AIG & Manchester United

[ProudTrinbagonian]

They shouldn't sever the ties with AIG.  AIG is the scapegoat, Obama has stated blame on AIG, and society will blindly follow.  AIG should pay the bonuses, how else will they draw the proper talent to get them out of the situation without proper compensation?
Anyway I am upset with AIG as much as the next but Man U should support the sponsor that gave the $$$ or else it shows poor business relations from their perspective.

AIG is not a scapegoat.  Their contribution to the financial crisis is significant and everyone recoginzes this.  They aren't being blamed for anything they didn't do.  Obama is not leading "blind peole" anyhwere...if anything it's the opposite.  One can more likely argue that Obama's latest reaction to AIG's bonuses is in response to fury over the fact that tax payers' dollars are being used to fund bonuses of traders who lost billions of dollars....

The fact that the bonuses are contracted retention bonuses as opposed to discretionary performance based compensation makes the issue more complicated. 

Not sure if the mods shoulda merged this thread....different issues being discussed.

Obama's administration is misleading about the so called "evils of bankers and their greed."  Pursuing every legal avenue as Obama puts it makes no sense.  AIG employees ARE entitled to their bonuses however the anti-corporate mentality being thrown around makes them the scapegoat.  blame the private sector, blame the compensation, blame the bankers...easy way out.  But is that the true reason for the global financial crisis?  Hardly.  Corporate behaviour plays a part but the US government is to blame...

[kicker]

Yeah ACORN was busted for fraud in the voter registration last year, but their mission as a company is alot broader than that, and I think they're synonymous with alot more than voter registration...but ok.

I'm not sure where the yahoo article speaks to my point about Obama (not) leading people blindly down the AIG scapegoat path about bonuses.  I read it quickly so maybe I missed it...

Kicker, ACORN has never been busted for fraud... its never even been charged with fraud.  In fact, ACORN was the victim of fraud when workers it hired submitted bogus names and didn't do the work for which they were hired.

Fraud committed by ACORN's employees is fraud committed by ACORN.  To my knowledge their actions were detected by their internal audit group- hence my contention that they were busted for fraud (by it's internal audit group)... I might be misunderstanding what happened (as I said I know little about ACORN)- but to my knowledge their employees fraudulently registered voters, and it was picked up by their internal audit...I'm not sure how ACORN was a victim of fraud as you say.

The premise of your thread is based on a fundamental misconception of the nature and scope of AIG's activities.  "AIG" isn't responsible for the mess they've found themselves in, a relatively small component of AIG, located in London of all places, is what's responsible for the credit default swap mess.  AIG stopped initiating CDSs linked to subprime mortgages way back in 2005 (if you believe the congressional testimony), but initiating these securities and having to pay them once they become due are two different things altogether.

The argument is that AIG CDS issuance/activity was overly agressive given the nature of the assets for which they were providing protection...so when the CDS' fell in value and AIG had to post additional collateral to the trading counterparties in response to credit downgrade, one can say the degree of their exposure due their own aggressiveness was not inkeeping with their fiduciary duty...and hence they are in part responsible for their mess...AIG business is AIG business.....whether it's just a small component of their business, and regardless of when they stopped their CDS activity.  When Arthur Andersen fell through it was just a few of their auditors in Texas who f*cked up with ENRON....doesn't abscond the rest of their firm (which is now dissolved in all geographies) from culpability.....Ask an AA auditor in NYC how much work he could get after that debacle....


That misunderstanding, and subsequent mischaracterisation of the situation as a "promulgation of the ills of society" aside... you then simplistically state that it would somehow be "moral" and "ethical" for Man U. to stop carrying the AIG logo on their shirts as though AIG was involved in the blood diamond trade or in dealing with child prostitutes in Thailand or something.  Contrary to what Kicker is saying, AIG is very much being scapegoated right now.  People have forgotten Lehman and Bear Stearns complicity in this mess and all the focus is on AIG who really did nothing other than to provide insurance for some of the loans made to companies like Lehman Bros. and BSC.  AIG is in need of a bailout because if it fails to pay on the premiums then many of the financial lenders who paid for its insurance services would fail.  This is why all the talk of letting AIG go into bankruptcy that some are sugggesting in the media is foolish and misinformed.

Do you know that the aggressive CDS trading is the same thing as providing insurance to lenders/invetors?  The way you say they "did nothing but provide insurance" to lenders makes it sound like you're not aware of the aggressive CDS activity that AIG indulged in is in fact that insurance that they were providing to investors. That insurance that you say that AIG only just provided is in the form of CDS...they didn't only just provide insurance to vulnerable investors who were at the mercy of Lehmann & Bear.  They issued CDS to these lenders/investors in risky assets (which is their way of providing that insurance)..and if they were diligent in their CDS issuance, they would have known that the underlying assets (and cash flows to these assets) were very very risky and they would have taken a much more fiduciarily responsible position than the agressive one that they had...don't think for a second that a potential motivating factor for a CDS trader behind guaranteeing cash flows of risk assets in the form of CDS/insurance, is not greed and the ability to make more money...AIG was no innocent bystander my friend...not at all...


Also I disagee that people have forgotten about Bear & Lehman.  I think the focus on this AIG bonus issue is pointed and specific...and an issue in itself that can be and is being focused on everything else notwithstanding.  I don't think Bear & Lehman for e.g. have anything to do with an uproar against AIG paying out massive (taxpayer funded) bonuses in the face of reckless trading and the resulting billion dollar losses....If Bear & Lehman (were alive and) were paying out bonuses in the face of billion dollar losses it'd be the same...

Bottomline is twofold:  AIG is hardly the corporate demon you paint it to be; and secondly the financial troubles have no bearing on Man U. and I hardly think that people worry about the logo on the chest of the players more than they're concerned with the performance on the pitch.  To cite a separation as "ethical" or "moral" is kneejerk overreactionism at its worst.

Totally agree with the last paragraph.

[Bakes]

AIG is also at fault man. Part of an underwriter's job is to do the required due diligence. If you are arguing that there were too many loans to diligence, then they should have only covered the ones they had a chance to examine.

On your other point, yeah contracts can be debated, but in theory they are supposed to be binding. So the concept of choosing whether or not a contract should be honored is wrong

I think I addressed the bolded here...

If anything we should fault AIG (its investment arm in London, really) for writing too many CDS obligations adn for not properly checking the bond ratings of the loans it was insuring... but again, the parent company (AIG) had no reason to question the activities in London up to that point.  Not only were they profitable... but they never raised any red flags before.

As for your latter point of 'choosing' whether a contract should be honored being wrong... this is not at all the case, in fact it would be irresponsible to adhere to a contract that is unconscionable or which was entered into on a fraudulent basis etc.  People, usually unsophisticated individuals get duped into all sorts of contracts... there's nothing wrong with reviewing whether that 'duped' person should be obligated to follow thru on the contractual terms or not.

[kicker]

If anything we should fault AIG (its investment arm in London, really) for writing too many CDS obligations adn for not properly checking the bond ratings of the loans it was insuring... but again, the parent company (AIG) had no reason to question the activities in London up to that point.  Not only were they profitable... but they never raised any red flags before.

With all due respect that's garbage.  First of all the distinction between AIG and AIG Financial products (their sub) is inconsequential.  It's AIG.  When someone says AIG they mean AIG and all it's subsidiaries. AIG Inc. is just a holding company- A holding company in itself has no operations....ALL AIG business is conducted through AIG subsidiaries so when you say the parent company (AIG) had no reason to question the activities of its subsidiaries (for e.g. AIG Financial Products), you're not making any sense.

Secondly, no reason to question? That's just a naive assertion.  It's not just about profitability- that mindset is why we're in this mess...The reason they didn't raise any red flags is because although CDS are in fact insurance they are not regulated like insurance... had they been we would not be here. 

[Bakes]

Fraud committed by ACORN's employees is fraud committed by ACORN.  To my knowledge their actions were detected by their internal audit group- hence my contention that they were busted for fraud (by it's internal audit group)... I might be misunderstanding what happened (as I said I know little about ACORN)- but to my knowledge their employees fraudulently registered voters, and it was picked up by their internal audit...I'm not sure how ACORN was a victim of fraud as you say.

Kicker... this is simply erroneous.  ACORN committed no fraud.  Voter fraud is attempting to vote when one is not entitled to that right.  What ACORN workers did was not to present individuals who were unqualified to vote, but rather to present names of fictitious individuals to ACORN.  They were hired to beat the pavement and register voters.  The fictitious names (such as "Mickey Mouse" and deceased individuals) were never registered to vote therefore NO FRAUD was conducted.  This is where the internal audit comes in... and this is the precise reason for such an internal audit, to check the names before they are submitted to the election officials in that jurisdiction.  Even if they submitted the names, again, no fraud is committed... because these mythical individuals would never show up to vote.  Now if they registered illegal immigrants and such a person voted... then that would be voter fraud.  But to make up a name and submit it on the voter rolls itself is no fraud, and violates no laws.

ACORN was defrauded because it paid these temporary workers to fulfill a job which they did not do. Instead they submitted false information to ACORN and was paid for dishonest work.  This is the only fraud at issue.  No different from if you hired a contractor to install hardwood floors and he accepted your money but installed laminate instead and passed it off as hardwood.  Fraud.

The premise of your thread is based on a fundamental misconception of the nature and scope of AIG's activities.  "AIG" isn't responsible for the mess they've found themselves in, a relatively small component of AIG, located in London of all places, is what's responsible for the credit default swap mess.  AIG stopped initiating CDSs linked to subprime mortgages way back in 2005 (if you believe the congressional testimony), but initiating these securities and having to pay them once they become due are two different things altogether.

The argument is that AIG CDS issuance/activity was overly agressive given the nature of the assets for which they were providing protection...so when the CDS' fell in value and AIG had to post additional collateral to the trading counterparties in response to credit downgrade, one can say the degree of their exposure due their own aggressiveness was not inkeeping with their fiduciary duty...and hence they are in part responsible for their mess...AIG business is AIG business.....whether it's just a small component of their business, and regardless of when they stopped their CDS activity.  When Arthur Andersen fell through it was just a few of their auditors in Texas who f*cked up with ENRON....doesn't abscond the rest of their firm (which is now dissolved in all geographies) from culpability.....Ask an AA auditor in NYC how much work he could get after that debacle....

If you want to be technical then there is no denying this... however it needs to be mentioned so that when we are pillorying AIG the proper context is noted.  The only fault of the parent company was in allowing the London arm too much leeway... which at the time was entirely reasonable.  Even the aggressive nature of the CDS transactions is hardly sufficient to rise to the level of breach of fiduciary duty, they exercised a business decision that was entirely within their discretion.  Their gamble just didn't pay off b/c they failed to properly vet the assets upon which their clients issued the loans which they were then asked to insure.  This failure too was a reasonable decision based on the usual business practices.  Held to the standard of another insurer in their position, their actions likely would conform to the norm.  Any court would take this into consideration... except of course, the court of public opinion.

That misunderstanding, and subsequent mischaracterisation of the situation as a "promulgation of the ills of society" aside... you then simplistically state that it would somehow be "moral" and "ethical" for Man U. to stop carrying the AIG logo on their shirts as though AIG was involved in the blood diamond trade or in dealing with child prostitutes in Thailand or something.  Contrary to what Kicker is saying, AIG is very much being scapegoated right now.  People have forgotten Lehman and Bear Stearns complicity in this mess and all the focus is on AIG who really did nothing other than to provide insurance for some of the loans made to companies like Lehman Bros. and BSC.  AIG is in need of a bailout because if it fails to pay on the premiums then many of the financial lenders who paid for its insurance services would fail.  This is why all the talk of letting AIG go into bankruptcy that some are sugggesting in the media is foolish and misinformed.

Do you know that the aggressive CDS trading is the same thing as providing insurance to lenders/invetors?  The way you say they "did nothing but provide insurance" to lenders makes it sound like you're not aware of the aggressive CDS activity that AIG indulged in is in fact that insurance that they were providing to investors. That insurance that you say that AIG only just provided is in the form of CDS...they didn't only just provide insurance to vulnerable investors who were at the mercy of Lehmann & Bear.  They issued CDS to these lenders/investors in risky assets (which is their way of providing that insurance)..and if they were diligent in their CDS issuance, they would have known that the underlying assets (and cash flows to these assets) were very very risky and they would have taken a much more fiduciarily responsible position than the agressive one that they had...don't think for a second that a potential motivating factor for a CDS trader behind guaranteeing cash flows of risk assets in the form of CDS/insurance, is not greed and the ability to make more money...AIG was no innocent bystander my friend...not at all...

This is not in accord with my understanding of the situation... they did not issues CDS to "investors", but rather to investment houses and banks.  The Credit Default Swaps were in essence the insurance policies issued to the banks and lending institutions.  These (banks and lending institutions) are the "investors" in the discussion.

Also I disagee that people have forgotten about Bear & Lehman.  I think the focus on this AIG bonus issue is pointed and specific...and an issue in itself that can be and is being focused on everything else notwithstanding.  I don't think Bear & Lehman for e.g. have anything to do with an uproar against AIG paying out massive (taxpayer funded) bonuses in the face of reckless trading and the resulting billion dollar losses....If Bear & Lehman (were alive and) were paying out bonuses in the face of billion dollar losses it'd be the same...

YOU may not think that... but ask the average Joe who's railing against the bonuses and they'll tell you "why should we pay them bonuses and they're the ones who got us in this mess".  AIG didn't get us in this mess... investors like Lehman and BSC who bought these bundled subprime loans are the ones who fed the machine that churned out these bad loans, because they provided a market for the bad loans (to be bundled and resold) on the back end.

AIG had nothing to do with that.  AIG's fault aside from the CDS fiasco is that it comes calling with hat in hand, only to then turn around and throw a party for its employees with the money... or at least that's how it's perceived. My point isn't so much that people have forgotten about Lehman and BSC, but AIG is being faulted for their wrongdoing, contributing to the degree of outrage we are witnessing.  If you want you could argue that AIG helped feed the beast by providing insurance for the shaky practices, but I'm not sure how much weight that would carry seeing that the bulk of the CDS were issued to non-US banks who had nothing to do with the buying of bundled sub-prime loans

[Bakes]

With all due respect that's garbage.  First of all the distinction between AIG and AIG Financial products (their sub) is inconsequential.  It's AIG.  When someone says AIG they mean AIG and all it's subsidiaries. AIG Inc. is just a holding company- A holding company in itself has no operations....

I've already explained the rational for keeping the scope of AIG's (holding company) complicity in its proper context.

Disagreement is your right, you calling my opinion 'garbage' is of no consequence to me.  Just another opinion.

ALL AIG business is conducted through AIG subsidiaries so when you say the parent company (AIG) had no reason to question the activities of its subsidiaries (for e.g. AIG Financial Products), you're not making any sense.

I make plenty sense to people with a bigger picture perspective and who are not only looking to fault AIG.  Using the acceptable business standards there is nothing negligent about AIG deferring to the business decisions of its qualified managers.  The director of AIG business never caused any ripples before and in fact was running a highly profitable subsidiary for the parent company.  He earned their trust and so them trusting him was reasonable.  Hence why I said they had no reason to question his activities.  If for years you arrive at work and give your car to the valet to park it for you... then one day out of the blue he wrecks the car b/c he didn't take his epilepsy meds... is his company ultimately responsible for compensating you... yes.  Is it unreasonable that they didn't verify whether he took his meds or not that morning?  No it's not unreasonable.  Doesn't absolve the company of responsibility, but offers mitigation for the degree of fault.

Secondly, no reason to question? That's just a naive assertion.  It's not just about profitability- that mindset is why we're in this mess...The reason they didn't raise any red flags is because although CDS are in fact insurance they are not regulated like insurance... had they been we would not be here. 

Blind emotionalism... I sense you didn't fully understand my position so I won't bother responding in kind. I know that CDS aren't regulated but CDS issuance isn't all that AIG business did.  When I say they never before raised any red flags I am referring to the sum of their practices... not just their CDS business.

[Marcos]

AIG is also at fault man. Part of an underwriter's job is to do the required due diligence. If you are arguing that there were too many loans to diligence, then they should have only covered the ones they had a chance to examine.

On your other point, yeah contracts can be debated, but in theory they are supposed to be binding. So the concept of choosing whether or not a contract should be honored is wrong

I think I addressed the bolded here...

If anything we should fault AIG (its investment arm in London, really) for writing too many CDS obligations adn for not properly checking the bond ratings of the loans it was insuring... but again, the parent company (AIG) had no reason to question the activities in London up to that point.  Not only were they profitable... but they never raised any red flags before.

As for your latter point of 'choosing' whether a contract should be honored being wrong... this is not at all the case, in fact it would be irresponsible to adhere to a contract that is unconscionable or which was entered into on a fraudulent basis etc.  People, usually unsophisticated individuals get duped into all sorts of contracts... there's nothing wrong with reviewing whether that 'duped' person should be obligated to follow thru on the contractual terms or not.

My bad on the first point, I actually read it after I posted.

A contract is usually entered into willingly unless one party was coerced. I can hardly believe that AIG was coerced into paying these individuals these "bonuses".

If a contract is unconscionable then it shouldn't be signed in the first place.

[kicker]

Kicker... this is simply erroneous.  ACORN committed no fraud.  Voter fraud is attempting to vote when one is not entitled to that right.  What ACORN workers did was not to present individuals who were unqualified to vote, but rather to present names of fictitious individuals to ACORN.  They were hired to beat the pavement and register voters.  The fictitious names (such as "Mickey Mouse" and deceased individuals) were never registered to vote therefore NO FRAUD was conducted.  This is where the internal audit comes in... and this is the precise reason for such an internal audit, to check the names before they are submitted to the election officials in that jurisdiction.  Even if they submitted the names, again, no fraud is committed... because these mythical individuals would never show up to vote.  Now if they registered illegal immigrants and such a person voted... then that would be voter fraud.  But to make up a name and submit it on the voter rolls itself is no fraud, and violates no laws.

ACORN was defrauded because it paid these temporary workers to fulfill a job which they did not do. Instead they submitted false information to ACORN and was paid for dishonest work.  This is the only fraud at issue.  No different from if you hired a contractor to install hardwood floors and he accepted your money but installed laminate instead and passed it off as hardwood.  Fraud.

cool- never really got the full gist of the issue...I understood it differently...and never really researched it either...thanks

If you want to be technical then there is no denying this... however it needs to be mentioned so that when we are pillorying AIG the proper context is noted.  The only fault of the parent company was in allowing the London arm too much leeway... which at the time was entirely reasonable.

Like I said, the parent- AIG Inc. is just a holding company...I'm not sure how this makes any sense...

Even the aggressive nature of the CDS transactions is hardly sufficient to rise to the level of breach of fiduciary duty, they exercised a business decision that was entirely within their discretion.  Their gamble just didn't pay off b/c they failed to properly vet the assets upon which their clients issued the loans which they were then asked to insure.  This failure too was a reasonable decision based on the usual business practices.  Held to the standard of another insurer in their position, their actions likely would conform to the norm.  Any court would take this into consideration... except of course, the court of public opinion.

Ever consider how more responsible CDS activity could have influenced activity of the lenders?

This is not in accord with my understanding of the situation... they did not issues CDS to "investors", but rather to investment houses and banks.  The Credit Default Swaps were in essence the insurance policies issued to the banks and lending institutions.  These (banks and lending institutions) are the "investors" in the discussion.

Investors are investors....whether they were banks, or different lending institutions etc....they are investors.  Of course when I say investors I mean institutional investors....and the nature of the investor doesn't really have much bearing on my point (or yours).  

YOU may not think that... but ask the average Joe who's railing against the bonuses and they'll tell you "why should we pay them bonuses and they're the ones who got us in this mess".  AIG didn't get us in this mess... investors like Lehman and BSC who bought these bundled subprime loans are the ones who fed the machine that churned out these bad loans, because they provided a market for the bad loans (to be bundled and resold) on the back end.

I guess I'm not an expert on the average Joe...

AIG had nothing to do with that.  AIG's fault aside from the CDS fiasco is that it comes calling with hat in hand, only to then turn around and throw a party for its employees with the money... or at least that's how it's perceived. My point isn't so much that people have forgotten about Lehman and BSC, but AIG is being faulted for their wrongdoing, contributing to the degree of outrage we are witnessing.  If you want you could argue that AIG helped feed the beast by providing insurance for the shaky practices, but I'm not sure how much weight that would carry seeing that the bulk of the CDS were issued to non-US banks who had nothing to do with the buying of bundled sub-prime loans

That last paragraph is potentially overly simplified.  The activities of AIG cannot be looked at in a silo which includes only those with whom direct business was done.  Do you know how the CDS purchasing activities of the non-US banks was funded or leveraged?  Do you know what else was on their balance sheets? Do you know who had a lien on their cash flows?  As is with most things in global finance and capital markets there's a trickle down effect of all activities affect far reaching constituencies....so I dunno.  But like I say, I think most people who know somewhat what they're talking about appreciate the significance of many fin. institutions' (other than AIG) effect on this credit crisis....

[Bally]

If anything we should fault AIG (its investment arm in London, really) for writing too many CDS obligations adn for not properly checking the bond ratings of the loans it was insuring... but again, the parent company (AIG) had no reason to question the activities in London up to that point.  Not only were they profitable... but they never raised any red flags before.

With all due respect that's garbage.  First of all the distinction between AIG and AIG Financial products (their sub) is inconsequential.  It's AIG.  When someone says AIG they mean AIG and all it's subsidiaries. AIG Inc. is just a holding company- A holding company in itself has no operations....ALL AIG business is conducted through AIG subsidiaries so when you say the parent company (AIG) had no reason to question the activities of its subsidiaries (for e.g. AIG Financial Products), you're not making any sense.

Secondly, no reason to question? That's just a naive assertion.  It's not just about profitability- that mindset is why we're in this mess...The reason they didn't raise any red flags is because although CDS are in fact insurance they are not regulated like insurance... had they been we would not be here. 

I work for AIG  a company called HSB and a lot of people don’t really understand why this happening AIG to risk in the home loans but they tried to pull out in 2005 the company is still the largest insurance firm the U.S could not afford to let them full.

[Filho]

AIG's financial products group wrote Credit Default Swaps, or insured billions of AAA-rated tranches in structured debt products, many of which where backed by subprime mortgages. As an institution, it has to take its share of the blame for its own demise as it overeached and insured too many, high risk assets.

Two things - 1) Many CDOs are highly leveraged and the AAA-tranche can often be as much as 70% of the capital structure. So there is not really a lot of subordinated debt and equity to provide cushion to the AAA debt, and 2) CDOs are structured so that as certain collateral quality and coverage tests fail, at the lower-rated tranches, then interest income and principal must be set aside to pay down the AAA tranches at par. By insuring the highest class, financial guarantors like AIG, MBIA, Ambac..etc are really betting on the entire risk spectrum, not just the AAAs and should have realized that. I'm also pretty sure AIG made some big bets on sub-prime mortgages after 2005....

It's not like AIG was trying to make a quick buck before the whole thing exploded. But it was their duty to better understand the risks, and limit their exposure appropriately and they got it wrong. There is a long line of people and institutions who have to share the responsibility, and that is not coming across the airwaves right now. Its popular and easy to blame 'Wall Street' and do it goes. But everyone from mortgage providers. to consumers, financial institutions, to investors, to financial guarantors, to the rating agencies, to the gov't are complicit in this ONE aspect of the recession we're in.  

Most employees at that particular AIG unit weren't greedy, or trying to fleece people. Most probably did a good job given their mandates. But higher up, some poor decisions were made, and lower down, not enough questions were asked. Even good, smart people require oversight...and even then, some things you just don't see coming and you have to learn the hard way. I know for a fact that many CDO managers didn't even fully understand the mechanics of their own products as Indentures just got recycled and tweaked and they were shocked when they had to make large paydowns to their AAAs. They were ignorant and are to blame for that. I suspect that at some level, AIG, MBIA, AMBAC, FSA..the whole lot were the same. They didn't understand what they were getting into. If they had known how easy it was to trigger a AAA repayment, there was no way they'd have taken on so much risk. There is no magic to it...many people looked the other way, or didn't look hard enough. I believe a strong component of the downfall was that too many people deferred responsibility of modelling and calculating the risks to the rating agencies and took their ratings as law. If A&P says its rated AAA I guess it is..but dep down everyone knew the bonds did not have the same credit worthiness of the US govt. But many looked the other way.

Should AIG pay bonuses? They may have to if they want to retain some of the best employees and people who actaully know the business enough to manage existing trades and turn things around. It would prob. cost more to fill those executive spots with 'newbies'...I know I'd demand a lot of compensation to step into that mess. Not to mention, innocent employees are getting death threats every day at work.....But its a political thing now and even so, you'd have to ask..how much is too much?

As for ManU...they'll do as the contract says, or come up with a mutually beneficial way to part with AIG (as it seems was already done). But I don't think the AIG name taints them in any way. If people don't mind wearing a shirt that has the names of players who have been accused of rape, running down prostitutes, fighting in bars, making racist comments etc...don't see how AIG is such a big deal. Then again....

[Marcos]

Filho is a man just like to come in and kill a thread yes 

[kicker]

I've already explained the rational for keeping the scope of AIG's (holding company) complicity in its proper context.

Disagreement is your right, you calling my opinion 'garbage' is of no consequence to me.  Just another opinion.

If you understand the role of a holding company you'd see that what you're saying isn't really making sense in reality- maybe conceptually but not in reality.  So what is AIG (by your definition) ever at fault for?


I make plenty sense to people with a bigger picture perspective and who are not only looking to fault AIG.  Using the acceptable business standards there is nothing negligent about AIG deferring to the business decisions of its qualified managers.  The director of AIG business never caused any ripples before and in fact was running a highly profitable subsidiary for the parent company.  He earned their trust and so them trusting him was reasonable.  Hence why I said they had no reason to question his activities.  If for years you arrive at work and give your car to the valet to park it for you... then one day out of the blue he wrecks the car b/c he didn't take his epilepsy meds... is his company ultimately responsible for compensating you... yes.  Is it unreasonable that they didn't verify whether he took his meds or not that morning?  No it's not unreasonable.  Doesn't absolve the company of responsibility, but offers mitigation for the degree of fault.

So from now on, when discussing this, everyone should specify AIG financial products then? Is that what you're saying?  In that case, the words (letters) AIG by themselves should never be uttered in regards to anything to do with business activity or operations, because a holding company has no operations.


Blind emotionalism... I sense you didn't fully understand my position so I won't bother responding in kind. I know that CDS aren't regulated but CDS issuance isn't all that AIG business did.  When I say they never before raised any red flags I am referring to the sum of their practices... not just their CDS business.

That has nothing to do with what I said....My point is that their CDS business should have raised red flags under proper due diligence and appropriate regulation regardless of how profitable it, or any other business segments is/was....and nothing I said is a result of blind emotionalism.  

[kicker]

AIG's financial products group wrote Credit Default Swaps, or insured billions of AAA-rated tranches in structured debt products, many of which where backed by subprime mortgages. As an institution, it has to take its share of the blame for its own demise as it overeached and insured too many, high risk assets.

Two things - 1) Many CDOs are highly leveraged and the AAA-tranche can often be as much as 70% of the capital structure. So there is not really a lot of subordinated debt and equity to provide cushion to the AAA debt, and 2) CDOs are structured so that as certain collateral quality and coverage tests fail, at the lower-rated tranches, then interest income and principal must be set aside to pay down the AAA tranches at par. By insuring the highest class, financial guarantors like AIG, MBIA, Ambac..etc are really betting on the entire risk spectrum, not just the AAAs and should have realized that. I'm also pretty sure AIG made some big bets on sub-prime mortgages after 2005....

It's not like AIG was trying to make a quick buck before the whole thing exploded. But it was their duty to better understand the risks, and limit their exposure appropriately and they got it wrong. There is a long line of people and institutions who have to share the responsibility, and that is not coming across the airwaves right now. Its popular and easy to blame 'Wall Street' and do it goes. But everyone from mortgage providers. to consumers, financial institutions, to investors, to financial guarantors, to the rating agencies, to the gov't are complicit in this ONE aspect of the recession we're in.  

Agreed - but I'm yet to hear anyone blame AIG for everything in this crisis.  It's just where the focus right now, because we're dealing with a high profile issue that is specific to AIG.

From all the articles I've read, the "mess" that people are talking about it the situation where the gov't had to bail out AIG...(not the entire credit crisis/recession) and the "you" in "you got us into this mess" are the derivative traders/underwriters who were aggressive in their CDS activity....i.e. the ones to be paid the controversial bonuses.

[Bakes]

My bad on the first point, I actually read it after I posted.

A contract is usually entered into willingly unless one party was coerced. I can hardly believe that AIG was coerced into paying these individuals these "bonuses".

If a contract is unconscionable then it shouldn't be signed in the first place.

All I can tell you breds is that this is a gross oversimplification of real world situations.  What you call coercion would be the equivalent of what the law calls "duress".  I can assure you the contracts are voided on many grounds and not all of them involve duress... just because someone willingly entered a contract that doesn't mean that that contract was a fair one or that there was full disclosure up front.  I'm not going to bog the discussion down with legalese, but again suffice to say that there are many grounds upon which the contract can be voided... as I said, there is a reason why the Law of Contracts has been around as long as it has.  If it were really as simple as you make it seem then these things wouldn't be litigated, all a judge has to say is "you signed the contract therefore you're bound by its terms".  But that's not the case... many disputes go thru the process precisely because it's seldom cut and dry.

[elan]

AIG provided coverage to businesses that they new were faulty but yet invested a lot of money to cover loans, etc. They then tried to "secure" those coverage by investing in other loans in Europe. I may not have it exactly right, but in essense they knew exactly what they were getting into with, Lehman, and Bear Stearn, etc.

Absolutely untrue.

Lehman, Bear Stearns et al. were not "faulty" 3-4 years ago... in fact they were quite profitable.  I also don't think you understand the situation either.  Think of the insurance as automobile insurance... AIG is in the business of selling insurance and they look at your driving record to determine the level of risk.  The level of risk on these loans were apparently acceptable.  Instead of making policies on driving records, AIG made loans on the financial worthiness of the firms... they were extremely profitable at the peak of the housing bubble.  

There was no indication that the loans made by the companies would fail (all drivers having an accident at the same time) and thus come calling to cash in their policies.  Because everybody came calling for cash at the same time AIG found itself unable to pay.  The bailout is money for AIG to pay those banks who provided the loans... which is what we're seeing now.  Without the bailout the banks fail and the economy contracts even worse than we're currently seeing.

It is simply erroneous to fault AIG for insuring these loans in hindsight... which as we know is always 20-20.  With what we know now about the subprime loans, we need to fault the lenders... that's like drivers driving around with faulty brakes.  You could fault the insurance company for not checking the brakes of every driver it insures, but how practical is that?

If anything we should fault AIG (its investment arm in London, really) for writing too many CDS obligations adn for not properly checking the bond ratings of the loans it was insuring... but again, the parent company (AIG) had no reason to question the activities in London up to that point.  Not only were they profitable... but they never raised any red flags before.

I am not sure if was Jon Stewart or CNN, but I was following it at the time, and the consensus was that AIG were over reaching themselves in covering these companies. I will try and find the interview, but from what was said they knew things could have gone bad, but pressed on and hope for the best. I can't tell you all the details, but I distintively remeber that from investigations, AIG was knowingly strectching themselves na making unnecessary business deals.

That bolded part is what the analyst explained, many of the risk were high and they still took them.

[Bakes]

Like I said, the parent- AIG Inc. is just a holding company...I'm not sure how this makes any sense...

It makes perfect sense because even if the holding company is ultimately responsible for the fault of its subsidiary, it would simply be disingenuine to try and paint ALL of AIG with the same brush of culpability.  A parent may ultimately be responsible for the actions of their minor child (in certain regards) but it's hard to argue that that parent is also CULPABLE for the actions of that child.  Arguing 'better supervision' makes sense in some regards, but is practically inapplicable in others.

Ever consider how more responsible CDS activity could have influenced activity of the lenders?

See my explanation above.  Child has earned the trust of the parent such that parent leaves them unsupervised.  Child functions fine for years with little supervision playing in the basement while parents are upstairs.  One day out of the blue child decides that making flame throwers with a candle and an aerosol can is cool.  Child plays with 'flamethrower' in basement for months unbeknownst to parents.  Child feels s/he has the situation under control... until the house burns down.  Parents ultimately responsible for actions of child, but parent not culpable.  If neighbor's house burns down, neighbor not studying which one of the Jones' started the fire... all neighbor know is that his house burned down b/c Mr. and Mrs. Jones was upstairs playing de fool while leaving Jr. downstairs alone playing with matches.  Neighbor blames Mr. and Mrs. Jones for actions of otherwise responsible child.  

That's what's happening... all of AIG is being tainted and tarnished by the actions of a small subsidiary.  Your earlier example of Arthur Andersen is apt.... moreso than you think.  To this day if you ask anyone about AA and they'll spit on the name... unawares that AA was ultimately absolved of any wrongdoing in Enron, with the convictions being overturned on appeal... but of course too much damage was done, AA was blamed for something it wasn't culpable for, and as it turns out, wasn't even responsible for.  So to bring the discussion full circle... the discussion needs to be kept within the context of the actual culpability of the holding company itself.

Investors are investors....whether they were banks, or different lending institutions etc....they are investors.  Of course when I say investors I mean institutional investors....and the nature of the investor doesn't really have much bearing on my point (or yours).  

How can you tell me what has bearing on my point... are you speaking for me now?  When you talk about investors (especially when you give the impression that these were hapless investors who were sold a faulty security, then of course I personally would think you're talking about individual investors. Not that that would make your assessment any more accurate because AIG business never sold any investment vehicle/security... whatever you call it.  It sold an insurance policy on a transaction... essentially guaranteeing a loan.

That last paragraph is potentially overly simplified.  The activities of AIG cannot be looked at in a silo which includes only those with whom direct business was done.  Do you know how the CDS purchasing activities of the non-US banks was funded or leveraged?  Do you know what else was on their balance sheets? Do you know who had a lien on their cash flows?  As is with most things in global finance and capital markets there's a trickle down effect of all activities affect far reaching constituencies....so I dunno.  But like I say, I think most people who know somewhat what they're talking about appreciate the significance of many fin. institutions' (other than AIG) effect on this credit crisis....

I can only conclude that you haven't been watching the news.  I've been watching CNN's iReports most of the day and the majority of people commenting on the the bonus fiasco seems to think that AIG is who's responsible for the economy being as it is.  If you find that an oversimplification then the fault is with the populace... not my assessment of their position.  

[Bakes]

I am not sure if was Jon Stewart or CNN, but I was following it at the time, and the consensus was that AIG were over reaching themselves in covering these companies. I will try and find the interview, but from what was said they knew things could have gone bad, but pressed on and hope for the best. I can't tell you all the details, but I distintively remeber that from investigations, AIG was knowingly strectching themselves na making unnecessary business deals.

That bolded part is what the analyst explained, many of the risk were high and they still took them.

Elan, I didn't see the interview, but I know what you're talking about.  It's the same thing I said to Marcos earlier... yes they overextended themselves.  Like I said, it's like them selling more insurance policies than they have money to pay out on... because what are the odds that everyone would total their cars and come calling... each for $20,000, $30,000 at the same time?  That would bankrupt most insurers because simply put they make policies based on statistical models... that's why they have actuaries on staff to help calculate risk. 

In this case the parent company didn't know enough of what the subsidiary was doing in London... all the parent company was looking at was the money coming in.  This is what Kicker (and others) are blaming the parent company for... not saying "wait... these CDS allyuh selling, suppose all dem people decided tuh cash them in at de same time... we could pay?"

It's a fair criticism... but my point is that from the parent company's perspective, it was reasonable to trust the subsidiary, even if ultimately and in hindsight we know that was the wrong thing to do.  Don't judge them by what is known now... judge them by what was known then.

[Bakes]

If you understand the role of a holding company you'd see that what you're saying isn't really making sense in reality- maybe conceptually but not in reality.  So what is AIG (by your definition) ever at fault for?

So now I don't understand the role of a holding company? lol... okay fella

So from now on, when discussing this, everyone should specify AIG financial products then? Is that what you're saying?  In that case, the words (letters) AIG by themselves should never be uttered in regards to anything to do with business activity or operations, because a holding company has no operations.


See my explanation above vis-a-vis "responsibility" versus "culpability".  People don't need to specify AIG financial products when they're typing... but I bet if acb (not faulting him for not fully understanding) properly understood the fault at issue here, then I'm pretty sure that he wouldn't be blaming them for "promulgating the ills of society" and calling for Man U. to remove the sponsor's name from it's shirt.  There is much about AIG which is legitimate and which is good, but people don't care about that right now because dey blood close to dey skin and the mere mention of "AIG" is fighting words... regardless as to which one of the Jones' actually set the fire.


That has nothing to do with what I said....My point is that their CDS business should have raised red flags under proper due diligence and appropriate regulation regardless of how profitable it, or any other business segments is/was....and nothing I said is a result of blind emotionalism.  

If you say so... but if YOU respond to something I said and what I said "has nothing to do" with your response to it, then that tells me that you either didn't understand what I initially said or you otherwise ignored it.  To furthermore call it a "naive assertion" when clearly you didn't understand it... that I can only attribute to you being unnecessarily emotional in your response.  A more rational approach would have been to address what I actually said... not what you thought I said.

CDS was a new investment vehicle devised by AIG Financial in London... AIG (holding company) didn't know enough about it to know that it was risky... when they realized the risk 4 yrs ago they stopped initiating the credit default swaps.  AIG Financial did nothing previously to draw that level of scrutiny and so the trust placed in it by the parent company was a reasonable one... regardless as to whether you think that 'naive' or not, easy to term it so now with the benefit of hindsight.  I bet your own supervisor puts a certain amount of trust in you and your work to grant you a measure of independence and autonomy.  Some aspects of your work is reviewed I'm sure... other aspects I'm sure you're granted greater deference. 

You seem to think that from jump the parent company should have been scrutinizing the activities of an otherwise reputable subsidiary and its director.  That's simply not how the real world operates... makes one wonder which of our assertions is truly 'naive'.

[kicker]

It makes perfect sense because even if the holding company is ultimately responsible for the fault of its subsidiary, it would simply be disingenuine to try and paint ALL of AIG with the same brush of culpability.  A parent may ultimately be responsible for the actions of their minor child (in certain regards) but it's hard to argue that that parent is also CULPABLE for the actions of that child.  Arguing 'better supervision' makes sense in some regards, but is practically inapplicable in others.

See my explanation above.  Child has earned the trust of the parent such that parent leaves them unsupervised.  Child functions fine for years with little supervision playing in the basement while parents are upstairs.  One day out of the blue child decides that making flame throwers with a candle and an aerosol can is cool.  Child plays with 'flamethrower' in basement for months unbeknownst to parents.  Child feels s/he has the situation under control... until the house burns down.  Parents ultimately responsible for actions of child, but parent not culpable.  If neighbor's house burns down, neighbor not studying which one of the Jones' started the fire... all neighbor know is that his house burned down b/c Mr. and Mrs. Jones was upstairs playing de fool while leaving Jr. downstairs alone playing with matches.  Neighbor blames Mr. and Mrs. Jones for actions of otherwise responsible child.  

That's what's happening... all of AIG is being tainted and tarnished by the actions of a small subsidiary.  Your earlier example of Arthur Andersen is apt.... moreso than you think.  To this day if you ask anyone about AA and they'll spit on the name... unawares that AA was ultimately absolved of any wrongdoing in Enron, with the convictions being overturned on appeal... but of course too much damage was done, AA was blamed for something it wasn't culpable for, and as it turns out, wasn't even responsible for.  So to bring the discussion full circle... the discussion needs to be kept within the context of the actual culpability of the holding company itself.

That's not my point...My point is that by saying AIG, in the context of anything operational it could mean "AIG and any of its subs"  So separating AIG from AIG Financial products in the context of this discussion is unnecessary- especially in a holding structure when the parent company has no operations...That whole supervision analogy is irrelevant because in holding structure the parent doesn't supervise anything operational...so there is no trust factor involved...A holding is akin to a major shareholder with ultimate voting rights and autonomy to elect a BOD/CEO etc....anyways this is going no where- you refuse to hear what I'm saying...and I starting to feel we having a parallel conversation on this one...

How can you tell me what has bearing on my point... are you speaking for me now?  When you talk about investors (especially when you give the impression that these were hapless investors who were sold a faulty security, then of course I personally would think you're talking about individual investors. Not that that would make your assessment any more accurate because AIG business never sold any investment vehicle/security... whatever you call it.  It sold an insurance policy on a transaction... essentially guaranteeing a loan.

In the context of this discussion to assume that investor means individual investor is not an intelligent assumption...I work in finance/consulting,and I've studied it extensively- the word investor is not necessarily synonymous with an individual....

Easy now.... AIG wrote Credit Default Swaps- an instrument which I fully understand... It's a derivative, the buyer in most cases is a lender in another transaction...a lender in another transaction is often an investor in some kind of debt instrument...i.e. bond etc...that's what I meant by the investor who bought a CDS- has nothing to do with AIG selling an investment vehicle/security...so I'm not sure where you're trying to go with that.  


I can only conclude that you haven't been watching the news.  I've been watching CNN's iReports most of the day and the majority of people commenting on the the bonus fiasco seems to think that AIG is who's responsible for the economy being as it is.  If you find that an oversimplification then the fault is with the populace... not my assessment of their position.  

Feel to junp to inaccurate conclusions just because I interpret the sentiment of the populace differently from you.  I am up with the news on this.  I think the light of the most current controversy, people's focus is on AIG and their reliance on Gov't funds and their fury over tax dollars assisting with this bailout especially in light of huge bonuses coupled with billion dollar losses.  The majority of what I read, and people I talk to attribute this crisis to a compounding of risky lending by mortgage shops, and the heavy MBS participation by Fannie & Freddie and other financial instutions...

[kicker]

CDS was a new investment vehicle devised by AIG Financial in London... AIG (holding company) didn't know enough about it to know that it was risky... when they realized the risk 4 yrs ago they stopped initiating the credit default swaps.  AIG Financial did nothing previously to draw that level of scrutiny and so the trust placed in it by the parent company was a reasonable one... regardless as to whether you think that 'naive' or not, easy to term it so now with the benefit of hindsight.  I bet your own supervisor puts a certain amount of trust in you and your work to grant you a measure of independence and autonomy.  Some aspects of your work is reviewed I'm sure... other aspects I'm sure you're granted greater deference. 

You seem to think that from jump the parent company should have been scrutinizing the activities of an otherwise reputable subsidiary and its director.  That's simply not how the real world operates... makes one wonder which of our assertions is truly 'naive'.

Breds are you kidding?!?!?!  First I never said or implied that....never impled that the parent should have scrutinized anything...I'm saying that AIG financial products should have scrutinized their own activities better....To the part in bold my whole point is that a holding company does NOT have that responsibility...geez..that is what I've been saying all along. 

And your first paragraph convinces me that you have no idea when you talk about a holding structure...

AIG holding company didn't know enough about it?  Know about what?  A holding company doesn't supervise any operation  They just own the shares and elect the BOD of the subs.... You're drawing an analogy between a holding parent and a "supervisor"? really? 

A holding company influences its subs via voting control (earned through ownership of shares)....they elect the board of directors who elects the CEO & executive management....The operations of the sub are NOT the responsibility of the parent in a holding structure...no supervisory...no scrutiny...no trust nada...a holding company is not set up for that kind of work... AIG Financial products CDS business operations are NOT the responsibility of the holding company- that's why I say there's no need to separate the parent & the sub because any discussion about the operations of AIG is a discussion about one of its subs....the parent has no operational responsibility- the ills committed by any of AIG's subs are ills committed by "AIG". 

When it comes to any operational ills (wrongs committed in the course of business) there is no such thing as AIG Inc. (the parent) because they are set up for the sole reason of owning shares and controlling votes of their subs via various Boards of Directors...so the separation of AIG financial products from AIG Inc. in the context of ACB's initial post does not make sense in reality... I don't know how else to spell this out.

 
 

[Bakes]

That's not my point...My point is that by saying AIG, in the context of anything operational it could mean "AIG and any of its subs"  So separating AIG from AIG Financial products in the context of this discussion is unnecessary- especially in a holding structure when the parent company has no operations...That whole supervision analogy is irrelevant because in holding structure the parent doesn't supervise anything operational...so there is no trust factor involved...A holding is akin to a major shareholder with ultimate voting rights and autonomy to elect a BOD/CEO etc....anyways this is going no where- you refuse to hear what I'm saying...and I starting to feel we having a parallel conversation on this one...

I think you misunderstand the structure of AIG... or at least the level of oversight to which AIG Business in London was subject to.  The London office was not a self-sufficient subsidiary.. don't know why I didn't catch that before.  They were subject to the oversight (along with the sub-office in Connecticut) of AIG Financial here in the US.  If you recall my s/o works for AIG, this is the sole reason I started getting as much info about this situation as I did.  That prompted me to start following the situation more closely, and that was capped off with a course which I'm currently taking that deals with corporate responsibility in which Enron and AIG feature prominently.  I'm sure it's no substitute for actually working in the field as you do.

In the context of this discussion to assume that investor means individual investor is not an intelligent assumption...I work in finance/consulting,and I've studied it extensively- the word investor is not necessarily synonymous with an individual....

Okay pardna... so we supposed to be mind readers and intuitively know what you talking about, any contrary interpretation is "not intelligent".  Too bad things aren't automatically as you say they are... I'm sure it would make your existence much easier.

Easy now.... AIG wrote Credit Default Swaps- an instrument which I fully understand... It's a derivative, the buyer in most cases is a lender in another transaction...a lender in another transaction is often an investor in some kind of debt instrument...i.e. bond etc...that's what I meant by the investor who bought a CDS- has nothing to do with AIG selling an investment vehicle/security...so I'm not sure where you're trying to go with that.  

Granted I'm no expert in Finance... but isn't a derivative and "investment vehicle"??  Isn't it something that investors buy (similar to a security) that they hope would appreciate in value?  I seriously thought I was making sense yes, lol

Feel to junp to inaccurate conclusions just because I interpret the sentiment of the populace differently from you.  I am up with the news on this.  I think the light of the most current controversy, people's focus is on AIG and their reliance on Gov't funds and their fury over tax dollars assisting with this bailout especially in light of huge bonuses coupled with billion dollar losses.  The majority of what I read, and people I talk to attribute this crisis to a compounding of risky lending by mortgage shops, and the heavy MBS participation by Fannie & Freddie and other financial instutions...

Isn't people's focus on AIG what we talking about??  What prompted acb to make his thread... Lehman Bros?  Dred, whether you want to acknowledge it or not is not Lehman et al who coming fuh ah bailout, is AIG.  People feel aggrieved by the fact that they coming for money then turning around and doling out bonuses.  You are more educated than most on the financial crisis.  I would like to think the same of the people you interact with... so it's no surprise that the people you talk to keep things in perspective.  Unfortunately a large segment of the American population don't have the same sophistication as you and your circle... just listen to the comments phoned in or submitted via email, and videos (to CNN).  Maybe is juss CNN, maybe I need to watch MSNBC and FOX to see the comments from people you talking about.

[Bakes]

CDS was a new investment vehicle devised by AIG Financial in London... AIG (holding company) didn't know enough about it to know that it was risky... when they realized the risk 4 yrs ago they stopped initiating the credit default swaps.  AIG Financial did nothing previously to draw that level of scrutiny and so the trust placed in it by the parent company was a reasonable one... regardless as to whether you think that 'naive' or not, easy to term it so now with the benefit of hindsight.  I bet your own supervisor puts a certain amount of trust in you and your work to grant you a measure of independence and autonomy.  Some aspects of your work is reviewed I'm sure... other aspects I'm sure you're granted greater deference. 

You seem to think that from jump the parent company should have been scrutinizing the activities of an otherwise reputable subsidiary and its director.  That's simply not how the real world operates... makes one wonder which of our assertions is truly 'naive'.

Breds are you kidding?!?!?!  First I never said or implied that....never impled that the parent should have scrutinized anything...I'm saying that AIG financial products should have scrutinized their own activities better....To the part in bold my whole point is that a holding company does NOT have that responsibility...geez..that is what I've been saying all along. 

And your first paragraph convinces me that you have no idea when you talk about a holding structure...

AIG holding company didn't know enough about it?  Know about what?  A holding company doesn't supervise any operation  They just own the shares and elect the BOD of the subs.... You're drawing an analogy between a holding parent and a "supervisor"? really? 

A holding company influences its subs via voting control (earned through ownership of shares)....they elect the board of directors who elects the CEO & executive management....The operations of the sub are NOT the responsibility of the parent in a holding structure...no supervisory...no scrutiny...no trust nada...a holding company is not set up for that kind of work... AIG Financial products CDS business operations are NOT the responsibility of the holding company- that's why I say there's no need to separate the parent & the sub because any discussion about the operations of AIG is a discussion about one of its subs....the parent has no operational responsibility- the ills committed by any of AIG's subs are ills committed by "AIG". 

When it comes to any operational ills (wrongs committed in the course of business) there is no such thing as AIG Inc. (the parent) because they are set up for the sole reason of owning shares and controlling votes of their subs via various Boards of Directors...so the separation of AIG financial products from AIG Inc. in the context of ACB's initial post does not make sense in reality... I don't know how else to spell this out.

 
 

Well hopefully my explanation above helps clear it up.  This is why I kept referring to 'holding company' in quotes because I wasn't sure why you were calling the US based AIG Financial such.  AIG Financial had oversight over the London office, the London operation was not a sub unto itself.  This is why I spoke of the oversight that many are saying was lacking.  Even if you were referring to just the actual "Holding" company...  the non-operational corporate entity, that entity still has a board that's supposed to provide guidance and ovesight.  That is what was lacking and why there was much consternation with the company.

You insist there's no need "in the context of the discussion" to delineate between the London office and the rest of AIG.  This to me is baffling, since in the context of the post it's all of AIG was being blamed for this mess... not the small london office.  I think you're likely the only one operating on the assumption that "AIG" only referred to the office involved in the swaps, and not AIG, Inc. itself.

[kicker]

I think you misunderstand the structure of AIG... or at least the level of oversight to which AIG Business in London was subject to.  The London office was not a self-sufficient subsidiary.. don't know why I didn't catch that before.  They were subject to the oversight (along with the sub-office in Connecticut) of AIG Financial here in the US.  If you recall my s/o works for AIG, this is the sole reason I started getting as much info about this situation as I did.  That prompted me to start following the situation more closely, and that was capped off with a course which I'm currently taking that deals with corporate responsibility in which Enron and AIG feature prominently.  I'm sure it's no substitute for actually working in the field as you do.

Isn't people's focus on AIG what we talking about??  What prompted acb to make his thread... Lehman Bros?  Dred, whether you want to acknowledge it or not is not Lehman et al who coming fuh ah bailout, is AIG.  People feel aggrieved by the fact that they coming for money then turning around and doling out bonuses.  You are more educated than most on the financial crisis.  I would like to think the same of the people you interact with... so it's no surprise that the people you talk to keep things in perspective.  Unfortunately a large segment of the American population don't have the same sophistication as you and your circle... just listen to the comments phoned in or submitted via email, and videos (to CNN).  Maybe is juss CNN, maybe I need to watch MSNBC and FOX to see the comments from people you talking about.

Ok I see where the disconnect is- phew (wiping my brow in relief)...I question the use that term "self-sufficient" though..To my knowledge AIGFP, sub of AIG Inc.- holding company, operates in London as it does in CT...but if I'm wrong ok.... if the oversight you're talking about is US- London oversight, then I see your point except that AIG Financial U.S. to my knowlege is not a holding company, and if there's an oversight/head office relationship between the geographies I highly doubt that it's referred to aS a parent-sub relationship....and in a bunch of your posts you referred to the supervisory authority coming from the holding parent (or at least parent) which is contrary to or at least inconsistent with what you're saying above....

Anyways, I don't distinguish between AIG Financial Products London, United States and their sub divisions in other geographies...just the way I look at it ........and I still think that to associate their mishaps with the AIG brand is a reality even if somewhat unfair by your assessment because of the reporting structure....but I get your point 

[GunnerStunner]

the american tax payers footing manu this season yes

[kicker]

You insist there's no need "in the context of the discussion" to delineate between the London office and the rest of AIG.  This to me is baffling, since in the context of the post it's all of AIG was being blamed for this mess... not the small london office.  I think you're likely the only one operating on the assumption that "AIG" only referred to the office involved in the swaps, and not AIG, Inc. itself.

Nah my point was more that there's no need to delineate between the parent (the holding company), and AIGFP (the sub)....but like I say I see where the disconnect is/was.

[Bakes]

Ok I see where the disconnect is- phew (wiping my brow in relief)...I question the use that term "self-sufficient" though..To my knowledge AIGFP (sub of AIG Inc.- holding company) is based on London,..but if I'm wrong ok.... if the oversight you're talking about is US- London oversight, then I see your point except that AIG Financial U.S. to my knowlege is not a holding company....and in a bunch of your posts you referred to the supervisory authority coming from the holding parent which is contrary to or at least inconsistent with what you're saying above....

Anyways, I don't distinguish between AIG Financial Products London, United States and their sub divisions in other geographies...just the way I look at it ........and I still think that to associate their mishaps with the AIG brand is a reality even if somewhat unfair by your assessment because of the reporting structure....but I get your point 

Yeah... I getting the terminology tied up.  AIGFP is indeed London-based.  I was saying that it was subject to the oversight of the Holding company.  I was correct and didn't even know it.  I thought there was another level to the subsidiary that was US-based but I was wrong.  The CT office is a sub-office of the London operations.  The oversight I kept referring to was indeed from the holding company's headquarters in NY.  Not sure where in the org. structure they originated but credit risk managers were set on the trail of AIGFP but were denied access to AIGFP's financial records.

I was fuzzy on the details but that's the oversight I kept referring to.

Check this link that describes Liddy's testimony today.

http://voices.washingtonpost.com/economy-watch/2009/03/aigs_liddy_we_ran_an_internal.html?hpid=topnews

[Deeks]

I confuse.

[kicker]

Yeah... I getting the terminology tied up.  AIGFP is indeed London-based.  I was saying that it was subject to the oversight of the Holding company.  I was correct and didn't even know it.  I thought there was another level to the subsidiary that was US-based but I was wrong.  The CT office is a sub-office of the London operations.  The oversight I kept referring to was indeed from the holding company's headquarters in NY.  Not sure where in the org. structure they originated but credit risk managers were set on the trail of AIGFP but were denied access to AIGFP's financial records.

I was fuzzy on the details but that's the oversight I kept referring to.

Check this link that describes Liddy's testimony today.

http://voices.washingtonpost.com/economy-watch/2009/03/aigs_liddy_we_ran_an_internal.html?hpid=topnews

LOL then we're back to square one, and I think you were a bit off in your analogies because a holding company doesn't "oversee" operations...

A holding company is made up of Chairmen & President's & directors...those guys don't get their hands dirty with operations.  They make voting "executive" decisions  and appoint executive management by heading/running the BODs of their subs...

The whole idea of a holding parent scrutinizing, supervising, overseeing...trusting sub etc.. should not even be part of the discussion....Any discussion about AIG operations is a discussion about the subs- in this discussion AIGFP is commonly referred to as AIG because it's just known that AIG Inc. doesn't really indulge in any operational business....

What AIG's operating subs do totally affects the overall AIG brand because that's what the AIG brand effectively is- no delineation necessary....anyway....

[Bakes]

LOL then we're back to square one because a holding company doesn't "oversee" operations...

A holding company is made up of Chairmen & President's & directors...those guys don't get their hands dirty with operations.  They make voting "executive" decisions by heading the BODs of their subs...

The whole idea of a holding parent scrutinizing, supervising, overseeing...trusting sub etc.. should not even be part of the discussion....Any discussion about AIG operations is a discussion about the subs- in this discussion AIGFP is commonly referred to as AIG because it's just known that AIG Inc. doesn't really indulge in any operational business....

What AIG's operating subs do totally affects the overall AIG brand because that's what the AIG brand effectively is- no delineation necessary....anyway....

Kicker... you are the one saying the Holding company was overseeing "operations"... I never said that.  I said they had oversight over AIGFP... or put another way AIGFP was still subject to the oversight of the parent company.  The Credit Risk managers had to come from somewhere... and we know they weren't from AIGFP.  So who dispatched the "in-house" risk managers?  Under what authority?

[kicker]

Kicker... you are the one saying the Holding company was overseeing "operations"... I never said that.  I

That's just dishonest.  I NEVER said that.  Show me where I said that.  You will not find it.  I've been saying the complete opposite from the start...adamantly.

I said that a supervisory role of a holding company should never even be discussed because holding companies are not set up for that...

You're the one who brought all the analogies about the parent/supervisor trusting the sub...and all along I was saying that that analogy is irrelevant because a holding parent is not set up for that kinda role to begin with....

I don't know how many times I need to type the same sh*t.

You came and spin around and sing a different song about UK & CT and how CT office was supervising/overseeing the UK office...now come back saying that you never implied any supervising/overseeing by the parent...I think you're confusing yourself here...I've been saying the same thing from the start.

About AIG's credit risk managers...if they work at the parent company (I.E. the holding company...i.e. AIG Inc.), I'd be shocked...Holding companies consist of Presidents & Chairmen who run the boards of directors of their subs.  You realistically think that a sub has the power to keep oversight personnel (credit risk managers) from seeing their books?  If the holding company (parent) appointed a commitee of credit risk managers to oversee the books of AIGFP, it would have been done.... They are probably employed by AIGFP in their risk management department or some other division of AIGFP, and the divisions are probably protected from eachother by a corporate firewall or restricting control of some sort.  I don't put my head on a block but I'd be really really surprised if there is a team of risk managers working for AIGFP's holding parent...A holding company is a shell with no assets other than the shares of its subs.

....the day to day business of AIGFP, or of any of the any subs are what I broadly refer to as the company's operations

...and this is just ridiculous now...