up to the auto companies today and said firmly -- you're not getting another one, unless you come up with better plans for restructuring your companies. The president forced out General Motors chairman Rick Wagoner and gave the company 60 days to submit a new restructuring plan. CBS Evening News anchor Katie Couric spoke to Fritz Henderson, GM's new CEO.
Katie Couric: Mr. Henderson, you have 60 days to get GM's house in order. Is that enough time?
Fritz Henderson: Well, I would say, Katie, we have - we've done a lot already. So it's not as if we need to recreate a plan from Day One. I think the clear findings of the task force was we need to move faster. We need to move deeper. And I think the clear view from their perspective, our perspective, is we're going to do what it takes to get this job done. And a 60-day period is what they outline for doing this out of court. And if we're not successful doing it out of court, we will do it in court.
Couric: President Obama said today at the White House, quote, "It will require unions and workers who have already made painful concessions to make even more." We've heard some GM workers say today enough is enough. They're not willing to make any more concessions, give any more back. What then?
Henderson: Certainly it's, you know, it's a tough message. I thought some of the measures that were identified to try to help - for example, communities and help people - were very well-structured. And I think there's a recognition that when sacrifice is required, there is pain and the need to help. So certainly I understand the reaction. But I think there's no question that more is going to be required from all of us.
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Katie Couric: Mr. Henderson, you have 60 days to get GM's house in order. Is that enough time?
(AP Photo/Carlos Osorio)
Couric: President Obama said today at the White House, quote, "It will require unions and workers who have already made painful concessions to make even more." We've heard some GM workers say today enough is enough. They're not willing to make any more concessions, give any more back. What then?
Henderson: Certainly it's, you know, it's a tough message. I thought some of the measures that were identified to try to help - for example, communities and help people - were very well-structured. And I think there's a recognition that when sacrifice is required, there is pain and the need to help. So certainly I understand the reaction. But I think there's no question that more is going to be required from all of us.
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Are Sales The New Normal?
(CBS)
"Many stores can't protect their brand right now because they have to worry about cash flow," said Gilbert Harrison, the chairman of Financo, an investment bank that specializes in merchandising.
In order to keep this cash flowing — or just trickling in — even high-end stores like Bloomingdale's and Saks Fifth Avenue have offered serious discounts, especially during the holiday season. Shoppers once had to wait months until full-priced items went on sale, but not anymore. And big-ticket items are no exception.
Beth Kobliner, author of "Get A Financial Life," agrees.
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Reaction And Analysis: Obama's Auto Plan
(CBS)
The administration forced G.M. Chairman and Chief Executive Rick Wagoner to resign and gave the company 60 days to come up with a better restructuring plan. Chrysler was given 30 days to work out a merger with the Italian automaker Fiat in order to be considered for further government money.
Here a sampling of what is being said in response to the move:
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Bank CEOs Pleased By Meeting With Obama
(CBS)
Many of the companies that these business leaders represent have been hard hit by the economic crisis - which they helped bring about through risky investments - and they have received billions of dollars in bailout funds from the federal government.
This largess has not always gone over well with the American taxpayer: The meeting came in the wake of an outpouring of populist anger over the $165 million in bonuses that American International Group, Inc. (AIG) gave to employees after receiving government aid.
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Paulson To Write Own Account Of Economic Crisis
(AP Photo/Manuel Balce Ceneta)
Paulson's currently untitled book will go beyond his tenure at treasury to offer insights on how the Obama administration is dealing with the faltering economy and what moves he believes it should take, according to a statement release by his publishers.
"My goal is to provide a historical record to help the public and future policy makers understand how, as market and political forces collided, we made our biggest decisions -- where we did things right and where we didn't do quite as well, and what we learned as we held the system together with the equivalents of duct-tape and bailing wire," Paulson said in statement.
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Geithner Appears To Flip-Flop on Support for U.S. Dollar
(AP Photo/Mark Lennihan)
Treasury Secretary Timothy Geithner's apparent openness to a non-dollar reserve currency roiled markets on Wednesday before he backtracked and said the dollar would maintain its current central role.
Geithner had said at a Council on Foreign Relations event that he was "quite open" to China's suggestion to displace the greenback with an "international reserve currency." China central bank governor Zhou Xiaochuan had called for a global currency to replace the dollar, perhaps a "reserve currency" from the International Monetary Fund.
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AIG Bonuses Renew Call for Congress to Read Bills
(AP Photo/Haraz N. Ghanbari)
The fine print in the stimulus bill authorizing the AIG bonuses, which was rushed through the U.S. Congress at lightning speed, has led to a renewed call for politicians to read legislation before they vote on it.
That kind of rule may seem like plain common sense, but it's surprisingly common for members of Congress to be handed a bill that's hundreds or thousands of pages long -- and have only a few hours to read it before a vote. In other words, legislators may approve complex and important measures even though they may not know what they're actually voting on.
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Analysis: AIG Letter Reflects Tone Deaf Wall Street
4876635The New York Times today printed a resignation letter from Jake DeSantis, an AIG executive vice president, to AIG CEO Edward M. Liddy.
In the letter, which DeSantis appears to have given to the Times, the now-former AIG executive explains that he had nothing to do with the credit default swap transactions that led to the company needing a massive government bailout.
He complains that Liddy has failed to defend him and others at the company who were not involved in the problematic transactions, writing that he feels betrayed that "you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments."
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In the letter, which DeSantis appears to have given to the Times, the now-former AIG executive explains that he had nothing to do with the credit default swap transactions that led to the company needing a massive government bailout.
He complains that Liddy has failed to defend him and others at the company who were not involved in the problematic transactions, writing that he feels betrayed that "you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments."
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