Republicans doing nothing. The unraveling of AIG and $85 billion worth of risk to the US taxpayer. Nice to see that Goldman Sachs was lying about its exposure to AIG and that they simply called up Paulson, former CEO, to demand a bailout. Pure extortion. Pure corruption.
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"Regardless of Goldman's exposure, by last year, AIG Financial Products' portfolio of credit default swaps stood at about $500 billion. It was generating as much as $250 million a year in income on insurance premiums, Cassano told investors.
Because it was not an insurance company, AIG Financial Products did not have to report to state insurance regulators. But for the past four years, the London unit's operations, whose trades were routed through Banque AIG, a French institution, were reviewed routinely by an American regulator, the Office of Thrift Supervision.
A handful of the agency's officials were always on the scene at an AIG Financial Products branch office in Connecticut, but it is unclear whether they raised any red flags. Their reports are not made public, and a spokeswoman would not provide details.
For his part, Cassano apparently was not worried that his unit had taken on more than it could handle. In an August 2007 conference call with analysts, he described the credit default swaps as almost a sure thing.
"It is hard to get this message across, but these are very much handpicked," he assured those on the phone.
Just a few months later, however, the credit crisis deepened. AIG Financial Products began to choke on losses - though they were only on paper.
In the quarter that ended Sept. 30, 2007, AIG recognized a $352 million unrealized loss on the credit default swap portfolio.
Because the London unit was set up as a bank and not an insurer, and because of the way its derivatives contracts were written, it had to put up collateral to its trading partners when the value of the underlying securities they had insured declined. Any obligations that the unit could not pay had to be met by its corporate parent." |
