Rolling Stones article about what happened at AIG

[gonzomax]

http://tpmmuckraker.talkingpointsmemo.com/2009/03/cassano_aig_finance_staffers_are_generally_well-co.php
AIG was thoroughly set up as a candy shop by the insiders. They took care of each other before they took care of the company. They had no interest in the impact on the economy.

[Quasimodem]

I always knew The Stones were very prolific. Especially that Richards guy!
Sorry, I don’t have much to do these days!:rolleyes:

Quasi

[Magiver]

@gonzomax

I am sure he has a few houses around the world. He is outside our jurisdiction, but if he senses a pending lynch mob ,he may be hard to find.

No, I meant the Brittish legal system is after him. He is being investigated by the the Serious Fraud Office.

[Quasimodem]

@Quasimodem

I always knew The Stones were very prolific. Especially that Richards guy!
Sorry, I don’t have much to do these days!:rolleyes:

Quasi

Oh, hell. Sorry! Didn’t realize where I’d landed. :eek:

Quasi

[ShibbOleth]

@elucidator

Coulda had a tooth ache, ya know? There are legitimate uses for pain killers. Killing pain, for instance.

Maybe. But this is a guy who is noted for writing that he dropped acid and then interviewed the former chief of the Office of National Drug Policy in 2004.

Also, FTR, I referred to him before as Mike Taibbi. Mike Taibbi is a reporter for NBC News. Matthew (Matt) Taibbi is his son and an editor specializing in politics for Rolling Stone magazine.

Mea culpa.

[Whack-a-Mole]

@China_Guy

AIG FP were hardly the sharpest knives in the drawer. It’s a Wall Street fallicy repeated ad nauseum trying to justify the whole bonus culture. With little exaggeration, I could take those bonuses and recruit a lot better and more experienced crew, and take over the trading book/risk in a matter of days. And if I could do it, one of the senior goldman, UBS, Barcap or MS guys could do it faster.

The Financial Times seems to be buying into that fallacy. How are they missing it? (bolding mine)

Normal loans go bad every time the economy enters a recession, as companies’ profits fall and mortgage-holders lose their jobs. But on top of that familiar problem, banks and other financial institutions have created complex financial securities, called derivatives, so blindingly complicated that even the people creating them didn’t really understand them.

SOURCE: The Geithner plan explained - FT.com

[ShibbOleth]

You have to figure that if you’re smart enough to really understand derivatives you’re not the guy reporting on them - you’re in the game. I think journalists at places like the Financial Times are also reluctant to criticize to quickly lest they be barred from the CEO’s musings. It’s really starting to seem like a toxic situation where everyone is afraid to say that the emperor has no clothes.

[gonzomax]

@ShibbOleth

Maybe. But this is a guy who is noted for writing that he dropped acid and then interviewed the former chief of the Office of National Drug Policy in 2004.

Also, FTR, I referred to him before as Mike Taibbi. Mike Taibbi is a reporter for NBC News. Matthew (Matt) Taibbi is his son and an editor specializing in politics for Rolling Stone magazine.

Mea culpa.

So, how does that mean this story is not true? He is saying what main stream press is afraid to. Many know how big a mess this is but reporters have been neutered.

[ShibbOleth]

Look at my previous post. I said that the article may well be accurate. Just kind of wish it came from someone with a more sterling reputation. It’s too easy for many to shrug off this kind of stuff when it comes from Rolling Stone.

[gonzomax]

I find Rolling Stone willing to print stories that main streamers wont. Hunter was telling the truth when we refused to listen a couple decades ago. You will not get the tough stories on CNBC or the big 3 networks.

[msmith537]

@Gozu

Now I have no clue as to the reputability of RS magazine am hoping that I am wrong. I hope that someone will post here and assure me that the article is just an inflammatory piece that grossly exaggerates what happened and that I shouldn’t feel as angry as I do, even after waiting a couple of days before posting this.

Let me put it to you this way. What would you say to a review of the latest bands published byThe Economist?

I’m sure the article is more or less accurate and probably fine for entertaining laymen. If I was going to research AIG from a professional standpoint, I might find a source with a bit more meat.

@Gozu

Otherwise, I’d like to ask: is there really a feasible way to regulate the companies engaging in such reckless behaviour? Or do we just have to sit and hope that next time, it’ll be different? That next time, people at the top will do the right thing?

Regulation only works if it is enforced. There were so many things wrong with everything that went on that I can’t even being writing it all. AIG makes a convenient scapegoat because people can understand executuves taking out huge bonuses while a giant insurance company goes out of business. But they did not cause the problem by themselves.

[Whack-a-Mole]

@msmith537

Let me put it to you this way. What would you say to a review of the latest bands published byThe Economist?

I’m sure the article is more or less accurate and probably fine for entertaining laymen. If I was going to research AIG from a professional standpoint, I might find a source with a bit more meat.

Rolling Stone has a history of good journalism. Of course they are “dumbing it down” for the layman but that’s fine. They are not pretending to be the Financial Times or The Economist and this is pretty complex stuff. Certainly there is more nuance to be had but overall, colorful language aside, they pretty much got it and are not misleading.

Regulation only works if it is enforced. There were so many things wrong with everything that went on that I can’t even being writing it all. AIG makes a convenient scapegoat because people can understand executuves taking out huge bonuses while a giant insurance company goes out of business. But they did not cause the problem by themselves.

AIG are definitely not a scapegoat. They of course are not the only company that behaved badly here but they were front and center in greasing the wheels that made this thing go. It was AIG that was taking the other side of these investments the banks were making. They were the ones to massively float the Credit Default Swaps. Others did it too but nothing like the level AIG was.

This was essentially viewed as “insurance” thus unregulated. Then when regulators would look at banks and say, “Whoa…you guys are leveraged to your eyeballs!” the banks could respond, “It’s ok, we are insured against default by AIG over there…nothing to see here, move along!”

Remember AIG gleefully let this little side part of their business put them in so much danger. Some few pointed out the Emperor had no clothes and got shut out fast. For awhile they were making freighter-loads of money and the people running the show were getting insanely wealthy. Of course it all went to hell, banks went to collect on their policies, all of them, all at once, and AIG imploded being staggeringly incapable of covering anything near what they were on the hook for.

Then they do their whole bonus schtick after all that.

AIG deserves every bit of our scorn. They are not the only ones either but certainly not a company to have any pity for.

[msmith537]

@Whack-a-Mole

AIG deserves every bit of our scorn. They are not the only ones either but certainly not a company to have any pity for.

True. Although I tend to pity the ordinary working Joes who are just doing there normal day to day non massive bonus job and all of a sudden don’t have a place to work.

[China_Guy]

@Whack-a-Mole

The Financial Times seems to be buying into that fallacy. How are they missing it? (bolding mine)

Look, the only thing reallY difficult about structured products (eg Derivatives) is

1. creating the original algorhythms…which is pretty much rocket science
   b) getting a true value for the underlying product that the derivative is based on.

Derivative financial products are based on some " underlying" product. For example, it could be 1,000 mortgages in LA. Well, does anyone know what the value of 10,000 mortgages is in LA at the moment? If you actually tried to sell 10,000 mortgages tomorrow, how much money would that bring in? No one freaking knows. No one is really willing to take on that risk unless it is at a huge discount.

Now, if that underlying product for the derivative happens to be the final third of 10,000 LA home mortgages, the second have of 5,000 NY mortgages, 10% of some other derivative guaranteed by the Lucky Trust company, blah blah blah. Then NO ONE has anything close to a realistic model for what the underlying is worth. And if you can’t value the underlying, then there is no freaking way in the universe any rocket scientist can value an illiquid ultra customized turbo charged derivate product that does not trade through a listed exchange.

[gonzomax]

@Whack-a-Mole

Rolling Stone has a history of good journalism. Of course they are “dumbing it down” for the layman but that’s fine. They are not pretending to be the Financial Times or The Economist and this is pretty complex stuff. Certainly there is more nuance to be had but overall, colorful language aside, they pretty much got it and are not misleading.

AIG are definitely not a scapegoat. They of course are not the only company that behaved badly here but they were front and center in greasing the wheels that made this thing go. It was AIG that was taking the other side of these investments the banks were making. They were the ones to massively float the Credit Default Swaps. Others did it too but nothing like the level AIG was.

This was essentially viewed as “insurance” thus unregulated. Then when regulators would look at banks and say, “Whoa…you guys are leveraged to your eyeballs!” the banks could respond, “It’s ok, we are insured against default by AIG over there…nothing to see here, move along!”

Remember AIG gleefully let this little side part of their business put them in so much danger. Some few pointed out the Emperor had no clothes and got shut out fast. For awhile they were making freighter-loads of money and the people running the show were getting insanely wealthy. Of course it all went to hell, banks went to collect on their policies, all of them, all at once, and AIG imploded being staggeringly incapable of covering anything near what they were on the hook for.

Then they do their whole bonus schtick after all that.

AIG deserves every bit of our scorn. They are not the only ones either but certainly not a company to have any pity for.

The only part of the equation they cared about was they were getting insanely wealthy. They were financial experts who knew damn well what the risks were. They should be scorned and absolutely not rewarded or employed to help fix the mess. They should be publicly scorned and ridiculed.

[elucidator]

@msmith537

True. Although I tend to pity the ordinary working Joes who are just doing there normal day to day non massive bonus job and all of a sudden don’t have a place to work.

“Ordinary working Joes”, eh? Working class heroes, then? Kind of guys, carry their lunch to work in a paper bag and a thermos of coffee? Belong to the Stockbrokers and Instrument Handlers Union, Local #3? How much money did these sturdy sons of the proletariat pull down, every year? Did they have to scrimp, forgo that pricey Merlot and just settle for a domestic chardonnay?

[gonzomax]

The algorhythms that the mathematicians and rocket scientists developed were bogus. No mathematical model has proven to be factual. it is after the fact mathematical justifications for what they were going to do anyway. They deliberately obfuscate the explanations and contracts to disguise them from the scrutiny. It was smoke and mirrors hiding rampant risk and financial danger.