All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Special Inspector General for TARP (aka "SIG TARP") Neil Barofsky said something we've all known for a while: the government gave away the farm when AIG failed.

If you recall, AIG's failure meant that the companies on the other side of all of its contracts (counterparties) were going to be left holding the bag. Under normal cases of bankruptcy, the court would impose haircuts to the amount of money due to counterparties, but because AIG didn't actually declare bankruptcy, the counterparties claimed that they were owed 100 cents of every dollar. The only bank that even considered taking a haircut was UBS - the Swiss, for goodness sakes - hard to imagine that a Swiss bank could make US banks look bad, but here's a case in point.

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AIG's Chief Executive Officer Robert Benmosche threatened to quit at a board meeting last week, saying it was too difficult to do his job with so much government oversight.

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Call it AIG: Part Deux?

Maurice "Hank" Greenberg, the man who built the AIG empire that barely stayed afloat during the financial crisis, is piecing together an insurance giant that could compete with his brainchild, according to a New York Times report Tuesday.

Greenberg, 84, spent nearly four decades at AIG's helm before his 2005 ouster amid an insurance scandal. He has insisted he bears no responsibility for the risky behavior of AIG's financial products division that prompted the largest government rescue package in U.S. history last year.

Now Greenberg is using the $4.3 billion retirement package from AIG (which AIG alleged he stole, though a court disagreed) to start C.V. Starr & Company, a network of insurance companies that bears at least some resemblance to AIG's complex structure (minus the financial product services unit). He's even luring top AIG executives away to help launch the venture.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Channeling his inner Russian emperor, Pay Czar Kenneth Feinberg's compensation edict shook top executives at some of the nation's biggest banks. The Special Master will cut the cash component of salaries for the top 25 earners at the companies he oversees - AIG, Bank of America, Citigroup, Chrysler, Chrysler Financial, GM and GMAC.


How big a deal is this? First of all, we're talking about 175 employees, so let's not leap to "compensation is changing forever!" And Feinberg is not cutting total compensation, he's changing the composition of pay packages - less cash, more stock with longer vesting periods. In other words, the top guys will have more skin in the game.

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If you want to make yourself a little nuts, read about America’s Bailout Barons. The Institute of Policy Studies released its annual report on compensation and the results are staggering. Here’s one of the more disturbing sentences: “From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation.” Yes, that was through 2008.


I never expected that the government could really address this issue, even with the appointment of Kenneth Feinberg as “Pay Czar”. Despite the clamor earlier in the year after the AIG bonuses were awarded, there were too many other issues for the Obama administration to tackle. Wall Street banks soon realized that the easiest way to escape the Pay Czar would be to repay TARP funds and a bunch have done so. For the rest, I have a sneaking suspicion that financial innovation will be alive and well.

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Dismantling AIG may turn out to be a pretty lucrative venture for Wall Street banks and law firms, according to a Wall Street Journal report ($) Thursday.

Firms stand to get in the area of $1 billion in fees from the Federal Reserve to handle initial public offerings of spin-off companies and other transactions associated with selling off parts of the insurance giant, which is nearly 80 percent-owned by the government after receiving more than $100 billion in federal aid, according to the report.

That puts some of the very same banks that also got billions in taxpayer money in a position to profit from the government-supervised sell-off, raising possible conflict of interest questions. As the report questions, will the government implement stricter regulations – as it has pledged to - on banks that they are now employing?

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Months after the fury surrounding AIG's more than $180 billion government bailout reached fever pitch, there are still a lot of unanswered questions surrounding the insurance giant's messy deals that threatened to bring down the entire global financial system.

Back in March, CEO Edward Liddy faced congressional outrage over the payment of bonuses worth hundreds of millions to the same people widely seen as responsible for the company's ruination – the infamous financial products division whose risky credit default swap transactions threatened to swallow up its parent company when they went sour.

Liddy termed those payments "distasteful" back then, though he insisted he was contractually obligated to pay them.

About a week later, Jake DeSantis, who worked in A.I.G.F.P., sent his letter of resignation to the company and the world through its publishing in the New York Times. In it, DeSantis wrote of being unfairly vilified by Congress and the media and of feeling betrayed by a company he had invested most of his time and efforts trying to restore.

He and his co-workers weren't the greedy, short-sighted snake oil salesmen everyone assumed them to be, he insisted.

But if DeSantis and all those like him in the company weren't to blame for A.I.G.'s collapse, who was?

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Embattled insurance giant AIG has once again been put into the role of villain.

Passengers on US Airways Flight 1549's "Miracle on the Hudson" landing will be forever grateful for the crew that saved their lives after a bird strike shortly after takeoff in New York. However, AIG, which is US Airways' insurer, is resisting several claims from passengers regarding lost items and medical expenses, reports The New York Times.

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American International Group Inc. says its chairman and chief executive plans to step down when a search for replacements is complete.

The company also says its board agrees with a recommendation from Edward Liddy, who took over the troubled insurer in September, to separate the chairman and CEO roles.

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Edward M. Liddy, chief executive of beleaguered insurance giant AIG, holds a $3 million stake in Goldman Sachs, presenting a possible conflict of interest regarding use of taxpayer dollars, according to a New York Times report Friday.

AIG has spent billions in federal bailout funds to repay its trading partners, including Goldman, which received $13 billion from the insurance company. Liddy's stake in Goldman comes from the time he served on its board of directors and audit committee, before taking AIG's helm at the request of former Treasury Secretary Henry Paulson, himself a former Goldman executive.

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