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July 11, 2010

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She's hot stuff

anna v and Ron Broberg have added to the momentum, mel.
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Al Asad

"Though the subject is endlessly debated, the spreadsheet provides yet another reminder of the violent shift in managerial styles and corporate culture between the Maurice “Hank” Greenberg era and the reign of Martin Sullivan."

In the Nineties, Corporations (initiated by finance beancounters)desired to offset perceived inefficiencies in failing to retain employees, sought to incent younger new-hires to stay by promising to fasttrack their promotional process. As a consequence, these folks took a short-cut that cost the Companies necessary street-level experience before they moved up the ladder. Now these X=gens and Millenials are in position to exert their
force on misguided tactical and strategic goals with all the fervor their avaricious handlers(Boards of Directors) can muster.

They made this bed. Now we all have to sleep on it.

Al Asad

So much for the efficiencies of the Private Markets.

Ignatz

--So much for the efficiencies of the Private Markets.--

Private markets are quite efficent at punishing incompetence or unwise decisions. The government's illconsidered intervention is what prevented AIG and its clients from receiving the market's discipline.

Old Lurker

Not to mention Fannie and Freddie, Iggy.

Or Citi.

narciso

Exactly, the farther away they moved from a real product, the more trouble they found, because there was no reliable way to ascertain
the value, the CRA revisions, Fannie & Freddie, Sarbanes Oxley, all led us in that
direction,

Otto

Turn your eyes towards AIG. Look full in its foolish face. And the things of GS will grow slowly dim,in the light of careful analysis instead of liberal bias.

Parking  Lot

((So much for the efficiencies of the Private Markets.))

Where did you get that? The article was elearly about the inefficiencies of PERSONS not of the markets.

The trouble with libbies they can never separate between principle and person. They see all criticism of the current president as personal criticism of his race instead of principled criticism of his foolhardy and ignorant policies.

They also cannot understand that pure capital markets represent the immutable laws of economics that no person can circumvent, no matter how hard they try. Dishonesty and corruption are punished by the markets and if the meddlers try to prevent that from happening, the market utimately reacts by punish the meddling.

It is libbie's inabity to respect principle and law that motivates their avarice to personaly meddle in everything.


Can'tsellanythingw/odoj

US buying back BP fund shares.

AIG had ambassadors employed as part of their making for jobs and dollars programs.

Al Asad

"of PERSONS not of the markets."

Uh, the policies of the markets are made by PEOPLE, the Entities are powerless in, and of themselves.

You might try reading a comment before you divert to your chosen delusion.

glasater

Uh oh--I think Cleo's back.....

jag

Anyone who knows the security lending business can tell you that it is a virtually risk-less way to goose the value of securities you hold.

That is, of course, if you are reasonably conservative in the collateral you accept on the security loans you make and keep the quality of any pooled, cash, collateral investments high and of short, overall, maturity. This conservative approach, of course, limits your possible returns but makes for predictable, very profitable but modest returns.

Apparently, AIG threw those notions completely out the window. In the process, they also clearly had no exit strategy for the risks they were taking. This wasn't a "market" failure. This was an egregious, greedy, management failure.

Is this a failure of "capitalism"? Only in that AIG was allowed to get so big its failure (apparently) put the financial system at risk.

AIG should have been allowed to fail like any other grossly mismanaged business. That they couldn't be allowed to do so in the normal fashion this time because of fears of a greater unwinding was a political decision as much as it was a financial decision.

glasater

Unflappable Bernanke said in his Sixty Minute interview last year that the AIG situation was the only thing that made him angry in the whole of the financial meltdown.

Rick Ballard

I'm just happy to know that it was the crap MBS peddled by the banksters that busted AIG rather than the CDS investment bankster suicide belts consisting of "insurance" on the crap MBS that the banksters peddled that was the "cause" of the TARP bailout of Wall Street Sporting House and Casino, Inc.

What a relief.

cathyf

jag -- are you the same Boston Safe alumnus who commented on the Financial Investigator article?

Rob Crawford

Uh oh--I think Cleo's back.....

What was your first clue? The stench of failure? The odor of desperation? The whiff of bile?

fdcol63

First clue?

The smell of BS.

Danube of Thought

Uh, the policies of the markets are made by PEOPLE

Ri-i-i-ight.  And in these particular markets the PEOPLE making the policies included Jimmy Carter, the US Congress, Alan Greenspan, Ben Bernanke, Franklin Raines, Jamie Gorelick, Barney Frank and a cast of thousands of legislators and regulators.

Ralph L

It bugs me that Wall Street gets all of the blame for the Meltdown, when Congress, the Fed, and millions of greedy homebuyers and refinancers were also at fault. The govt set the wave in motion, everyone else just rode it, off a cliff.

squaredance

It most surely is a systemic failure, not one of "people"--that is a specious and rather silly notion. Of course it is a matter of "people" failing. So is the notion of "mismanagement". If it were either of these it would have been contained.

It most certainly is not a failure of markets (though the Left has been quite successful in push this "big lie" the last couple of years).

What it is is failure of government and the the political system. Naively put, tt is "cronyism". It not "Crony Capitalism", a phase which is really nothing but an obscuring bromide, but rather the realized designs of the political arm and the "commercial arm" of the Democrat Party-most specifically on Walls St., the "Money Center Banks", their supporting institutions and the hedgies in the US, EU and a spattering in Asia bilking the American people.

It is hard to more deeply characterize the matter. Corporatism? "socialist syndicalism"? Fascism? "Financial Gangsterism"? None of these really capture fully what is going on. One thing is certain: its form is shaped by the requirement to corrupt the democratic capitalist system of the West from within without giving the game away.

However tedious it is to recount the matter, it needs to be clearly stated. These are in fact insiders. They are either Democrat insiders or RINO enablers. The whole game has been going on since the New Deal and in various forms, but from the 1990's on, pace the "tech bubble", the gane was floating a huge bubble via the housing market guided by "laws" like the CFA and by way of institutions such as Freddie and Fannie. This was not "foisted" on a naive and supine Wall St--far from it. it was, in part, engineered by them. It was "foisted" on the rest of us including the "Main St." and regional financial sectors where very few were involved in the whole business at all.

Toss in that this all entailed a timebomb intentionally put out there by the establishment Left and the willful manipulation of it all for an "Oct. Surprise" in 08 and what you have is a fundamental failure of the "political system".

(And obviously, and as other have said, the firms involved should have been allowed to fail. Note however, that Lehman, one of the few firms down there with a more GOP leaning management, was allowed to fail.)

What we have is almost 20 years of an artificial market propped up by government and when that failed a bail out of the money center fanciable establishment was quickly executed with minimal debate. In fact, Wall St. knew it could count on it and knew that sooner or latter it was coming.

We are about to repeat the whole thing in energy markets. Cap and trade is an even more bizarre derivative than the whole MBS/cds/securities lending mess and one that is wholly detached from any other reality than a political one.

People who are grousing, on either side of the matter, about the new financial legislation are missing the point. The game has moved elsewhere. Soon it will be in
"energy trading" (or whatever you want to call that), and besides, the large banks can essentially out source there derivative trading in more traditional markets.

It is all a shell game

(That being said, perhaps securities lending should be examined. It serves a rather different function that does the analogous process does is commodity markets.)

The only real reform that would do us any real good would be to reorient the financial markets to what should be their primary functions: The development of a productive economy served by productive capital (as oppose to financial capital) inside the USA that creates real wealth.

What we have witnessed here is the largest transfer of wealth in the history of the world.

This was not stolen from "the rich" it was stolen form the (mostly white) middle classes and the future descendants and given to "the rich".

It is one of the most hideous assaults against this nation in history and yet we cannot even being to talk about it or even meaningfully characterize it.

Clarice

Drudge:
NYT: In private weekend meetings with White House, Dem governors voice deep anxiety about suit against AZ immigration law, worrying it could cost party in fall elections... Developing...

He's running this over a pic of Oman who looks like he's having a breakdown.

fdcol63

Obama and Holder have already squeezed their cheeks and can't recall the shart.

The room stinks already, and everyone knows who laid the turd.

Auto Insurances

AIG didn't totally collapse they took some of there assets and renamed them. Like AIG Direct there online person insurance division was renamed to 21st century to distance themselves from there negative public view

Matthew Crandall

Otto, i'll never sing that hymn again without thinking of you. Uhh, thanks, kinda.

Soumyaranjan Dash

Though back in India it didn't effect the TATA & AIG merger, did it?

london estate agent

Nice links. I dont think AIG has collapsed and totally sunk. Anyway thanks for sharing a informative content.

PaulL

Don't miss Nat Hentoff today. He calls Ibama a liar and the most dangerous and incompetent president we have ever had.

LUN

Melinda Romanoff

kim-

I opened it up a bit. Thanks.

jag

cathyf,

yes, I am the same jag who commented at the other site. Sorry about the lag in responding.

Rob Crawford

Don't miss Nat Hentoff today. He calls Ibama a liar and the most dangerous and incompetent president we have ever had.

Huh.

I knew that before the jackass was elected.

2002

madamimadam

Tom Bowler

How 'bout that!

I'm trying to imagine how AIG could lose $44 billion in a securities lending operation. Here's a thought: they could have been lending out of their portfolio of stocks or bonds, and making their spread on the cash collateral they received by investing in Lotto tickets -- or maybe mortgage backed securities.

Turned out to be the lotto tickets after all!

It was the pure economic loss of capital in its most natural state. It represented the decline in value of assets AIGGIC purchased with the cash Wall Street’s banks and brokerages gave as collateral for borrowing stocks and bonds from its life insurance investment-management portfolios.

When Wall Street returned the securities and reclaimed its cash, AIGGIC was obligated to deliver the original sum in full.

The problem was, of course, that AIGGIC, instead of buying triple-A rated, highly-liquid short-term agency or asset-backed securities bought longer-dated sub-prime mortgage-backed securities.

And of course, this had nothing to do with anybody being over-leveraged. AIG was just trying to make money from the spread. Borrow at one rate to reinvest at a higher rate. Unfortunately it was reinvesting in crap.

supplyanddemand

Gee, maybe they worked in cash.

glasater

I wonder what the story would have been had not Hank Greenberg stayed in place at AIG.

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