AIG Warned of 'Crisis' if Government Didn't Help-Draft-Obtained by ABC-Dated 4 Days Before Bailout

[kpete]

Source: ABC News

AIG Warned of 'Crisis' if Government Didn't Help
Draft, Obtained by ABC News, Dated Four Days Before Bailout
By MATT JAFFE and NED POTTER
March 9, 2009

An AIG report to the Treasury Department last month warned that if the government didn't come to its rescue again, its collapse would trigger a "chain reaction of enormous proportion" that would "potentially bankrupt or bring down the entire system" and make it impossible for AIG to repay the billions it already owed the U.S. government.

A draft report, obtained by ABC News, and marked "strictly confidential," said, "the failure of AIG would cause turmoil in the US economy and global markets, and have multiple and potentially catastrophic unforeseen consequences."
http://abcnews.go.com/images/Business/aig_systemic_090309.pdf

A draft of the report, obtained by ABC News, was marked "strictly confidential." It said, "The failure of AIG would cause turmoil in the U.S. economy and global markets and have multiple and potentially catastrophic unforeseen consequences."

The draft was dated Feb. 26. On March 2, the Treasury Department and the Federal Reserve system announced that AIG, which lost $61.7 billion in the fourth quarter of 2008, would receive $30 billion in new government help.


Read more: http://abcnews.go.com/Business/story?id=7040420&page=1

[armodem08]

1. Fucking extortion artists... n/t

[Supersedeas]

54. if you want us to repay you...heh-heh...then you will give us more of your damned money

[OhioChick]

2. Treasonous Bastards. n/t

[Tandalayo_Scheisskopf]

3. As fine an example...

Of an extortionate threat as I have seen in quite a while. Where did these guys go to school? The Capone School of Business Management?

[TheEuclideanOne]

41. Yeah....dat's a nice economy ya got dere....

would be a shame if something were to...happen.....to it

sorry, that's the best I could do as a written italian accent.

[spag68]

59. Italian accent

For all of us Italians out here, fuck you

[TheEuclideanOne]

62. Sorry, didn't mean to offend

I am sure that The Capone School of Business Management is a fine institute and I certainly didn't mean to insult your Alma Mater. For all of the Italians out there with no sense of humor, Vaffanculo.

[bananas]

4. That's what Rockefeller told Carter in 1979

[Blackhatjack]

5. Keep in mind that AIG was always a 'pass through' for taxpayer $$ ...

IT is clear that the taxpayer bailout billions for AIG went straight through to lots of foreign banks and investors, with additional amounts being scoffed up anonymously by the US Financial Big Boys.

As included in the report: "The company points out in the report that it operates in 140 countries and is the largest insurer in the Mideast, Southeast Asia, Hong Kong, the Philippines, Thailand and Japan. It argues that its failure would create a "crisis of confidence" worldwide."

That is why we still do not know where the billions of taxpayer $$ went ...

[valerief]

29. and I thought the Pentagon was our biggest money launderer. nt

[Triana]

6. How is this different than the Somali Pirates? n/t

[neuvocat]

7. Pirates are better liked.

[Tansy_Gold]

8. And more honest.

At least they don't try to tell you they're not pirates.

[girl gone mad]

12. Somali pirates aren't asking for $200Billion from the US taxpayer.

[Supersedeas]

55. Pirates spread the wealth at home -- Bankers tuck it away in off-shore accounts

[Blackhatjack]

9. Ahhh... Here is a telling paragraph which I believe is the linchpin of AIG's extortion request...

From the AIG report ABC News has uncovered:

"• AIG operates in more than 140 countries around the world, whose customers,
regulators, and governments have thus far been refrained from liquidating or seizing
assets based largely on the support given to AIG by the U.S. government."

So other countries have obviously told the US to make good on AIG's obligations or they will begin seizing assets. You can imagine the next steps would be liquidating US dollars and debt instruments.

THAT would have a disasterous effect on the economies of a whole host of countries ....

[BelgianMadCow]

19. spot on. It's back up or else..

liquidation

[Sarah Ibarruri]

10. I just have one question - why aren't these f____ers not in jail? All of them...

I'm not just talking about Bush and Dick. Geithner, Paulson, all of them.

[valerief]

27. I guess they still control the keys to the cells. nt

[Blackhatjack]

11. IS ANYONE ELSE READING the actual report at the LINK? This is devastating news ....

Take a gander at this and then you will understand why AIG is still around and the US is pouring billions of taxpayer $$ into an absolutely failed financial entity.

IT sure looks like the Government is 'playing for time' to try and figure out a solution to this disaster... and time has almost run out.

http://abcnews.go.com/images/Business/aig_systemic_090309.pdf

From Page 4 of 21:

" While the term “insurance” is used, AIG and its industry brethren sell and service
not just the traditional property and casualty and death benefit life insurance
policies, but accident and health coverage, pension and retirement policies, and a
variety of wealth accumulation vehicles, such as annuities.

 The systemic risk is principally centered in the “life insurance” business because it
is this subsector that has the greatest variety of investments and obligations that
are subject to loss of value of the underlying investments.

 The life insurance industry employs approximately 2.3 million people in the U.S.
who sell individual and group policies. There are over $19 trillion of face value
“life” policies in force in the U.S. and 375 million policies.

 Over the past decade, the voluntary termination rate on individual policies
declined remarkably (to six percent by 2007) as consumers could obtain liquidity
from numerous other sources.

 A significant rise in surrender rates – inspired by consumers’ needs for cash or
because of rumored or real failure of insurance companies – could be disastrous.
Because of widespread loss of liquidity, the industry would struggle to raise
adequate cash to meet surrender requests. A “run on the bank” in the life and
retirement business would have sweeping impacts across the economy in the
U.S. In countries around the world with higher savings rates than the U.S., the
failure of insurance companies like AIG would be a catastrophe."

MORE

[rainy]

23. posting so I can come back to this. nt

[Blackhatjack]

13. AIG Fin Products Corp has $1.6 TRILLION in notional DERIVATIVES EXPOSURES ...

Holy Cow! AIG is alive in name only ..... and the US Govt Taxpayers are being forced to make good on AIG's gambling debt.

http://abcnews.go.com/images/Business/aig_systemic_090309.pdf

Page 17 of 21 from the report:

"AIG Financial Products Corp. (AIGFP) has
approximately $1.6 trillion in notional derivatives exposures"

[Frank Booth]

14. Take a look at this. It's kinda scary:

But unregulated and opaque derivatives trading was countercultural in the sense that low or no risk led to quick, astronomically high rewards. By plunking down millions of dollars, a hedge fund could reap billions once these fatally constructed securities plunged. Again, the funds did not need to own the securities; they just needed to pay for the derivatives—the insurance policies for the securities. And they could pay for them again and again. This was known as replicating. It became an addiction.

About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in 1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank for International Settlements, a consortium of the world's central banks based in Basel (the Fed chair, Ben Bernanke, sits on its board), reported the gross value of these commitments at $596 trillion. Some are due, and some will mature soon. Typically, they involve contracts of five years or less.

Credit derivatives are breaking and will continue to break the world's financial system and cause an unending crisis of liquidity and gummed-up credit. Warren Buffett branded derivatives the "financial weapons of mass destruction." Felix Rohatyn, the investment banker who organized the bailout of New York a generation ago, called them "financial hydrogen bombs."

Both are right. At almost $600 trillion, over-the-counter (OTC) derivatives dwarf the value of publicly traded equities on world exchanges, which totaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a year later.

The nice thing about public markets is that they act as canaries that give warnings as they did in 1929, 1987 (the program trading debacle), and 2001 (the dot-com bubble), so we can scramble out with our economic lives. But completely private and unregulated, the OTC derivatives trade is justly known as the "dark market."

The heart of darkness was the AIG Financial Products (AIGFP) office in London, where a large proportion of the derivatives were written. AIG had placed this unit outside American borders, which meant that it would not have to abide by American insurance reserve requirements. In other words, the derivatives clerks in London could sell as many products as they could write—even if it would bankrupt the company.

http://www.villagevoice.com/2009-01-28/news/what-cooked-the-world-s-economy/2

[valerief]

28. Declare derivatives illegal and invalidate all pending claims. Can that be done? nt

[fed_up_mother]

32. That is one scary bit of information. Time to stock up on beans and rice. :(

[RUMMYisFROSTED]

40. IIrc, $596T would be over 8 times the total global money supply. nt

[Marie26]

50. Please help me understand this.

If AIG made derivative "bets" for 1 trillion dollars that they did not have the capital to pay off, why can't they just declare bankruptcy? The derivative creditors (CDS holders) will have to line up like everybody else & might not get the full amount, but who cares? Isn't it better off for these insane derivatives to be settled for a lesser (or no) amount rather than expecting the U.S. government to back up the full $1 trillion dollars in debt?

[Frank Booth]

61. I agree. Plus, assuming that the underlying credit on the CDS hasn't defaulted, the only

money lost is the "premium" to buy the CDS in the first place -- and this could be refunded out of the bankruptcy funds. I understand wanting to keep AIG around because of all the real insurance policies it's obligated on, but it seems like some separate mechanism should be set up to unwind all these credit default swaps -- somehow just throw the CDS division into bankruptcy.

[JDPriestly]

18. We should be trying to get back the money AIG paid its management and board

over the past 10 years. They were violating their obligations -- contractual, perhaps fiduciary to everyone they did business with including all American taxpayers.

[waiting for hope]

42. Repossess all of their material assets -

Cars, homes, boats, jewelery .. ya know, the stuff rich people like to keep around and have a big ass auction.

[DemReadingDU]

36. Thank you for reading and summarizing, n/t

[Marie26]

49. And a lot of that is those "credit default swaps"

AIG is a sucking black hole.

[Bread and Circus]

15. LOL I have a life insurance policy with AIG so that if I die my family is taken care of...

I bought it when I was younger so the rate is good. If AIG goes under I'm out of luck and I'd have to get reinsured but at a much higher rate. Basically, 10 years of payments would be wiped out.

I'm not saying that AIG should be bailed out for that. Frankly, considering what people are losing right now, it's small potatoes.

But, I thought I'd add my story because it's an example of the real world effect of what's happening.

[fasttense]

24. Your supposed life insurance is only as good as the corporation

you buy it from. If I were you, I'd cash in my policy, if you have whole life, or find another corporation to insure you, if you have term.

[Grinchie]

30. Well said. Lot's of people look at the mistakes of the Auto industry and want to run away.

The enormous amount of fraud revealed in this collapse is staggering, but it was all foreseen several years ago, and fortunately, I paid attention.

In a way, the Enron collapse was a bright warning flare sent up to the hundreds of people that were directly and indirectly hurt by it. Even though it projected me into bankruptcy, I learned a great deal from the experience -- "Everybody Wants Your Money". They don't care about anything else. People are expendable, not matter what skills they have, or what products they produce. When you get slapped in the head by that realization you become more self sufficient, start paying close attention, and learn to go with the flow.

I extracted myself form the Phony economy, and the current situation is an exciting movie to observe. I feel sorry for all the people that actually think that Money means something, because at this point, it doesn't. The losses need to unwind, debt forgiven, and the world needs a do over with people a little less self centered and kind to each other.

Is anyone surprised about AIG when most insurance claims for Katrina went unpaid? Or when Allstate wants to leave the Florida and California markets? Insurance is a scam. You hope for a windfall that normally never happens.

[HarukaTheTrophyWife]

38. Your life insurance policy is secure

If AIG goes under, your policy will be bought up by another insurer.

Life insurance is also basically insured by the feds and states to make sure your policy will still have value, if the insurer goes under.

[Bread and Circus]

43. thanks for that info, and the poster above you. I will check w/ m ins. agent.

about my options and these issues.

[wroberts189]

16. They suckered us ..not all of us ..but those with power without a clue...

Others I suspect were in on it.

[Blackhatjack]

17. The way I read this the US Govt is paying off the criminals with taxpayers' money .....

The transfer of billions of dollars is creating 'unfathomable wealth' for some individuals and investors, and is destroying the entire US financial system to do it.

We are in the middle of a white collar heist .... and the criminals have their people at the controls to provide them with protection from prosecution, and assurance that the payoff will be made.

[fed_up_mother]

33. What I want to know is why is Obama involved in this payoff

Fatalistic buying for time? What's going on???

[Marie26]

64. How much did AIG contribute to Obama's campaign?

That might be the answer.

[DemReadingDU]

37. 'unfathomable wealth' for some individuals

Who are these individuals?


Catherine Austin Fitts has been trying for years to determine who these individuals are. She guesses, but says she really doesn't know. A few comments from her blog


catherine
Feb 6th, 2009 at 9:45 pm

The right question is, of course, who is in charge. The answer is that I do not know.

My personal experience is that there is a handful of families — intergenerational wealth– who run things. Yes, the Rockefellers are the most prominent in the US, although outside of David it seems to be mostly outside the bloodline at this point. Yes, there are also coordinating bodies used for management — both bureaucracies like G8 or various secret societies or policy bodies like the Trilateral Commission and the CFR. For my story on the CFR, read http://www.dunwalke.com .

The question is what is driving the current behavior. Is it the power of technology that gives extraordinary ability to centralize and kill?Is it the belief that war is essential to ensure control and a sustainable economy? Is it the perversion in culture that the black budget and organized crime breads? Is it thousands of years of intergenerational mind control? Is it the prisoner’s dilemma caused by the economics in which humans are easy to manipulate (See my article Narco Dollars for Beginners.) Or is it the belief that the only way to achieve sustainability on planet earth is significant depopulation? Or are the stories of aliens really true? Or an out of the box event, such as a pole shift that is anticipated to make the planet uninhabitable.

I don’t know the answer. What I do know is that we are dealing with leadership who are behaving rationally according to the rationale in which they are operating. That is why it is very important to understand their point of view, how they view their risks and why they are so afraid.

Which leads me back to the same question I have been asking for many years…where is the money and how do we get it back?

Find the money and we find the logic of the behavior as well as who is pulling the strings.

Step one is that the rest of us withdraw our money. We stop financing criminal enterprises and shift to the most competent, ethical that we find. That shift will reveal a great deal about who is who and what is really going one.

If you have a “tapeworm” best to stop feeding it what makes it grow and you die.


Catherine
Feb 7th, 2009 at 2:29 am

In response to the request that I give names…

The answer is that I do not know. Sure, I can guess, but that is conjecture. And guessing the names of the “twelve people” who run the world or the various cartels, syndicates and secret societies bypasses the point that this system takes millions of people implementing the most forceful parts of it and hundreds of millions financing it. We get our greatest power when we see the betrayal that occurs at the most intimate levels. (BTW, where’s your money?)

I have found the ability to find the truth on any particular issues requires both the speedy admission that we don’t know, the ability to search for real facts and to do so with an open heart without anger. After all the time that I have invested to try to know the answer to these questions, I don’t know. Somehow, I am no longer frustrated by having to live in a state of ignorance about things I need to know to use my time and serve others effectively in this world.

Anger gives energy to evil. We need to channel all of our energy to ourselves and those who help and protect us.

The above comments from
2/2/09 Financial Coup d’Etat
full article...
http://solari.com/blog/?p=2058



This is another excellent posting...

1/14/09 Financial Coup d’Etat & Your 401k
http://solari.com/blog/?p=2005



edit for a few more links

About Solari
http://solari.com/about-us /

About Catherine Austin Fitts
http://solari.com/blog/?page_id=2

Bio
http://solari.com/about-us/catherine /

Resume
http://solari.com/about-us/resume /

[Marie26]

48. Or using it to cover it up

That's my suspicion. Where are these billions to AIG going, exactly? Probably to cover up & back up the cooked books.

[Optical.Catalyst]

20. So AIG set itself up under the Bush Administration to steal taxpayer dollars for a generation

Big business had a free run for eight years not just to steal on the Republican's watch, but rigged the system to continue being paid no matter which party controls the Government.

[dipsydoodle]

21. Yes folks - it's time for Blackmail

http://www.youtube.com/watch?v=wZgwNutwK0Y

[liberal N proud]

22. It is the same fucking fear tactics used by the bu$h regime

If you don't give us what we want, all hell will break loose

[valerief]

25. Disaster Econ 101. nt

[Christa]

26. K & R nt

[varelse]

31. We're being held up and robbed

again

:grr:

[harun]

34. Looting their customers, shareholders and employess wasn't enough

they needed to loot the Gov't too.

I would like to see Obama be more aggressive with these criminals.

[antimatter98]

35. This is how corporations run the government--we only see the tip of the iceberg.

Notice how our government puts on show-hearings, and then
with a dirty look, hands the banks and corporations trillions of
dollars anyway.

Corporations are running the United States, and we're seeing
it all come out into the open now. GM, AIG, CitiCorp, etc.

Contrast this to how FDR operated. He was actually for
the citizens and working people of the country, and made
no bones about it. Obama's not FDR---he's got on his
economic/financial team, the very ones who, back in the 90's
pushed and got passed the banking and corporate deregulation, that
we see now are doing us in.

Just for reference, here is a quote from an article in the NYT by
Larry Summers, then Treasury Secretary (!!) about the removal
of the Glass-Stegall Act, and a quote from Clinton (shown first),
and then Phil Gramm's quote:

"When this potentially historic agreement is finalized," Clinton said
in a statement, "it will strengthen the economy and help consumers,
communities and businesses across America."

Treasury Secretary Lawrence H. Summers said in an interview, "At
the end of the 20th century, we will at last be replacing an archaic
set of restrictions with a legislative foundation for a 21st-century
financial system." The measure, he added, "would provide
significant benefits to the national economy."

"Senator Gramm said the measure "is the most important banking
legislation in 60 years."

article link:
http://partners.nytimes.com/library/financial/102399banks-congress.html

[jwirr]

39. Has anyone here read John Kerry's book The New War? I have it but

I get to depressed reading so it sets there. However, I read enough to know that he believes that we are facing a new world wide crime syndicate that is everywhere. If anyone has read it does this blackmail threat fit in with what he is talking about?

I also think it is time that someone take a look at what actually will be the result of the crash of these big crocks and what we need to do to survive it. Also I do not know why President Obama does not use the tools used by President Theodore Roosevelt to break these large failing businesses into smaller businesses that are healthier. It seems like the only way to end this. They are simply too big to succeed - not to big to fail.

[Marie26]

51. Because maybe Obama is beholden to them as well. nt

[Jefferson23]

44. Bernanke Blasts AIG For 'Irresponsible Bets' That Led to Bailouts

snip* AIG exploited a huge gap in the regulatory system," Bernanke said. "There was no oversight of the Financial Products division. This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets -- took huge losses. There was no regulatory oversight because there was a gap in the system."

article in full: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/03/AR2009030303810.html?hpid=topnews



So, is ANYONE going to be prosecuted here?

And what a bizarre recent history too:

A.I.G. Chief Can’t Stop Looking Over His Shoulder,By ANTHONY BIANCO
Published: February 3, 2008

WHEN Martin J. Sullivan, now 53, took over the world’s largest insurer, the American International Group, three years ago, the company was the target of multiple criminal and civil investigations and its books were in such disarray that its auditors refused to endorse them. During Mr. Sullivan’s first 18 months on the job, A.I.G.’s bottom line was successively pounded by three huge hurricanes and a South Asian earthquake. Then came an equally costly disaster, though one of human origin: the subprime credit market meltdown.

The only thing I have missed is a plague of locusts,” Mr. Sullivan says.

Despite all of this, Mr. Sullivan’s most trying experience has been fending off challenges from his predecessor as A.I.G.’s chiefexecutive — Maurice R. Greenberg. Mr. Greenberg, 82, and known as Hank, is widely credited as a visionary who single-mindedly built A.I.G. into the corporate giant it is today before state and federal investigations drove him out of the company.

http://www.nytimes.com/2008/02/03/business/03sully.html?_r=1&pagewanted=1

[CJCRANE]

45. There were no al-Qaeda sleeper cells in America after 9/11

but there were people at the heart of the financial industry able to destroy the system from the inside.

:scared:

[Karenina]

46. Heck of a job, eh?

[glitch]

56. Perhaps you should broaden your definition of al-Qaeda sleeper cells

to include the people at the heart of the financial industry who destroyed the system from the inside.

[Marie26]

47. Let it burn

That's the beauty of capitalism, right? Banks like AIG make bad investments, falsify profits, inflate assets etc. & when that's found out, they go bankrupt. Not this BS where the public gets to pay all debt after AIG execs. have made off with the profits. IMO there's no way the gov. can satisfy all AIG's debts & we shouldn't even try. And I'm sick of the Obama Ad. helping out these banks w/o demanding any accountability for their past crimes.

[Sultana]

52. I say let AIG go under, fuck them

[sce56]

58. I'm with ya there

Is it time for Pitch Forks and Torches yet



Actually I think it is to late and we are already

[Sultana]

65. Hell ya!

Too bad as a country we are cowards. But we sure do love shopping....


:eyes:

[high density]

53. No more "too big to fail" companies

These are the worst offenders of the socialized losses, privatized profits scenario.

[McCamy Taylor]

57. AIG held out insurance hostage so we would pay the bad mortgage debts of

people like the Carlyle Group.

They are scum.

[JFKfanforever]

60. Follow the money! Here's an AIG >>> BANKS money trail for you

Banks Grabbed $50 Billion in AIG Bailout Cash 

By Barry Ritholtz 

March 7th, 2009 

Yesterday, in Backdoor Bailouts for Goldman Sachs, we noted
that GS, 
as well as Morgan Stanley, Merrill Lynch,
and Deutsche Bank, were all 
made whole on their bad
bets with AIG. 

That's right, what was misleadingly described as systemic risk
turned 
out to be in large part little more than a
counter-party bailout - 
money for the very same
people who helped cause the problem. 

Only the $25 billion figure I mentioned was off by 100% - the
WSJ is 
reporting this morning it was $50 billion
dollars, almost a third of 
$173 billion total AIG
loot: 

"The beneficiaries of the government's bailout of
American 
International Group Inc. include at least
two dozen U.S. and foreign 
financial institutions
that have been paid roughly $50 billion since 
the
Federal Reserve first extended aid to the insurance giant. 

Among those institutions are Goldman Sachs Group Inc. and
Germany's 
Deutsche Bank AG, each of which received
roughly $6 billion in 
payments between
mid-September and December 2008, according to a

confidential document and people familiar with the
matter. 

Other banks that received large payouts from AIG late last
year 
include Merrill Lynch, now part of Bank of
America Corp., and French 
bank Société Générale SA.


More than a dozen firms with smaller exposures to AIG also
received 
payouts, including Morgan Stanley, Royal
Bank of Scotland Group PLC 
and HSBC Holdings PLC,
according to the confidential document." 

Now you know why the Fed was so reluctant to reveal who the

coutnerparties were. 

This is a giant FUCK YOU to the American taxpayer. Isn't there
some 
Congressmen (besides Ron Paul) who are morally
offended by the Paulson 
plan, which is slowly
becoming the Geithner plan? Isn't there 
anything
that can be done? 

According to the WSJ, these are the counter-party banks paid
by AIG 
with bailout money: 

Covered Counterparties 
 
Goldman Sachs 
 
Deutsche Bank 
 
Merrill Lynch 
 
Société Générale 
 
Calyon 
 
Barclays 
 
Rabobank 
 
Danske 
 
HSBC 
 
Royal Bank of Scotland 
 
Banco Santander 
 
Morgan Stanley 
 
Wachovia 
 
Bank of America 
 
Lloyds Banking Group 

This is simply unconscionable . . . 

[Supersedeas]

63. trying to reconcile the Republicon argument that neither the rich nor the poor need gov help or

interference