The Man Who Crashed the World – lets say he was a stupid part of the puzzle

It is unbelievable that a back office ( Cassano) man was running the biggest accumulation of concentrated risk and Hank Greenberg is still not in jail as he let the guys play beneath all means and odds risking money they never had. Same is true for the rating agencies which again have proven to be absolutely worthless and all the regulators who did not see it coming ?
That’s almost to much to take as any instance has failed and that Obama lets the rating agencies carry on is even a clear evidence of his incompetence or the degree of the corruption of the whole system. In either case the system is completely rotten and the fish stinks from all ends. America has undermined any moral power it might have had as it has no angle to demand anything from Russians or Chinese governments and the ironic part according to his speech Americans and Russians should find common ground – well it appears they have more in common as only one rule seems to count the stronger does what pleases him and a few privileged ones run the show is something both systems have in common. The value added now is that the commoner pays the risk of the moron privileged ones as Mainstreet bailed out Wallstreet and they do not change anything – well you are in trouble Mr President as no one will buy your stories in 6-9 months as you had a little help by the stars but that effect of Euphoria will be gone soon and the brutal reality of a depression will haunt your admin’s incompetence – especially the change mantra which turns out to be another read my lips phrase.

The Man Who Crashed the World

June 30, 2009, 12:01 AM

Is it really possible for one man to precipitate a global economic catastrophe? In the August 2009 issue of Vanity Fair, contributing editor Michael Lewis, one of the most insightful Wall Street critics writing today, investigates the central role of A.I.G.’s Financial Products division in the subprime-mortgage and financial crises that necessitated a $182.5 billion taxpayer bailout out the insurance behemoth.

Following the public outcry over its bailout and bonus handouts, A.I.G. has become the company perhaps most associated with Wall Street greed and arrogance. But, as Lewis points out, its collapse has remained poorly understood. Talking to a number of A.I.G. F.P. traders, Lewis takes us deep inside the company to form a detailed history of who made what decision, when, and why—and what the consequences were.

A.I.G. F.P. was founded in 1987 by a group of mathematically gifted Wall Street traders who saw an opportunity to revolutionize credit markets through derivatives and computer models. It began as a limited and cautiously run enterprise, but its success, and the growing pressure for increasing profits, led it to grow and branch out into riskier types of credit-based derivatives. In 2001, Joe Cassano, a scrappy and ambitious longtime A.I.G. F.P. employee who lacked a mathematics background, was promoted to head the division. Under his watch A.I.G. F.P. would become increasingly immersed in credit-default swaps—insurance it sold on packages of corporate and consumer loans, including subprime mortgages, created by Wall Street. By the time the housing bubble burst, A.I.G. F.P. was on the hook for $450 billion in these credit-default swaps—enough to bankrupt A.I.G. many times over if even a fraction of this debt went bad.

In the article, “The Man Who Crashed the World,” Lewis explores:

• How A.I.G. F.P.’s decline began when Cassano took over and stifled its culture of healthy dissent with his autocratic leadership style: “A.I.G. F.P. became a dictatorship,” one trader from the division tells Lewis. “Joe would bully people around. He’d humiliate them and then try to make it up to them by giving them huge amounts of money.” Another trader confirms, “Under Joe the debate and discussion that was common under [previous A.I.G. F.P. C.E.O.] Tom [Savage] ceased.“

• How the bundles of loans that A.I.G. was insuring came to include not just relatively safe corporate debt but far riskier consumer debt—car loans, credit card loans, and, of course, subprime mortgages. As one A.I.G. F.P. trader explains to Lewis, “The problem is that something else came along that we thought was the same thing as what we’d been doing.”

• How A.I.G. F.P. became the first stop for Wall Street banks looking to insure the massive amounts of debt they were buying, packaging, and selling: “We were doing every single [credit-default swap] deal with every single Wall Street firm, except Citigroup,” says one A.I.G. F.P. trader. “Citigroup decided it liked the risk and kept it on their books. We took all the rest.”

• The failure of A.I.G. executives to realize just how much of the debt they were insuring was subprime-mortgage-related

• Joe Cassano’s initial refusal to scale back A.I.G. F.P.’s C.D.S. business when confronted with evidence of its unsoundness, and the decision he made that came back to haunt the company.

Below the full article which is an excellent inside into the world of insane AIG which was setup bu JPM and ran into the biggest trap but only with the help op Secretary Paulson they could rip off the house as finally the taxpayer paid the bill.

http://www.marketfolly.com/2009/07/michael-lewis-aig-article-in-vanity.html

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~ by behindthematrix on July 8, 2009.

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