Unanswered Questions about AIG and the Passthroughs

[WhiskeyGirl]

A few unanswered questions keep coming to mind, and it may be ignorance.

Why did AIG have a financial obligation to the counterparties?

Did the counterparties buy the mortgages that went sour?  Did they notice over time the declining profit?  Increased defaults?

Did they sell the risk to AIG?  Why would anyone buy risk if the numbers showed increasing defaults?  Why would anyone take that risk?

Was AIG mislead?

iirc, CDS and derivatives were relatively new to AIG.  Who at AIG made the decision that AIG should enter this business?  What kind of credentials/credible work experience did this person have with CDS and derivatives?

Who approved all these CDS/counterparty agreements?  On what basis?

Friendship?  Cronyism?  Nepotism?

So many questions remain about AIG and the counterparties.  Why would anyone agree to partner with folks that had massive losing portfolios?

Do I have this backwards?  AIG sold this mess to the counterparties?

[WhiskeyGirl]

If the CDS / derivatives unit as AIG was not competent to make good financial decisions from the get go, why are they competent to remain in their jobs?

Aren't their smarter minds that AIG could employ?

Is AIG derivatives a special unit, like the Federal Reserve?  Job rotations and secrecy?

[WhiskeyGirl]

"Like it or not, we have to have a financial system that is healthy and functioning," - Obama

The extensive bailout of AIG was a mistake in the first place, but trying to correct things afterward simply does not work. Cutting bonuses today could scare away top executives who might be crucial for the firm in getting its financial house in order. Besides, AIG's financial crash was due to just one small part of the company, and most of the company was doing quite well. The "outrageous" bonuses to which Mr. Geithner referred cover jobs across the whole firm, whether they experienced financial problems or not. It would be counterproductive to punish executives who were doing a good job or executives who are coming on board to turn things around.

http://washingtontimes.com/news/2010/feb/06/obamas-outrageous-bank-tax/

Is AIG part of our 'financial system'?  I don't think so.

Were all those counterpayments vital to our 'financial system'?  I don't think so.

Goldman, part of our financial system?

Why did they let Lehman go? 

Maybe it's time for fresh eyes to look at what's going on at AIG and make some REAL suggestions to end this financial disaster.

Follow the money Tim.  Find out who made those bad deals, who signed up those poor credit risks, find out who sold those bad deals to AIG.

Who decided AIG had to get involved in casino banking?

[WhiskeyGirl]

Barclays Comes to AIG's Aid in Derivatives Deals

In fact, dozens of interest rate swaps that AIG put together -- for many of the very same troubled collateralized debt obligations that drove the giant insurer to the brink of bankruptcy -- are generating "north of $1 billion in value" for the firm, according to people familiar with the deals.

But AIG has been at risk of losing that value ever since the fall of 2008, when the U.S. government stepped in with a massive bailout and the insurer's once mighty credit rating was slashed.

That's because the CDOs were written in a way that enabled the managers of those mortgage-related securities to cancel the interest rate swaps with AIG if the insurer's credit rating fell below a stipulated level.

However, after many months of negotiations with the CDO managers, the rating agencies and one big bank, AIG has come up with a solution that will enable it to continue getting the monetary benefit from those interest rate swaps, said people familiar with the situation.

AIG has struck a deal with Barclays in which the British-based bank will stand in as an intermediary for AIG in more than three dozen of these derivative transactions, said people familiar with the situation.

An executive with AIG Financial Products, the much-maligned AIG division that engineered the interest rate swaps as well as the controversial CDO guarantees, said the arrangement is in the best interest of stockholders and U.S. taxpayers.

"This is another example of how the employees of FP have used their experience and understanding of these complex securities to preserve value," said Gerald Pasciucco, head of AIG Financial Products.

When I read stuff like this, I'm thinking AIG was set up to fail, a planned bailout by taxpayers.

Just another in a long line of bailouts, that cause inflation, rob taxpayers, and anyone with an investment.

http://abcnews.go.com/Business/wireStory?id=9748374

What are these folks hiding?  What is the Federal Reserve hiding?

What conclusion would fresh intelligent eyes see in all these deals and deal making?

Is AIG a planned drain on taxpayer money?  A planned destruction of our economy?  A plan to help keep Americans in a cycle of perpetual debt?