Comments on: How AIG FP brought down the world http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/ A slice of lime in the soda Tue, 18 Jun 2013 21:59:52 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: Kamran http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3829 Kamran Tue, 07 Jul 2009 21:36:49 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3829 Felix – Michael Lewis’ piece on AIG FP was good but it was far from original reporting. In fact the picture he put together has been out there for some time now in bits and pieces…he seems merely to have aggregated it all while also deeming it the “original story as told by insiders at AIGFP”. For instance, the Washington Post ran a 3 part series late last year charting the evolution and denigration of AIG FP’s corporate culture from the time of Howard Sosin to the time of Joe Cassano. Part 1 - http://www.washingtonpost.com/wp-dyn/content/article/2008/12/28/AR2008122801916_pf.html; Part 2 - http://www.washingtonpost.com/wp-dyn/content/article/2008/12/29/AR2008122902670_pf.html; Part 3 - http://www.washingtonpost.com/wp-dyn/content/article/2008/12/30/AR2008123003431_pf.html Carole Loomis took great pains to detail how AIG thought there was no default risk but did not even contemplate market risk (fall in the value of these securities would expose it to massive collateral calls); others have made this point too; Carol also pointed out how AIG’s securities lending ops and other insurance units also made stupid bets on subprime mortgage bonds - http://money.cnn.com/2008/12/23/news/companies/AIG_150bailout_Loomis.fortune/index4.htm And finally, you explained in your regional broker dealer conference speech how a whole lot of risky subprime mortgage bonds got crammed into these CDOs that through a faith-in-models approach adopted by everybody got rated AAA and how AIG was the main counterparty that helped make the market for these trades I generally admire Lewis’ work – his Iceland piece and his take on the whole subprime debacle in Portfolio were excellent. This article though, despite all the hype around it, is really not that original – it’s as you said a lot of throat clearing and beyond that simply a summary of all the various issues underlying the collapse of AIGFP that have already been reported. Felix – Michael Lewis’ piece on AIG FP was good but it was far from original reporting. In fact the picture he put together has been out there for some time now in bits and pieces…he seems merely to have aggregated it all while also deeming it the “original story as told by insiders at AIGFP”.
For instance, the Washington Post ran a 3 part series late last year charting the evolution and denigration of AIG FP’s corporate culture from the time of Howard Sosin to the time of Joe Cassano.
Part 1 – http://www.washingtonpost.com/wp-dyn/con tent/article/2008/12/28/AR2008122801916_ pf.html; Part 2 – http://www.washingtonpost.com/wp-dyn/con tent/article/2008/12/29/AR2008122902670_ pf.html; Part 3 – http://www.washingtonpost.com/wp-dyn/con tent/article/2008/12/30/AR2008123003431_ pf.html
Carole Loomis took great pains to detail how AIG thought there was no default risk but did not even contemplate market risk (fall in the value of these securities would expose it to massive collateral calls); others have made this point too; Carol also pointed out how AIG’s securities lending ops and other insurance units also made stupid bets on subprime mortgage bonds – http://money.cnn.com/2008/12/23/news/com panies/AIG_150bailout_Loomis.fortune/ind ex4.htm
And finally, you explained in your regional broker dealer conference speech how a whole lot of risky subprime mortgage bonds got crammed into these CDOs that through a faith-in-models approach adopted by everybody got rated AAA and how AIG was the main counterparty that helped make the market for these trades
I generally admire Lewis’ work – his Iceland piece and his take on the whole subprime debacle in Portfolio were excellent. This article though, despite all the hype around it, is really not that original – it’s as you said a lot of throat clearing and beyond that simply a summary of all the various issues underlying the collapse of AIGFP that have already been reported.

]]> By: cgortiz http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3739 cgortiz Sun, 05 Jul 2009 21:20:48 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3739 we are witnessing the deathrattle of paper currency and the re emergence of bartering// how long will china and other countries accept paper money ie the us dollar in return for oil and value added goods // they already have more currency than they can possibly spend //soon they will demand tangible assets in return for any product we buy//thats when the real nightmare begins we are witnessing the deathrattle of paper currency and the re emergence of bartering// how long will china and other countries accept paper money ie the us dollar in return for oil and value added goods // they already have more currency than they can possibly spend //soon they will demand tangible assets in return for any product we buy//thats when the real nightmare begins

]]> By: cgortiz http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3738 cgortiz Sun, 05 Jul 2009 21:11:03 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3738 the unfortunate consequence of this delusional and destructive behavior has been to undermine the trust the global markets had in our economy// how long do we think the chinese and other countries are going to keep accepting our paper currency to pay for natural resources ie oil & value added products// these countries already have more of our currency than they can possibly spend//at some point china et al will want tangible assets instead of paper// we will see the emergence of bartering of physical goods the unfortunate consequence of this delusional and destructive behavior has been to undermine the trust the global markets had in our economy// how long do we think the chinese and other countries are going to keep accepting our paper currency to pay for natural resources ie oil & value added products// these countries already have more of our currency than they can possibly spend//at some point china et al will want tangible assets instead of paper// we will see the emergence of bartering of physical goods

]]> By: quantacide http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3625 quantacide Thu, 02 Jul 2009 19:54:43 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3625 Mea culpa. Chrome can't handle scribd well. Mea culpa. Chrome can’t handle scribd well.

]]> By: quantacide http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3623 quantacide Thu, 02 Jul 2009 19:51:57 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3623 Grr. Works on scribd, but not in Acrobat. No Kindle DX love. Grr. Works on scribd, but not in Acrobat. No Kindle DX love.

]]> By: Steve Numero Uno http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3621 Steve Numero Uno Thu, 02 Jul 2009 19:27:00 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3621 The confidence that these people placed in their statistical models was absurd. They forgot the wisdom expressed by Disraeli: "There are three kinds of lies: lies, damned lies and statistics" -Attributed to Benjamin Disraeli (1804-81), British statesman and Prime Minister (1868, 1874-80), in: Mark Twain (Samuel Langhorne Clemens), U.S. writer and humorist (1835-1910), Autobiography, "Notes on Innocents Abroad" The confidence that these people placed in their statistical models was absurd. They forgot the wisdom expressed by Disraeli:

“There are three kinds of lies: lies, damned lies and statistics”

-Attributed to Benjamin Disraeli (1804-81), British statesman and Prime Minister (1868, 1874-80), in:

Mark Twain (Samuel Langhorne Clemens), U.S. writer and humorist (1835-1910), Autobiography, “Notes on Innocents Abroad”

]]> By: Don the libertarian Democrat http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3610 Don the libertarian Democrat Thu, 02 Jul 2009 18:50:34 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3610 I'm pushing this post on Bloomberg. It helped me: http://www.bloomberg.com/apps/news?pid=20601170&sid=afDX3.N1Kdgw "What brought the company down, Pasciucco says, was its exposure to fewer than 200 insurance contracts that were sensitive to AIG’s credit ratings and the value of the underlying CDOs. Pasciucco’s job is to extricate AIG from tens of thousands of derivatives contracts, or trades, entered into by what amounted to a hedge fund within the insurance company -- one whose managers worked independently and took home 30 percent of the profits. No winding down on this scale has ever been attempted. The effort that comes closest may be the dismantling of hedge fund Long-Term Capital Management LP, which in 1998 lost more than 90 percent of its value amid the Russian bond default. " And: "Some of the most treacherous deals are also the longest dated. In the first quarter, the number of trades lasting more than 50 years was cut to 11 from 67. Pasciucco notes that his predecessors didn’t shy away from complicated derivatives. “They were often combining commodity risk with equity risk and with puts and calls,” he says. “They were very comfortable with complexity.” Read it and see. I’m pushing this post on Bloomberg. It helped me:

http://www.bloomberg.com/apps/news?pid=2 0601170&sid=afDX3.N1Kdgw

“What brought the company down, Pasciucco says, was its exposure to fewer than 200 insurance contracts that were sensitive to AIG’s credit ratings and the value of the underlying CDOs.

Pasciucco’s job is to extricate AIG from tens of thousands of derivatives contracts, or trades, entered into by what amounted to a hedge fund within the insurance company — one whose managers worked independently and took home 30 percent of the profits. No winding down on this scale has ever been attempted. The effort that comes closest may be the dismantling of hedge fund Long-Term Capital Management LP, which in 1998 lost more than 90 percent of its value amid the Russian bond default. ”

And:

“Some of the most treacherous deals are also the longest dated. In the first quarter, the number of trades lasting more than 50 years was cut to 11 from 67. Pasciucco notes that his predecessors didn’t shy away from complicated derivatives.

“They were often combining commodity risk with equity risk and with puts and calls,” he says. “They were very comfortable with complexity.”

Read it and see.

]]> By: AndrewBW http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/comment-page-1/#comment-3608 AndrewBW Thu, 02 Jul 2009 18:47:51 +0000 http://blogs.reuters.com/felix-salmon/2009/07/02/how-aig-fp-brought-down-the-world/#comment-3608 Someone has posted a copy of the Vanity Fair article to Scribd at: http://www.scribd.com/doc/17017708/vf-article. Yves Smith linkeed to it. Someone has posted a copy of the Vanity Fair article to Scribd at: http://www.scribd.com/doc/17017708/vf-ar ticle. Yves Smith linkeed to it.

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