The Real Causes Of The Great Recession

[Jarhead]

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

I can see why the Rand institute would take that position. The last thing in the world Repubs want is to have the housing collapse attributed to their obsession in repealing Graham Leach.

And while the FDIC banks had always been allowed into mortgage lending, that one sentence highlighted is a bit disingenuous.

Seems like the writer forgot to mention this; their problems arose from investments in residential mortgages an residential mortgage backed securities consisting of poor quality loans. Investments they had always been free to engage in but declined.


There was a reason that legislation was in place. It served a purpose. If you (and others) don't believe it played a major part in the collapse, if you think it was simply coincidence that after this repeal things started to get crazy, that it was just bad timing, then why was it so important to Republicans to repeal that particular law? What did they and their backers gain from the repeal?

And who allowed those loans to be sold? Who was found to be delinquent in their responsibilities and when it was discovered, who received the support of Frank and who, as chairman of the committee, deemed the report bogus and let things continue as they were?

 

[Jarhead]

Clinton? The 'repeal' of G/S had no effect on Dubya's regulator problem OR the Banksters creating ANOTHER credit bubble like Reagan S&L or Harding/Coolidge's great depression.

I understand that. However, you can't deny that keeping investment banks out of the mortgage lending business, by law, kept the gamblers at bay in terms of mortgage lending.

Clinton opened the door to the proverbial wolves. There was a reason that law was put into place and there was a reason the Republicans had fought for its repeal for years and years.

Now we know why. It had been a very successful law.

Right wingers MUST love this one, from Ayn Rand Institute, BUT TRUE:


There is zero evidence this change unleashed the financial crisis. If you tally the institutions that ran into severe problems in 2008-09, the list includes Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, and Fannie Mae and Freddie Mac, none of which would have come under Glass-Steagall’s restrictions. Even President Obama has recently acknowledged that “there is not evidence that having Glass-Steagall in place would somehow change the dynamic.”

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

Why The Glass-Steagall Myth Persists - Forbes


THIS WAS A REGULATOR PROBLEM, BOTH WITH DUBYA AND GREENSPAN'S 'BELIEF' THAT MARKETS SELF CORRECT, FORGETTING WHAT HAPPENED UNDER RONNIE'S S&L CRISIS OR HARDING/COOLIDGE'S MELTDOWN

No, there was a problem in the securities that were being bundled and sold.

The largest issue was in the bond rating system, it was AIG's fault and AIG was too big to fail under the Obamma administration.

For an industry insider you seem to be dumb as shit ..................

REALLY? BOND RATINGS WAS #1??? LOL

I THOUGHT IT WAS THE FACT THAT BANKSTERS WERE BUNDLING BAD LOANS!!!


Abstract:

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis

Competition and Crisis in Mortgage Securitization by Michael Simkovic SSRN

Your bound and determined to blame a president for the whole mess.

You will not admit "PERSONAL RESPONSIBILITY" had any thing to do with it ............

Yes George Dubya baited all the ignorant n*ggers and white thrash by telling them they could own houses.

He just forgot to mention their part in the program of hard work and self priorities..

Yes it was all the presidents fault for duping all those dumb n*ggers, he personalty held a gun to each and everyones head and made them sing those contracts......

They sang their contracts?

 

[DrDoomNGloom]

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

I can see why the Rand institute would take that position. The last thing in the world Repubs want is to have the housing collapse attributed to their obsession in repealing Graham Leach.

And while the FDIC banks had always been allowed into mortgage lending, that one sentence highlighted is a bit disingenuous.

Seems like the writer forgot to mention this; their problems arose from investments in residential mortgages an residential mortgage backed securities consisting of poor quality loans. Investments they had always been free to engage in but declined.


There was a reason that legislation was in place. It served a purpose. If you (and others) don't believe it played a major part in the collapse, if you think it was simply coincidence that after this repeal things started to get crazy, that it was just bad timing, then why was it so important to Republicans to repeal that particular law? What did they and their backers gain from the repeal?

Read wikipedia it talks about commercial banks "gambling" with investors funds ...................

 

[DrDoomNGloom]

I understand that. However, you can't deny that keeping investment banks out of the mortgage lending business, by law, kept the gamblers at bay in terms of mortgage lending.

Clinton opened the door to the proverbial wolves. There was a reason that law was put into place and there was a reason the Republicans had fought for its repeal for years and years.

Now we know why. It had been a very successful law.

Right wingers MUST love this one, from Ayn Rand Institute, BUT TRUE:


There is zero evidence this change unleashed the financial crisis. If you tally the institutions that ran into severe problems in 2008-09, the list includes Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, and Fannie Mae and Freddie Mac, none of which would have come under Glass-Steagall’s restrictions. Even President Obama has recently acknowledged that “there is not evidence that having Glass-Steagall in place would somehow change the dynamic.”

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

Why The Glass-Steagall Myth Persists - Forbes


THIS WAS A REGULATOR PROBLEM, BOTH WITH DUBYA AND GREENSPAN'S 'BELIEF' THAT MARKETS SELF CORRECT, FORGETTING WHAT HAPPENED UNDER RONNIE'S S&L CRISIS OR HARDING/COOLIDGE'S MELTDOWN

No, there was a problem in the securities that were being bundled and sold.

The largest issue was in the bond rating system, it was AIG's fault and AIG was too big to fail under the Obamma administration.

For an industry insider you seem to be dumb as shit ..................

REALLY? BOND RATINGS WAS #1??? LOL

I THOUGHT IT WAS THE FACT THAT BANKSTERS WERE BUNDLING BAD LOANS!!!


Abstract:

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis

Competition and Crisis in Mortgage Securitization by Michael Simkovic SSRN

Your bound and determined to blame a president for the whole mess.

You will not admit "PERSONAL RESPONSIBILITY" had any thing to do with it ............

Yes George Dubya baited all the ignorant n*ggers and white thrash by telling them they could own houses.

He just forgot to mention their part in the program of hard work and self priorities..

Yes it was all the presidents fault for duping all those dumb n*ggers, he personalty held a gun to each and everyones head and made them sing those contracts......

They sang their contracts?

Typo supposed to signed, but hey spell check passed it. I caught it when I proof read it but decided to let it ride.

 

[DrDoomNGloom]

Say G I noticed your post got all kinds of responses ..................

ROFLMMFAO ....................WHAT A MORON!!

 

[Jarhead]

Say G I noticed your post got all kinds of responses ..................

ROFLMMFAO ....................WHAT A MORON!!

It got you to respond. Relax. Was only having fun. Lighten up.

 

[g5000]

So here's the deal with AIG.

I mentioned CDOs earlier in the topic and how they were constructed. I also mentioned the early CDOs were made of blue chip loans and so were low risk. The senior tranches (small cups which get to dip into the revenue stream first) were so low risk that on a mathematical scale, the world would blow up before one of those cups would not get their water.

But just to add some extra special sauce to allay the regulators who did not fully understand these new derivatives, the builders of these early CDOs went out and bought Credit Default Swaps (CDS) against the senior tranches.

They bought these CDS primarily from the world's largest insurance company, American International Group (AIG).

Note that AIG is not a bond rating company, which is the first part which makes DrDoomNGloom's post so funny.

From AIG's perspective, the "insurance" premiums paid to them to protect these senior tranches from default was free money. The world would end before they would ever have to pay for any losses those tranches would suffer.

This was free money coming in, and so...here's the important part...AIG did not set aside any cash in the event of a CDO senior tranche defaulting.

They could have gotten away with that. But...as we have learned, Wall Street got greedy. They wanted more fees for building and selling CDOs to investors. Once they ran out of blue chip companies and 800 credit score homebuyers, they chucked out the underwriting laws of the Universe and began building CDOs that were made up of progressively worse credit risks.

Right around the end of 2005, a couple of guys at AIG CP finally got their boss to wake up to this fact. By then, AIG was insuring CDOs that were 90 percent toxic. Their boss had been assuming up to that point they were only 5 to 10 percent toxic.

Once Cassano woke up, he told everybody on Wall Street, "Hey, we aren't insuring your shit any more."

Cassano thought he got out early enough to avoid disaster.

He was wrong.

When the toxic CDOs began defaulting, the broker-dealers (Goldman Sachs, etc.) came to AIG for their insurance pay-outs. Except AIG had not been setting any money aside, remember?

Thus, AIG had to go hat in hand to the government for a bailout.

And the Treasury Secretary paid 100 cents on the dollar on those CDS. His name was Hank Paulson.

Guess what job Hank came from in early 2006, just after AIG kissed everybody off?

He came from the job of Goldman Sachs CEO.

 

[Dad2three]

Obama and ACORN - Bing Images

This is an article that was posted 2 months before Obama took office. Everything in it has proven to be true. It's strange how all of this information has been out there for years yet little bits and pieces of it keep surfacing. The left will claim that it's all old news and they'll say that anyone who brings it up is just trolling. I expect the usual USMB members to do their jobs and attack me personally. Well, bring it on:

​

As a New York Post article describes it:

A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.


Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.

Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with "100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns." Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed "the most flexible underwriting criteria permitted." That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

The lender they were speaking of was Countrywide, which specialized in subprime lending and had a working relationship with ACORN.

Investor's Business Daily added:

The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical "housing rights" groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama. (Emphasis, mine.)

Since these loans were to be underwritten by the government sponsored Fannie Mae and Freddie Mac, the implicit government guarantee of those loans absolved lenders, mortgage bundlers and investors of any concern over the obvious risk. As Bloomberg reported: "It is a classic case of socializing the risk while privatizing the profit."

And if you think Washington policy makers cared about ACORN's negative influence, think again. Before this whole mess came down, a Democrat-sponsored bill on the table would have created an "Affordable Housing Trust Fund," granting ACORN access to approximately $500 million in Fannie Mae and Freddie Mac revenues with little or no oversight.

Even now, unbelievably -- on the brink of national disaster -- Democrats have insisted ACORN benefit from bailout negotiations! Senator Lindsay Graham reported last night (9/25/08) in an interview with Greta Van Susteren of On the Record that Democrats want 20 percent of the bailout money to go to ACORN!

This entire fiasco represents perhaps the pinnacle of ACORN's efforts to advance the Cloward-Piven Strategy and is a stark demonstration of the power they wield in Washington.

Enter Barack Obama

In attempting to capture the significance of Barack Obama's Radical Left connections and his relation to the Cloward Piven strategy, I constructed following flow chart . It is by no means complete. There are simply too many radical individuals and organizations to include them all here. But these are perhaps the most significant.

In his few years as a U.S. senator, Obama has received campaign contributions of $126,349, from Fannie and Freddie, second only to the $165,400 received by Senator Chris Dodd, who has been getting donations from them since 1988. What makes Obama so special?

His closest advisers are a dirty laundry list of individuals at the heart of the financial crisis: former Fannie Mae CEO Jim Johnson; Former Fannie Mae CEO and former Clinton Budget Director Frank Raines; and billionaire failed Superior Bank of Chicago Board Chair Penny Pritzker.

........
Most significantly, Penny Pritzker, the current Finance Chairperson of Obama's presidential campaign helped develop the complicated investment bundling of subprime securities at the heart of the meltdown. She did so in her position as shareholder and board chair of Superior Bank. The Bank failed in 2001, one of the largest in recent history, wiping out $50 million in uninsured life savings of approximately 1,400 customers. She was named in a RICO class action law suit but doesn't seem to have come out of it too badly.

As a young attorney in the 1990s, Barack Obama represented ACORN in Washington in their successful efforts to expand Community Reinvestment Act (CRA) authority. In addition to making it easier for ACORN groups to force banks into making risky loans, this also paved the way for banks like Superior to package mortgages as investments, and for the Government Sponsored Enterprises Fannie Mae and Freddie Mac to underwrite them. These changes created the conditions that ultimately lead to the current financial crisis.


​

Note the repeated theme of using existing laws and expanding their reach thus changing their intended purpose. This has been repeated over and over throughout Obama's tenure as president. He expands on existing laws or programs and renders them unrecognizable. He did this with Fast & Furious and several other programs. The excuse is always that it was a law or program from a previous administration. He's doing the same thing with the Patriot Act. Many liberals here think this is funny, but this is no joke.

ACORN has split up and changed it's name, but it is still highly active. Ferguson was one of it's babies.

Links:
Articles Barack Obama and the Strategy of Manufactured Crisis
Obama 8217 s new pardon chief funded ACORN
Obama and ACORN - WikiLeaks
Association of Community Organizations for Reform Now - Wikipedia the free encyclopedia
Obama 8217 s Secret Collaboration with ACORN Bosses FrontPage Magazine
Obama and ACORN Chicago-The Barack Obama Campaign 2004 - WikiLeaks​

CRA loans accounted for only 6% of the toxic residential loans that and zero percent of the toxic commercial loans.

Too bad that destroys your entire hallucination.

And where did you get that stat from?

It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did. And that is not political correctness. It is correctness.


Community Reinvestment Act had nothing to do with subprime crisis - BusinessWeek



A study dealing with blame the CRA here:

http://www.stat.unc.edu/faculty/cji/fys/2012/Subprime mortgage crisis.pdf


The Community Reinvestment Act of 1977 is a favorite boogeyman for some, despite the numbers that so easily disprove it as a cause.It is a statistical invalid argument, as the data show.

For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.

CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill
>

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

Examining the big lie How the facts of the economic crisis stack up The Big Picture

 

[Dad2three]

Clinton? The 'repeal' of G/S had no effect on Dubya's regulator problem OR the Banksters creating ANOTHER credit bubble like Reagan S&L or Harding/Coolidge's great depression.

I understand that. However, you can't deny that keeping investment banks out of the mortgage lending business, by law, kept the gamblers at bay in terms of mortgage lending.

Clinton opened the door to the proverbial wolves. There was a reason that law was put into place and there was a reason the Republicans had fought for its repeal for years and years.

Now we know why. It had been a very successful law.

Right wingers MUST love this one, from Ayn Rand Institute, BUT TRUE:


There is zero evidence this change unleashed the financial crisis. If you tally the institutions that ran into severe problems in 2008-09, the list includes Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, and Fannie Mae and Freddie Mac, none of which would have come under Glass-Steagall’s restrictions. Even President Obama has recently acknowledged that “there is not evidence that having Glass-Steagall in place would somehow change the dynamic.”

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

Why The Glass-Steagall Myth Persists - Forbes


THIS WAS A REGULATOR PROBLEM, BOTH WITH DUBYA AND GREENSPAN'S 'BELIEF' THAT MARKETS SELF CORRECT, FORGETTING WHAT HAPPENED UNDER RONNIE'S S&L CRISIS OR HARDING/COOLIDGE'S MELTDOWN

No, there was a problem in the securities that were being bundled and sold.

The largest issue was in the bond rating system, it was AIG's fault and AIG was too big to fail under the Obamma administration.

For an industry insider you seem to be dumb as shit ..................

REALLY? BOND RATINGS WAS #1??? LOL

I THOUGHT IT WAS THE FACT THAT BANKSTERS WERE BUNDLING BAD LOANS!!!


Abstract:

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis

Competition and Crisis in Mortgage Securitization by Michael Simkovic SSRN

Your bound and determined to blame a president for the whole mess.

You will not admit "PERSONAL RESPONSIBILITY" had any thing to do with it ............

Yes George Dubya baited all the ignorant n*ggers and white thrash by telling them they could own houses.

He just forgot to mention their part in the program of hard work and self priorities..

Yes it was all the presidents fault for duping all those dumb n*ggers, he personalty held a gun to each and everyones head and made them sing those contracts......

Got it, YOU are a racist prick. Shocking

Bush's working group said it "was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007". Now what would 'trigger a dramatic weakening' and prevent Bush's regulators from enforcing them?


FACTS on Dubya s great recession US Message Board - Political Discussion Forum

 

[g5000]

Guess what the payments for a CDS premium look like?

That's right, a revenue stream!

A revenue stream can be packaged into a CDO. But since this is a revenue stream made up of insurance for another revenue stream, these CDOs were called CDO-Squared.

The people who were investing in tranches in CDO-Squareds were actually on the hook for the underlying CDOs. So they weren't just putting their investment at risk, they were on the hook for tens of billions of dollars on top of that.

This is the trick Wall Street played after AIG said they were out of the CDS business for a while. Wall Street then created their own CDS and CDO-squareds to shovel the risk onto their investors.

Cool, huh?

Fraudulent as fuck, too. Because some of these assholes began constructing deliberately toxic CDOs so they could take the other side of the insurance bet.

It's like building a house out of shoddy materials and faulty wiring and stuffing it was oily rags to the rafters and then buying fire insurance against it, AFTER you have also sold the house to some ignorant schmuck.

 

[DrDoomNGloom]

American International Group
From Wikipedia, the free encyclopedia
"AIG" redirects here. For other uses, see AIG (disambiguation).
American International Group, Inc.


Type
Public
Traded as NYSE: AIG
S&P 500 Component
Industry Insurance, Financial services
Founded Shanghai, China (1919)[1]
Founder Cornelius Vander Starr
Headquarters New York, New York, U.S.

Area served
Worldwide

Key people
Peter Hancock
(President & CEO)
Robert S. Miller (Chairman)[2]
Products Insurance, Property Casualty: Commercial & Consumer, Life & Retirement, Mortgage Insurance, Aircraft Leasing
Revenue

US$ 68.6 billion (2013)[3]

Operating income

US$ 9.08 billion (2013)[3]

Net income

US$ 6.7 billion (2013)[3]
Total assets

US$ $541.3 billion (2013)[3]
Total equity

US$ $100.5 billion (2013)[3]

Number of employees

Approximately 64,000 (2013)[4]
Website AIG.com

American International Group, Inc. – also known as AIG – is an American multinational insurance corporation with more than 88 million customers in 130 countries. AIG companies employ over 64,000 people in 90 countries. The company operates through three core businesses: AIG Property Casualty, AIG Life and Retirement and United Guaranty Corporation(UGC). AIG Property Casualty provides insurance products for commercial, institutional and individual customers. AIG Life and Retirement provides life insurance and retirement services in the United States. and UGC focus on mortgage guaranty insurance and mortgage insurance. AIG also focuses on global capital markets operations, direct investment and retained interests.

AIG’s corporate headquarters are in New York City, its British headquarters are in London, continental Europe operations are based in La Défense, Paris, and its Asian headquarters are in Hong Kong. The company serves 98% of the Fortune 500 companies, 96% of Fortune 1000, and 90% of Fortune Global 500, and insures 40% of Forbes 400 Richest Americans. AIG was ranked 40th largest company in the 2014 Fortune 500 list.[5] According to the 2014 Forbes Global 2000 list, AIG is the 42nd-largest public company in the world.[6] As of June 1, 2014, it had a market capitalization of $78.48 billion, per Google Finance.

Contents

• 1 History
  • 1.1 The Early Years: 1919 to 1945
  • 1.2 International and Domestic Expansion: 1946 to 1959
  • 1.3 Reorganization and Specialization: 1960 to 1979
  • 1.4 New Opportunities and Directions: 1980 to 1999
  • 1.5 Further expansion and decline: 2000 to now
    • 1.5.1 Growth
    • 1.5.2 Accounting scandal
    • 1.5.3 Expansion to the credit default insurance market
    • 1.5.4 Liquidity crisis and government bailout
• 2 Corporate governance
  • 2.1 Board of directors
• 3 Business
• 4 See also
• 5 References
• 6 Further reading
• 7 External links

History


North China Daily News Building on the Bund, Shanghai (elevation): the original home of what became AIG; now the AIA building.


70 Pine Street was known as the American International Building.


The American International Building on 175 Water Street, New York City.
The Early Years: 1919 to 1945
AIG traces its roots back to 1919, when American Cornelius Vander Starr (1892-1968) established a general insurance agency, American Asiatic Underwriters (AAU), in Shanghai, China.[7] Business grew rapidly, and two years later, Starr formed a life insurance operation.[8] By the late 1920s, AAU had branches throughout China and Southeast Asia, including the Philippines, Indonesia, and Malaysia.[9] In 1926, Mr. Starr opened his first office in the United States, American International Underwriters Corporation (AIU).[10] He also focused on opportunities in Latin America and, in the late 1930s, AIU entered Havana, Cuba.[11] The steady growth of the Latin American agencies proved significant as it would offset the decline in business from Asia due to the impending World War II.[7] In 1939, Mr. Starr moved his headquarters from Shanghai, China, to New York City.[12][13]

International and Domestic Expansion: 1946 to 1959
After World War II, American International Underwriters (AIU) entered Japan[7] and Germany,[14] to provide insurance for American military personnel. Throughout the late 1940s and early 1950s, AIU continued to expand in Europe, with offices opening in France, Italy,[9] and the United Kingdom.[15] In 1952, Mr. Starr began to focus on the American market by acquiring Globe & Rutgers Fire Insurance Company and its subsidiary, American Home Fire Assurance Company.[16] By the end of the decade, C.V. Starr's general and life insurance organization included an extensive network of agents and offices in over 75 countries.[16]

Reorganization and Specialization: 1960 to 1979
In 1960, C.V. Starr hired Maurice R. Greenberg to develop an international accident and health business.[17] Two years later, Mr.Greenberg reorganized one of C.V. Starr’s U.S. holdings into a successful multiple line carrier.[16] Greenberg focused on selling insurance through independent brokers rather than agents to eliminate agent salaries. Using brokers, AIU could price insurance according to its potential return even if it suffered decreased sales of certain products for great lengths of time with very little extra expense. In 1967, American International Group, Inc. (AIG) was incorporated as a unifying umbrella organization for most of C.V. Starr’s general and life insurance businesses.[18] In 1968, Starr named Greenberg his successor. The company went public in 1969.[19]

The 1970s presented many challenges for AIG as operations in the Middle East and Southeast Asia were curtailed or ceased altogether due to the changing political landscape. However, AIG continued to expand its markets by introducing specialized energy, transportation, and shipping products to serve the needs of niche industries.[20] By 1979, with a growing workforce and a worldwide network of offices, AIG offered clients superior technical and risk management skills in an increasingly competitive marketplace.[20]

New Opportunities and Directions: 1980 to 1999
During the 1980s, AIG continued expanding its market distribution and worldwide network by offering a wide range of specialized products, including pollution liability[20] and political risk.[20] In 1984, AIG listed its shares on the New York Stock Exchange (NYSE).[21] Throughout the 1990s, AIG developed new sources of income through diverse investments, including the acquisition of International Lease Finance Corporation (ILFC), a provider of leased aircraft to the airline industry.[22] In 1992, AIG received the first foreign insurance license granted in over 40 years by the Chinese government. Within the U.S., AIG acquired Sun America Inc. a retirement savings company, in 1999.[23]

Further expansion and decline: 2000 to now
Growth
The early 2000s saw a marked period of growth as AIG acquired American General Corporation, a leading domestic life insurance and annuities provider,[24] and AIG entered new markets including India.[25] In February 2000, AIG created a strategic advisory venture team with the Blackstone Group and Kissinger Associates "to provide financial advisory services to corporations seeking high level independent strategic advice."[26] AIG was an investor in Blackstone from 1998 to March 2012, when it sold all of its shares in the company. Blackstone acted as an adviser for AIG during the 2007-2008 financial crisis.[27]

In November 2004, AIG reached a US$126 million settlement with the U.S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, but the company must still cooperate with investigators continuing to probe the sale of a non-traditional insurance product.[28]

Accounting scandal
In 2005, AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General's Office. Greenberg was ousted amid an accounting scandal in February 2005.[29][30][31] The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives.[32]

On May 1, 2005, investigations conducted by outside counsel at the request of AIG's Audit Committee and the consultation with AIG's independent auditors, PricewaterhouseCoopers LLP resulted in AIG's decision to restate its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, the quarters ended March 31, June 30 and September 30, 2004 and 2003 and the quarter ended December 31, 2003.[33] On November 9, 2005, the company was reported of delaying its third-quarter earnings report because it must restate earlier financial results to correct accounting errors.[34]

Expansion to the credit default insurance market
Martin J. Sullivan became CEO of the company. He began his career at AIG as a clerk in its London office in 1970.[35] AIG then took on tens of billions of dollars of risk associated with mortgages. It insured tens of billions of dollars of derivatives against default, but did not purchase reinsurance to hedge that risk. Secondly, it used collateral on deposit to buy mortgage-backed securities. When losses hit the mortgage market in 2007-2008, AIG had to pay out insurance claims and also replace the losses in its collateral accounts.[36]

AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749 million.[37] With the failure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance.[38][39]

On June 11, 2008, three stockholders, collectively owning 4% of the outstanding stock of AIG, delivered a letter to the Board of Directors of AIG seeking to oust CEO Martin Sullivan and make certain other management and Board of Directors changes. This letter was the latest volley in what the Wall Street Journal called a "public spat" between the company's board and management, on the one hand, and its key stockholders, and former CEO Maurice Greenberg on the other hand.[40]

On June 15, 2008, after disclosure of financial losses and subsequent to a falling stock price, Sullivan resigned and was replaced by Robert B. Willumstad, Chairman of the AIG Board of Directors since 2006. Willumstad was forced by the US government to step down and was replaced by Edward M. Liddy on September 17, 2008.[41] AIG's board of directors named Robert Benmosche CEO on August 3, 2009 to replace Mr. Liddy, who earlier in the year announced his retirement.[42]

Liquidity crisis and government bailout
Further information: Subprime mortgage crisis and Financial crisis of 2007–08
AIG faced the most difficult financial crisis in its history when a series of events unfolded in late 2008. The insurer had sold credit protection through its London unit in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) but they had declined in value.[43][44] The AIG Financial Products division, headed by Joseph Cassano, in London, had entered into credit default swaps to insure $441 billion worth of securities originally rated AAA. Of those securities, $57.8 billion were structured debt securities backed by subprime loans.[43][45] As a result, AIG’s credit rating was downgraded and it was required to post additional collateral with its trading counter-parties, leading to a liquidity crisis that began on September 16, 2008 and essentially bankrupted all of AIG. The United States Federal Reserve Bank stepped in, announcing the creation of a secured credit facility of up to US$85 billion to prevent the company's collapse, enabling AIG to deliver additional collateral to its credit default swap trading partners. The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company and the right to suspend dividends to previously issued common and preferred stock.[46][47][48] The AIG board accepted the terms of the Federal Reserve rescue package that same day, making it the largest government bailout of a private company in U.S. history.[49][50]

On March 17, 2009, AIG announced that they were paying $165 million in executive bonuses, according to news reports. Total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion.[51] President Barack Obama, who voted for the AIG bailout as a Senator[52] responded to the planned payments by saying "t's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?" and "In the last six months, AIG has received substantial sums from the U.S. Treasury. I’ve asked Secretary Timothy Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole." Politicians on both sides of the Congressional aisle reacted with outrage to the planned bonuses. Political commentators and journalists expressed an equally bipartisan outrage.[citation needed]

Due to the Q3 2011 net loss widening, on November 3, 2011, AIG shares plunged 49 percent year to date. The insurer's board approved a share buyback of as much as $1 billion.[53]

The U.S. Department of the Treasury in December 2012 published an itemized list of the loans, stock purchases, special purpose vehicles (SPVs) and other investments engaged in with AIG, the amount AIG paid back and the positive return on the loans and investments to the government.[54] Treasury said that it and the Federal Reserve Bank of New York provided a total $182.3 billion to AIG, which paid back a total $205 billion, for a total positive return, or profit, to the government of $22.7 billion. In addition, AIG sold off a number of its own assets to raise money to pay back the government.

AIG since September 2008 marketed its assets to pay off its government loans. A global decline in the valuation of insurance businesses, and the weakening financial condition of potential bidders, challenged its efforts.[55] AIG closed on the sale of its Hartford Steam Boiler unit on March 31, 2009 to Munich Re for $742 million, which was announced December 22, 2008.[56][57] On April 16, 2009, AIG announced plans to sell 21st Century Insurance subsidiary to Farmers Insurance Group for $1.9 billion.[58] June 10, 2009. AIG sold down its majority ownership of reinsurer Transatlantic Re.[59] The Wall Street Journal reported on September 7, 2009 that Pacific Century Group had agreed to pay $500 million for a part of American International Group's asset management business, and that they also expected to pay an additional $200 million to AIG in carried interest and other payments linked to future performance of the business.[60]

AIG agreed in March 2010 to sell its American Life Insurance Co. (ALICO) to MetLife Inc. for $15.5 billion in cash and MetLife stock.[61] Bloomberg L.P. reported on March 29 that after almost three months of delays, AIG had completed the $500 million sale of a portion of its asset management business, branded PineBridge Investments, to the Asia-based Pacific Century Group.[62] Fortress Investment Group purchased 80% of the interest in financing company American General Finance in August 2010.[63] AIG in September sold AIG Starr and AIG Edison, two of its Japan-based companies, to Prudential Financial for $4.2 billion in cash and $600 million in assumption of third party AIG debt by Prudential.[64][64] On November 1, AIG announced it has raised $36.71 billion from both the sale of ALICO and its IPO of AIA. Proceeds go specifically to pay off FRB of New York loan.[65]

In October 2010 the WSJ reported that a family sued AIG for alleged complicity in a 'stranger-originated life insurance' scheme, whereby AIG managers allegedly welcomed people without an insurable interest to take out life insurance policies against others. The case involved JB Carlson and Germaine Tomlinson, and was one of many similar lawsuits in the US at the time.[66]

Reported in January 2011, AIG sold its Taiwanese life insurance company, Nan Shan Life, to a consortium of buyers for $2.16 billion.[67]

May 7, 2012. Treasury announced an offering of 188.5 million shares of AIG for a total of $5.8 billion. The sale reduced Treasury’s stake in AIG to 61 percent, from 70 percent before the transaction.[68]

September 6, 2012. AIG sold $2 billion of its investment in AIA to repay government loans. The board also approved a $5 billion stock repurchase of government-owned shares in AIA.[69]

September 14, 2012. The Treasury completed its fifth sale of AIG common stock, with proceeds of approximately $20.7 billion, reducing the Treasury’s ownership stake in AIG to approximately 15.9 percent from 53 percent. Government commitments were fully recovered, and Treasury and the FRBNY to date had received a combined positive return of approximately $15.1 billion.[70]

December 14, 2012. Treasury sold the last of its AIG stock in its sixth stock stale for a total of approximately $7.6 billion. In total, the Treasury Department realized a gain of more than $22 billion from the sale of AIG common stock and $0.9 billion from the sale of AIG preferred stock.[71][72]

AIG began an advertising campaign on January 1, 2013, called "Thank You America," in which several company employees, including AIG President and CEO Robert Benmosche, talked directly to the camera and offered their thanks for the government assistance.[73] In January 2013, AIG's board discussed joining a lawsuit against the United States government because the bailout they received was unfair to their investors.[74] The idea was rejected.[75] AIG was criticized, however, when news stories soon appeared that it was considering joining a lawsuit brought by AIG shareholders and former CEO Maurice Greenberg against the New York Federal Reserve Bank for what the plaintiffs considered unfair terms imposed on AIG by the New York Fed. The AIG board announced on January 9, 2013, that the company would not join the lawsuit, and on January 9, 2013, Bob Benmosche told CNBC’s Maria Bartiromo that it would not be “socially acceptable” for AIG to sue the government, continuing that while people may be angry, "a deal’s a deal."[76][77]

The specific issue was whether the New York Federal Reserve transferred $18 billion in litigation claims on troubled mortgage debt to Maiden Lane II, an entity created by the Fed in 2008, and thus prevented AIG from recouping losses from insured banks. On May 7, 2013, Los Angeles U.S. District Judge, Mariana Pfaelzer, ruled that $7.3 billion of the disputed claims had, in fact, not been assigned. AIG withdrew the case "with prejudice" on May 28, 2013. Praelzer was overseeing a suit between AIG and Bank of America (BAC-US) concerning possible misrepresentations by Merrill Lynch and Countrywide as to the quality of the mortgage portfolio. In signing the order closing the case, U.S. District Judge Lewis Kaplan who also adjudicated the Maiden Lane case, American International Group Inc. et al. v. Maiden Lane II LLC, U.S. District Court, Southern District of New York, No. 13-00951 admonished the Fed saying, "On the face of it" some of its actions "perhaps are unattractive and, indeed, wrongful.”[78]

Corporate governance
Board of directors

• Peter D. Hancock – President and Chief Executive Officer, American International Group, Inc.
• W. Don Cornwell – Former Chairman of the Board and Chief Executive Officer, Granite Broadcasting Corporation
• Peter R. Fischer - Former Head of Fixed Income Portfolio Management, Blackrock Inc.
• John H. Fitzpatrick – Chairman, Oak Street Management Co., LLC
• Christopher S. Lynch – Former Partner, KPMG LLP
• Arthur C. Martinez – Former Chairman of the Board, President and Chief Executive Officer, Sears, Roebuck and Co.
• George L. Miles, Jr. – President and Chief Executive Officer, WQED Multimedia
• Henry S. Miller – Chairman and Managing Director, Miller Buckfire & Co., LLC
• Robert S. Miller – Non-Executive Chairman of the Board, American International Group, Inc.
• Suzanne Nora Johnson – Former Vice Chairman, The Goldman Sachs Group, Inc.
• Ronald A. Rittenmeyer – Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation
• Douglas Steenland – Former President and Chief Executive Officer, Northwest Airlines Corporation
• Theresa M. Stone - Former Executive Vice President and Treasurer, Massachusetts Institute of Technology
• William G. Jurgensen - Former Chief Executive Officer Nationwide Insurance

As of September 1, 2014[79]

Business
In the United States, AIG is the largest underwriter of commercial and industrial insurance.[80]

AIG offers property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services.[81] In the third quarter of 2012, the global property-and-casualty insurance business, Chartis, was renamed AIG Property Casualty. SunAmerica, life-insurance and retirement-services division, was renamed AIG Life and Retirement, other existing brands continue to be used in certain geographies and market segments.[81][82]

AIG Property Casualty

AIG Life and Retirement

Mortgage Guaranty (United Guaranty Corporation or UGC)

On October 12, 2012, AIG announced a 5 ½ year agreement to sponsor six New Zealand-based rugby teams, including world champion All Blacks. The AIG logo and the Adidas logo, the league’s primary sponsor, will be displayed on the league’s team jerseys.[83]

 

[Dad2three]

Clinton? The 'repeal' of G/S had no effect on Dubya's regulator problem OR the Banksters creating ANOTHER credit bubble like Reagan S&L or Harding/Coolidge's great depression.

I understand that. However, you can't deny that keeping investment banks out of the mortgage lending business, by law, kept the gamblers at bay in terms of mortgage lending.

Clinton opened the door to the proverbial wolves. There was a reason that law was put into place and there was a reason the Republicans had fought for its repeal for years and years.

Now we know why. It had been a very successful law.

Right wingers MUST love this one, from Ayn Rand Institute, BUT TRUE:


There is zero evidence this change unleashed the financial crisis. If you tally the institutions that ran into severe problems in 2008-09, the list includes Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, and Fannie Mae and Freddie Mac, none of which would have come under Glass-Steagall’s restrictions. Even President Obama has recently acknowledged that “there is not evidence that having Glass-Steagall in place would somehow change the dynamic.”

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

Why The Glass-Steagall Myth Persists - Forbes


THIS WAS A REGULATOR PROBLEM, BOTH WITH DUBYA AND GREENSPAN'S 'BELIEF' THAT MARKETS SELF CORRECT, FORGETTING WHAT HAPPENED UNDER RONNIE'S S&L CRISIS OR HARDING/COOLIDGE'S MELTDOWN

No, there was a problem in the securities that were being bundled and sold.

The largest issue was in the bond rating system, it was AIG's fault and AIG was too big to fail under the Obamma administration.

For an industry insider you seem to be dumb as shit ..................

REALLY? BOND RATINGS WAS #1??? LOL

I THOUGHT IT WAS THE FACT THAT BANKSTERS WERE BUNDLING BAD LOANS!!!


Abstract:

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis

Competition and Crisis in Mortgage Securitization by Michael Simkovic SSRN

Your bound and determined to blame a president for the whole mess.

You will not admit "PERSONAL RESPONSIBILITY" had any thing to do with it ............

Yes George Dubya baited all the ignorant n*ggers and white thrash by telling them they could own houses.

He just forgot to mention their part in the program of hard work and self priorities..

Yes it was all the presidents fault for duping all those dumb n*ggers, he personalty held a gun to each and everyones head and made them sing those contracts......

DUBYA FOUGHT ALL 50 STATE AG'S IN 2003, INVOKING A CIVIL WAR ERA RULE SAYING FEDS RULE ON "PREDATORY" LENDERS!

Dubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources. Later in 2004 Dubya allowed the leverage rules to go from 12-1 to 33-1 which flooded the market with cheap money!

Predatory Lenders' Partner in Crime

Predatory lending was widely understood to present a looming national crisis.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge?

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative

Eliot Spitzer - Predatory Lenders Partner in Crime



Thanks again to the Bush administrations & allowing the greedy & unethical brokers to operate at their will.

 

[g5000]

Factbox How Goldman s ABACUS deal worked Reuters

 

[DrDoomNGloom]

Guess what the payments for a CDS premium look like?

That's right, a revenue stream!

A revenue stream can be packaged into a CDO. But since this is a revenue stream made up of insurance for another revenue stream, these CDOs were called CDO-Squared.

The people who were investing in tranches in CDO-Squareds were actually on the hook for the underlying CDOs. So they weren't just putting their investment at risk, they were on the hook for tens of billions of dollars on top of that.

This is the trick Wall Street played after AIG said they were out of the CDS business for a while. Wall Street then created their own CDS and CDO-squareds to shovel the risk onto their investors.

Cool, huh?

Fraudulent as fuck, too. Because some of these assholes began constructing deliberately toxic CDOs so they could take the other side of the insurance bet.

It's like building a house out of shoddy materials and faulty wiring and stuffing it was oily rags to the rafters and then buying fire insurance against it, AFTER you have also sold the house to some ignorant schmuck.

No in short they made mortgages they knew the borrow would never pay back and then "insured" just for that scenario. It was a win / win no matter how AIG sliced it and it all hinged on "ignorant / unqualified buyers" wanting a house!!

 

[g5000]

American International Group
From Wikipedia, the free encyclopedia

And you quoted an entire Wiki entry...why?

Did you notice there was no mention of AIG rating bonds anywhere in that entry?

 

[Dad2three]

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in

I can see why the Rand institute would take that position. The last thing in the world Repubs want is to have the housing collapse attributed to their obsession in repealing Graham Leach.

And while the FDIC banks had always been allowed into mortgage lending, that one sentence highlighted is a bit disingenuous.

Seems like the writer forgot to mention this; their problems arose from investments in residential mortgages an residential mortgage backed securities consisting of poor quality loans. Investments they had always been free to engage in but declined.


There was a reason that legislation was in place. It served a purpose. If you (and others) don't believe it played a major part in the collapse, if you think it was simply coincidence that after this repeal things started to get crazy, that it was just bad timing, then why was it so important to Republicans to repeal that particular law? What did they and their backers gain from the repeal?

And who allowed those loans to be sold? Who was found to be delinquent in their responsibilities and when it was discovered, who received the support of Frank and who, as chairman of the committee, deemed the report bogus and let things continue as they were?

CHAIRMAN OF THE COMMITTEE? BARNEY FRANK? Oh you mean Jan 2007 AFTER Dubya's bubble?

Bush's working group said it "was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007".

LET THING CONTINUE? LOL

June 17, 2004

(CNN/Money) - Home builders, realtors and others are preparing to fight a Bush administration plan that would require Fannie Mae and Freddie Mac to increase financing of homes for low-income people, a home builder group said Thursday.

Home builders fight Bush s low-income housing - Jun. 17 2004

LET ME GUESS, DUBYA WHO ACTUALLY WAS THE REGULATOR OI F/F, BEGGED THE GOP CONGRESS FOR F/F 'REFORM' BUT THOSE MEAN DEMS STOPPED HIS REFORM, AFTER 17 PLEADINGS RIGHT? lol

FACTS on Dubya s great recession US Message Board - Political Discussion Forum

 

[DrDoomNGloom]

What part of "if ignorant buyers had not participated" this scenario would have never happened do you not understand???

 

[g5000]

So here's the deal with AIG.

I mentioned CDOs earlier in the topic and how they were constructed. I also mentioned the early CDOs were made of blue chip loans and so were low risk. The senior tranches (small cups which get to dip into the revenue stream first) were so low risk that on a mathematical scale, the world would blow up before one of those cups would not get their water.

But just to add some extra special sauce to allay the regulators who did not fully understand these new derivatives, the builders of these early CDOs went out and bought Credit Default Swaps (CDS) against the senior tranches.

They bought these CDS primarily from the world's largest insurance company, American International Group (AIG).

Note that AIG is not a bond rating company, which is the first part which makes DrDoomNGloom's post so funny.

From AIG's perspective, the "insurance" premiums paid to them to protect these senior tranches from default was free money. The world would end before they would ever have to pay for any losses those tranches would suffer.

This was free money coming in, and so...here's the important part...AIG did not set aside any cash in the event of a CDO senior tranche defaulting.

They could have gotten away with that. But...as we have learned, Wall Street got greedy. They wanted more fees for building and selling CDOs to investors. Once they ran out of blue chip companies and 800 credit score homebuyers, they chucked out the underwriting laws of the Universe and began building CDOs that were made up of progressively worse credit risks.

Right around the end of 2005, a couple of guys at AIG FP finally got their boss to wake up to this fact. By then, AIG was insuring CDOs that were 90 percent toxic. Their boss had been assuming up to that point they were only 5 to 10 percent toxic.

Once Cassano woke up, he told everybody on Wall Street, "Hey, we aren't insuring your shit any more."

Cassano thought he got out early enough to avoid disaster.

He was wrong.

When the toxic CDOs began defaulting, the broker-dealers (Goldman Sachs, etc.) came to AIG for their insurance pay-outs. Except AIG had not been setting any money aside, remember?

Thus, AIG had to go hat in hand to the government for a bailout.

And the Treasury Secretary paid 100 cents on the dollar on those CDS. His name was Hank Paulson.

Guess what job Hank came from in early 2006, just after AIG kissed everybody off?

He came from the job of Goldman Sachs CEO.

 

[DrDoomNGloom]

American International Group
From Wikipedia, the free encyclopedia

And you quoted an entire Wiki entry...why?

Did you notice there was no mention of AIG rating bonds anywhere in that entry?

Their business is bond rating / insurance, comprehension a big issue with you??

 

[g5000]

Here is a good read about AIG FP and Cassano: http://www.masonlec.org/site/rte_uploads/files/The_Man_Who_Crashed_the_World.pdf