Saturday, March 28, 2009

Andrew Cuomo and AIG

The New York State Attorney General Andrew Cuomo seems to be the only elected leader that sees through the web of deception that is AIG. When the bonus furor came to the forefront, many elected leaders including President Obama feigned disgust in public but sought little legal remedies. Congress held hearings to publicly ridicule the AIG Executives, the President and Secretary of Treasury Geithner made public pronouncements but none of them began investigations.

Not only did New York State Attorney General Andrew Cuomo begin an investigation into the AIG Bonus Scandal, he issued subpoenas, set deadlines and demanded answers. Attorney General Cuomo was relentless in demanding the names and figures associated with the bonuses, and he was successful in shaming a majority of the recipients to publicly announce that they would return the bonuses. Of more significance is another investigation that Andrew Cuomo is pursuing in regards to AIG. Mr. Cuomo is seeking the answer that Secretary of Treasurer Paulson and the incoming Obama Administration should have sought, what did AIG do with the Federal Bailout Money.

The AIG downfall began with the issuance of Credit Default Swaps to banks around the world. These derivative instruments that were unregulated were secret transactions that were so complicated the purchasing banks did not even understand what they were buying. AIG sold these instruments under the guise of financial insurance against the deterioration of assets in a downfall, effectively insuring a default of a variety of other financial instruments. AIG was constructing contracts and charging premiums based on other pieces of paper that represented bundled assets that they were guaranteeing would not default. While the economy was charging ahead during the waning days of the Clinton Administration AIG was making money in the billions of dollars off of these premiums that they were charging for the Credit Default Swaps that they created. As thew Bush Administration crushed the growth of the economy with their liaise fare policies, the likes of AIG became more creative in constructing Credit Default Swapos and were selling them around the world to multi-national banks and national sovereign banks. These instruments effectively put the onerous of 6 trillion dollars on AIG if the economy started to deteriorate and these Credit Default Swaps came due. As we know that is exactly what happened.

Effectively, AIG went to the Republican Bush Administration and said we are Bankrupt and our failure to pay off the Credit Default Swaps that we have written is going to cause a global economic crisis. The Bush Administration bought the theory and began the Bailout of AIG which now totals over 182.5 Billion Dollars of United States Treasury Money. What Mr. Cumo is investigating is why did AIG use the Federal Bailout Money to pay off multi-national banks at face value, why were the payoffs of these Credit Default Swaps not negotiated as would have been the case if AIG had to decalre Bankruptcy. Effectively AIG took Federal Money and gave it to foreign companies with no questions asked by the Bush Administration or the incoming Obama Administration. Now someone is asking questions, New York State Attorney General has subpoenaed the records of AIG and wants the break down of who was paid off in full and what contracts are still outstanding. By most accounts AIG is still on the hook for trillions of dollars in Credit Default Swaps if the economy does not recover in the next two years. Will the Federal Government continue to throw money at AIG for bad business practices and how does it benefit the American People to hand money over to AIG in order to pay off these contracts that were written with no basis in reality. During the days that AIG was collecting massive premiums from these contracts their Executives lived the high life taking salary and bonuses in the hundreds of millions of dollars per person. Now that their Ponzi Scheme has collapsed they expect to be compensated from the taxes of the average American Worker that can never hope to even make 1% over the course of a lifetime what these people paid themselves in a year.

The entire Bush Rebate totaled 13 Billion Dollars to be split among all of the American People, AIG's rebate already totals 182.5 Billion Dollars, that means that the measly $400 check that you received from the Bush Administration that was suppose to stimulate the economy could have been ten times larger and still leave 5 Billion in change in the Treasury.

At least one elected official thinks that there is something rotten in AIG and is pursuing it to the best of ability. Surely, if Mr. Cuomo gets too close to the truth he will be stopped from continuing the investigation, for the games that AIG played are games that not only ravaged the US Treasury but also affected the Sovereign Banks of many Nations. The International pressure on Washington will surely have the effect of Washington trying to limit the scope of Mr. Cuomo's investigations and this will be the shame of the Obama Administration. The Obama Administration should back the efforts of Mr. Cuomo and assist his investigations by having Federal Investigations into the Corporate Structure of AIG and the individuals who wrote these contracts with foreign banks and governments and their relation to the same.
Add to Google

No comments: