I was interviewed on Oakland-based KTVU about the AIG scandal. You can watch it here.
A key point I was not able to work into the discussion: we need to keep in mind the larger picture here.
First, according to a must read profile of the AIG Financial Products unit in Rolling Stone, its 400 employees were paid some 3.5 billion dollars in salary and BONUSES over the last seven years, including $280 million to the group’s founder Joe Cassanno, a veteran of the junk bond fraud run by disgraced financier and now ex-con Michael Milken. And yet the US Treasury – led by Neel Kashkari – thought it essential to hand them $40 billion in new money last fall and only limit the bonuses paid to the top executives of the holding company, AIG parent, not AIG Financial Products!
Second, what value have these financial geniuses brought the US public for our $40 billion (followed by another $100 billion or so since, including a $30 billion line of credit a few weeks ago)? Instead of negotiating with their counter parties to whom they sold the Credit Default Swaps that were at the heart of the AIG-FP business model, they apparently just paid them off at 100 cents on the dollar!
Now, that’s the kind of insurance company I want.