Hubbs Posted April 3, 2009 Share Posted April 3, 2009 Former AIG CEO Hank Greenberg testified before Congress today, and it's strange how he said pretty much the exact opposite of what the Treasury has been telling us.... MALONEY: I'd like to ask you, do you believe if we had had that process in place, a receivership would have been better for AIG and the American taxpayer and the economy.GREENBERG: Thank you for that question. Given the terms, the original terms that the government gave AIG for $85 billion of a loan, which funneled money almost immediately out the back door to counterparties, charged 14 percent interest and took 79.9 percent of the company, clearly, everybody would have been better off, in my judgment, if they had declared Chapter 11. MALONEY: Your testimony that AIG would have been better off if going into Chapter 11 -- at this point, the taxpayers have put $180 billion into AIG, and you're telling me AIG would have been better off. My question is: Would the taxpayers have been better off if AIG had gone to Chapter 11. The taxpayers would have their $180 billion, it would be part of our Treasury, but what would have happened to our economy, in your judgment, if AIG had gone to Chapter 11? GREENBERG: Well, if AIG went to Chapter 11 at the very beginning and didn't -- and didn't have access to the $85 billion at those generous terms of 14 percent interest and 79.9 percent of the company, what would have happened? There would have been -- there would have been a bankruptcy, but a bankruptcy court would have taken hold of it, and the counterparties would have been general creditors. It would not have affected the insurance subsidiaries. They're insulated from that bankruptcy. State laws protect them, and they were adequately capitalized. So it wouldn't have affected the insurance subsidiaries. It would have affected AIG Financial Products.... Link Believe me, you want to read the rest of it. Greenberg says several more times that it would have been better to just AIG fail and explains why. Link to comment Share on other sites More sharing options...
The 12th Commandment Posted April 3, 2009 Share Posted April 3, 2009 WTF? That's really all I have. Link to comment Share on other sites More sharing options...
Hubbs Posted April 3, 2009 Author Share Posted April 3, 2009 WTF? That's really all I have. At some point, you'd think I'd stop being surprised when I see this kind of news, especially since I've been practically screaming this exact thing for months. And yet I'm still surprised. Maybe it's because it took until April for someone to say, "Hey, uh, do you think we should ask the guy who was AIG's CEO until 2005 about AIG?" Link to comment Share on other sites More sharing options...
NavyDave Posted April 3, 2009 Share Posted April 3, 2009 Failing, having winners and losers in the market place just isn't FAIR. Just like in kids sports nowadays everyone must win. Link to comment Share on other sites More sharing options...
The 12th Commandment Posted April 3, 2009 Share Posted April 3, 2009 It's mind boggling and a part of me wants to believe, and probably does, that there has to be more to it. Maybe there's stuff, maybe of the shady variety(?), that happened since '05 that would have had more of impact on the economy as a whole? Course if it was dirty dealings that doesn't adequately rationalize it anyway. I'm waiting for someone really smart to post something that explains a little of this more to my liking. Read: I'm too freakin tired to wrap my mind around it tonight. I'll have to read the interview again tomorrow and do a little more poking around. Link to comment Share on other sites More sharing options...
ACW Posted April 4, 2009 Share Posted April 4, 2009 Too bad he took no responsibility http://www.washingtonpost.com/wp-dyn/content/article/2009/04/02/AR2009040203600.html Link to comment Share on other sites More sharing options...
Elessar78 Posted April 4, 2009 Share Posted April 4, 2009 Why would you believe the former CEO of AIG? Link to comment Share on other sites More sharing options...
Hubbs Posted April 4, 2009 Author Share Posted April 4, 2009 It's mind boggling and a part of me wants to believe, and probably does, that there has to be more to it. Maybe there's stuff, maybe of the shady variety(?), that happened since '05 that would have had more of impact on the economy as a whole? Course if it was dirty dealings that doesn't adequately rationalize it anyway.I'm waiting for someone really smart to post something that explains a little of this more to my liking. Is it that mind-boggling after seeing the government hand tens of billions to the Big Three only to come to the conclusion that many were pointing out months ago, that they were going to go bankrupt and there was nothing that anybody could do about it? After the AIG bonus scandal that Congress wrote into the stimulus package and the Treasury knew about a week before it hit the news? After the creation of the Private-Public Partnership that the banks are now openly gaming because there's nothing in place to stop them? Link to comment Share on other sites More sharing options...
zoony Posted April 4, 2009 Share Posted April 4, 2009 Why would you believe the former CEO of AIG? /thread. And if I had a billion dollars, I could give a **** what happened to the US economy either. Link to comment Share on other sites More sharing options...
Elessar78 Posted April 4, 2009 Share Posted April 4, 2009 So he's saying that the Federal gov't forced AIG into taking the money and ceding 80% ownership? And this is the first time we're hearing about it? "Even on September 16th, when the state first intervened, AIG was a controversial candidate for assistance. Its insurance businesses are ring-fenced by local regulators and individually capitalised, precisely so they can survive a collapse of the holding company. A bankruptcy was avoided only because of the size of the holding company’s book of toxic credit derivatives, which senior executives barely understood. These left AIG so intertwined with other financial firms that its failure was judged by the Federal Reserve and Treasury to endanger the financial system." I don't know how the CEO of AIG, a "senior executive" who barely understood their own toxic credit derivatives known what the far reaching impact of the collapse of his company would have on the economy as a whole? "The original solution was to sell the insurance operations to raise cash, but with AIG’s competitors also reeling, this looked less and less realistic." His testimony talks about selling off parts of AIG if it was forced to declare bankruptcy. Who exactly would they have sold it to? source: The Economist. Nov 13, 2008. Link to comment Share on other sites More sharing options...
zoony Posted April 4, 2009 Share Posted April 4, 2009 His testimony talks about selling off parts of AIG if it was forced to declare bankruptcy. Who exactly would they have sold it to? source: The Economist. Nov 13, 2008. Good point And what he's saying is that the parts of AIG that would have led to the kind of catastrophe that the government feared so much would have survived in Bankruptcy b/c they were secure. And that the part of the business that was insolvent would not have mattered much. So you can argue that one back and forth for a while. But let's be clear, the CEO isn't really saying that AIG should be allowed to fail. He's saying that a bankruptcy court should have split the company up and allowed certain parts of it to fail. Link to comment Share on other sites More sharing options...
Hubbs Posted April 4, 2009 Author Share Posted April 4, 2009 Good pointAnd what he's saying is that the parts of AIG that would have led to the kind of catastrophe that the government feared so much would have survived in Bankruptcy b/c they were secure. And that the part of the business that was insolvent would not have mattered much. So you can argue that one back and forth for a while. But let's be clear, the CEO isn't really saying that AIG should be allowed to fail. He's saying that a bankruptcy court should have split the company up and allowed certain parts of it to fail. ...which is what bankruptcy courts do. Which is what "failure" means in the context of any company we're bailing out. Link to comment Share on other sites More sharing options...
Hubbs Posted April 4, 2009 Author Share Posted April 4, 2009 Why would you believe the former CEO of AIG? Hmmm. Current CEO of AIG, who stands to benefit from the company staying afloat, says, "We need hundreds of billions of dollars, or the entire economy will collapse." Former CEO of AIG, who actually could be damaged if the company goes bankrupt (because his pension probably includes oodles of stock and that stock is put into all sorts of uncertainty in bankruptcy court), says that it should have gone through Chapter 11 in the first place, and should most certainly do so now. Who to believe, who to believe.... Link to comment Share on other sites More sharing options...
Destino Posted April 4, 2009 Share Posted April 4, 2009 Failing, having winners and losers in the market place just isn't FAIR. Just like in kids sports nowadays everyone must win. You're right we should have allowed our economy to collapse just to piss off the liberals. Link to comment Share on other sites More sharing options...
GibbsFactor Posted April 4, 2009 Share Posted April 4, 2009 You're right we should have allowed our economy to collapse just to piss off the liberals. What do you think I've been rooting for??? Get our manhood back. Link to comment Share on other sites More sharing options...
stevenaa Posted April 4, 2009 Share Posted April 4, 2009 You're right we should have allowed our economy to collapse just to piss off the liberals. The Economy wouldn't have collapsed and that's the point. Link to comment Share on other sites More sharing options...
IHOPSkins Posted April 4, 2009 Share Posted April 4, 2009 The Economy wouldn't have collapsed and that's the point.And we wouln't be subsidizing bad behavior either Link to comment Share on other sites More sharing options...
zoony Posted April 4, 2009 Share Posted April 4, 2009 The Economy wouldn't have collapsed and that's the point. The hell it would have. Merrill, Lehman, AIG, BoA, Citi, Sterns all fail, and you think those toxic assets could just dissapear in bankruptcy court and the good assets bought up by other firms? And the US Economy wouldn't collapse? That's beyond myopic. I don't even think Hoover would have the stones to argue that one. All those firms becoming bankrupt in one sweep and we'd ALL be out of a job by now. ...... Link to comment Share on other sites More sharing options...
deejaydana Posted April 4, 2009 Share Posted April 4, 2009 Interesting take and you're right Hubbs, Greenberg stands to lose gazillions if AIG goes into BK and yet here is saying it was the thing to do. (?) Wow. How badly have we been bilked? What has bothered me equally (if not more) than AIG itself is our government trying to act as if they're not part of this scandal. The posturing by Dodd (and earlier by Paulson) to separate the gov't and AIG a couple weeks back just seemed completely rehearsed to me and a desperate effort to keep the stink off gov't. Unfortunately it seemed to work but the gov't has always banked on our complacency. It will be interesting to see how this plays out over the course of the next couple years and how much information we will be privy to re: where our money actually went. Link to comment Share on other sites More sharing options...
Elessar78 Posted April 4, 2009 Share Posted April 4, 2009 DD, haha nice sig. We would also have accepted "Less taxes macht frei." Link to comment Share on other sites More sharing options...
Burgold Posted April 4, 2009 Share Posted April 4, 2009 Just to ask the contrarian question... what did Bush, Paulson, and Bernanke have to gain in pulling off this con to "save" AIG? If they honestly didn't think it would cause incredible economic damage and a horrendous domino effect why would they sabotage and dishearten their own party in such a drastic way in the midst of an election campaign? Link to comment Share on other sites More sharing options...
Elessar78 Posted April 4, 2009 Share Posted April 4, 2009 The Economy wouldn't have collapsed and that's the point. By collapsed do you mean in the same sense that the communist economy ceased to exist? No, I don't think we would've reached that point. But my take is that we MIGHT have been in a severe prolonged recession had AIG been allowed to collapse and creating a domino effecting taking with it a bunch of other businesses. I don't want to take that risk and look back and have done nothing. We may still end up in severe prolonged recession but at least we tried something. When people were talking about letting or not letting the car companies fail, the discussion was over 3 million jobs and the affect on the lives and businesses linked to those 3 million jobs. 3 million is about 1% of the US population and there were serious discussions on how that would affect the economy. The US is no longer a manufacturing/industrial based system. Money is our chief product now. It would be like the Saudis not doing anything if ARAMCO was on the verge of failure. Link to comment Share on other sites More sharing options...
Thiebear Posted April 4, 2009 Share Posted April 4, 2009 At least AIG wouldn't have given foreign country banks 100% of the dollar on every loan ever made... As with the rest of the economy for the last century concessions would have been made during the recession and 100billion could have been saved for the next round of failures. Link to comment Share on other sites More sharing options...
Destino Posted April 4, 2009 Share Posted April 4, 2009 The hell it would have. Merrill, Lehman, AIG, BoA, Citi, Sterns all fail, and you think those toxic assets could just dissapear in bankruptcy court and the good assets bought up by other firms? And the US Economy wouldn't collapse? That's beyond myopic. I don't even think Hoover would have the stones to argue that one. All those firms becoming bankrupt in one sweep and we'd ALL be out of a job by now. ...... Don't forget the loss of the secondary market when Freddie and Fannie were allowed to fail. Link to comment Share on other sites More sharing options...
Hubbs Posted April 4, 2009 Author Share Posted April 4, 2009 The hell it would have. Merrill, Lehman, AIG, BoA, Citi, Sterns all fail, and you think those toxic assets could just dissapear in bankruptcy court and the good assets bought up by other firms? And the US Economy wouldn't collapse? That's beyond myopic. I don't even think Hoover would have the stones to argue that one. All those firms becoming bankrupt in one sweep and we'd ALL be out of a job by now. ...... You know what? If you haven't noticed, I've been buried neck-deep in this stuff for the past few months. I have yet to see one - one - specific explanation as to exactly how the big banks going into bankruptcy would cause the economy to collapse. It's been nothing but vague "End is Near" proclamations. And no, the still-incredibly-vague "but no one will be around to lend to anyone else" explanation isn't good enough, because if the markets are right about the value of the toxic assets - which is a much, much better bet than the banks being right simply because they want to be - then the big banks don't have anything to lend anymore. Arguing that we should suck hundreds of billions of dollars away from individuals and businesses that are still profitable, dollars that would otherwise naturally flow towards still-healthy banking entities via traditional market forces, makes exactly zero sense. None. The toxic assets have already been re-valued. The banks just don't want to admit it. Similar assets that aren't held by Merrill, BofA, etc. are already trading at their market values. Would their bankruptcy suck for a while? Of course. But what you're arguing is that we, as a nation, need to literally spend trillions to pretend that the real estate bubble didn't pop - and that if businesses need lending, we should take money from those businesses in order to give it to the banks so it can be lent to the businesses. It's absolutely nonsensical. Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.