The Watering Hole, Saturday, September 21, 2013: Pru Too Big, Too

The Financial Stability Oversight Council, a US Treasury Dept agency created with the passage of Dodd-Frank, has designated insurance giant Prudential Financial as “too big too fail,” a move that forces the third non-banking institution so designated to undergo additional oversight and stress testing to avoid the kind of financial crisis we endured before. The Pru joins American International Group (better known as AIG) and General Electric Capital Corporation (better known as GE Capital) as non-banks to earn the distinction, and it’s one they don’t want. The FSOC “determined that material financial distress at this company — if it were to occur — could pose a threat to US financial stability,” but they stressed that there were no signs of trouble at the moment. The Prudential said in a statement that it is “reviewing the rationale for the determination and our options.” The rationale, I’m sure, has to do with the fact that Prudential has over a trillion dollars in assets worldwide. If they were to engage in extremely risky behavior they could bring about global financial ruin. They should be scrutinized more closely.

Better yet, they should be broken up into smaller companies that can’t be bring down the entire global financial markets should they fail. “Too big to fail” is the same as “too big to exist.” No person and no corporation (they are not the same thing) should ever be so big and financially powerful that they could bring down the world economy should they stumble. That is not a sound financial footing. I’m neither an economist nor a person educated in the field of Economics, but I can promise you this: No economy can work if the money within it doesn’t circulate. If all the money is in the hands of too few people, then it stands to reason there isn’t enough leftover for everyone else to use. Hoarding more money than you’ll ever need to use in your lifetime is not just selfish, it’s actually harmful to everyone else. In order for society to function, people need to have money to spend to get the things done that they need done. For example, I’ve got a gutter that needs to be repaired. Money’s a little tight right now so I can’t get it done. If I could, the gutter repair company would not only fix my broken gutter (which could save me money down the road form damages caused by the broken gutter), but they could take the money I pay them and use it not only to pay their workers, but also to pay for the materials they used to fix my gutter. Their workers, in turn, would take their paychecks and go to the store to buy groceries, and the companies from which they bought their supplies to fix my gutter would use their money in a similar way. And the money would move from one business to the next, into the hands of the workers, who in turn would circulate the money around getting the things done that they need done. None of us are getting rich off the one or two transactions we have with that money, but we’re all getting what we need. That doesn’t happen when rich people sit on money they don’t need. (And, no, their investment into more stocks does not help the economy nearly as much.) What good is having more than you need? How do you benefit from excessive selfishness? And why do we treat the philosophy of Selfishness as something positive?

To paraphrase Aaron Sorkin, the Republican Party has been so busy trying to keep their jobs that they forgot to do their jobs. The Tea Party faction (a project of the Koch Brothers and their ilk) has got the semi-normal members of the party so frightened of losing their jobs that they cave in out of fear of being primaried out of Congress. The result is forty-one pathetic attempts to defund Obamacare. I keep hearing them say how Obamacare is “destroying” the country, yet I never once gear exactly how this is happening. No one ever truthfully explains how the law is harming our nation. What I do hear is example after example of how conservative business owners are trying to get around Obamacare by cutting employees’ hours so they won’t have so many full-time workers who are eligible for health insurance. In other words, because some people will be selfish, everyone has to suffer. Instead of denouncing the greedy business owners, conservatives have held them up as examples of what could go wrong with healthcare reform. “Obamacare is bad because greedy, selfish people like me can take advantage of it and my workers.” Maybe the law needs to be strengthened, not repealed.

This is our daily open thread. Feel free to talk about Prudential, the Koch Brothers, your greedy, selfish Republican relatives or anything else you wish to discuss.

Kucinich: We Are Moving From Industrial Capitalism To Financial Capitalism To Crony Capitalism!

Dennis Kucinich is explaining why he put in HR444, “which says we have to have a national policy – which states that the maintenance of steel, automotive, aerospace and shipping are vital to our national economic security and our national defense.”  

” We can not be a free nation if we don’t have the ability to make things.” He further states, “How can we defend a country if you can’t make cars, you can’t make planes and you can’t produce steel.” “This is a national security issue.”

Video by VotersThinkdotorg.

AIG Outrage Revealed: Fights Almost 50% Of Serious Claims

ProPublica

Civilian workers who suffered devastating injuries while supporting the U.S. war effort in Iraq and Afghanistan have come home to a grinding battle for basic medical care, artificial limbs, psychological counseling and other services.

The insurance companies responsible for their treatment under taxpayer-funded policies have routinely denied the most serious medical claims. Those insurers — primarily American International Group (AIG) — recorded hundreds of millions of dollars in profits on this business.

The civilian contractors have played an indispensable role in the two conflicts, delivering fuel to frontline troops, guarding U.S. diplomats and translating for soldiers during dangerous raids. More than 1,400 civilian workers have died and 31,000 have been wounded or injured in the two war zones.

The insurance system for civilian contractors has generated profits for the providers, primarily AIG, the war zone’s dominant player. Insurers collected more than $1.5 billion in premiums paid by U.S. taxpayers and have earned nearly $600 million in profit, according to congressional investigators.

Continue reading

AIG Turns Back On Blind Amputee

Vodpod videos no longer available.

How AIG has handled John Woodson’s claim is unconscionable.  While executives get bonuses and expensive junkets, Woodson received the least expensive route they could possible take.  He is a 51 year old truck driver for the KBR contracting firm who lost his leg when his truck hit a roadside bomb in Iraq.

An Oklahoma man who lost an eye and a leg in Iraq says the giant insurance company AIG refused to provide him a new plastic leg and fought to keep from paying for a wheelchair or glasses for the eye in which he has 30 percent vision.

Woodson is one of a number of injured contractors whose alleged difficulties with AIG were examined in the joint investigation.

Continue reading

Ex-AIG CEO: Don’t Blame Me!

He would like all of us to believe that he had “nothing to do” with AIG’s failures. This is getting old, I know I’m tired of hearing him say this.  Maurice “Hank” Greenberg is playing the blame game, this is everyone else’s fault not his.  The government should send in auditors to determine exactly how his management contributed to their current state of affairs.

He spread blame generously across virtually every other party involved in the company and its rescue – including subsequent management, federal regulators and ratings agencies.

Greenberg blamed his successors for all of New York City-based AIG’s problems.

An AIG representative disagreed with Greenberg’s testimony.

AIG spokesman Mark Herr disputed those claims, saying Greenberg expressly approved the division’s selling of the risky multi-sector credit-default swaps.

“He refuses to acknowledge that he approved entry into the credit default swap business, approved more than $40 billion of swaps written on (debt obligations) containing sub-prime loans, and didn’t hedge or put up reserves against them,” Herr wrote in an e-mail.

Continue reading

The Big Takeover

Rolling Stone, by Matt Taibbi

It’s over — we’re officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That’s $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG’s 2008 losses).

So it’s time to admit it: We’re fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we’re still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream.

It’s no accident.  Wall Street crashed this economy because they could, and now they’re looting the taxpayers of this country for generations to come.

Ronald Reagan started the ball rolling in the 80s when he declared that regulation was BAD.  Why did we buy into that?  Did the average Joe, who was hollering “free market!!!” really think any of the “little people” would get on that gravy boat?  Idiots.

Then along came George W. Bush and his merry band of power-hungry, bloodthirsty money-grubbers to deliver the coup de grace to the American economy, the world economy, and generations of taxpayers.  Oversight?  What the hell is that?  Three to the noggin — bang bang splat!!

Taibbi’s article is a long one, but read the whole thing.  It will make you fucking sick, but you’ll have a clearer idea of what the hell happened at AIG.

add to del.icio.us : Add to Blinkslist : add to furl : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

ABC News: AIG Under Criminal Investigation

Truthout

Investigations

The statement called for an “investigation of the validity of A.I.G.’s past accounting and securities disclosures and its executive compensation program by the Office of Thrift Supervision, the Securities and Exchange Commission, and the FBI.”

“I think that A.I.G. is simply one of the most obvious examples where their accounting was false. Fraudulent accounting at a publicly traded company is securities fraud and that’s a felony,” Professor Black told Truthout.

Continue reading

Grassley’s Comment On AIG Execs: Resign Or Commit Suicide

Vodpod videos no longer available.

Politico

Sen. Charles Grassley is so angry over AIG bonuses that he says the executives should resign or kill themselves.

In a comment aired this afternoon on WMT, an Iowa radio station, Grassley (R-Iowa) said: “The first thing that would make me feel a little bit better towards them if they’d follow the Japanese model and come before the American people and take that deep bow and say I’m sorry, and then either do one of two things – resign, or go commit suicide.”

The Top Ten Worst Corporations For 2008

To be on this list, not only do you have to be a corporate villain, the actions of the corporation have to be really bad, in some cases criminal, others are labor abuses, workplace safety violators and many fall into the category of not having one shred of human decency.  These corporate scoundrels will do anything to have a large bottom line, no sacrifice is too low, even at the expense of human lives.

Here are the 10 Worst Corporations of 2008 and their misdeeds by Multinational Monitor:

AIG: Money for Nothing

There’s surely no one party responsible for the ongoing global financial crisis. But if you had to pick a single responsible corporation, there’s a very strong case to make for American International Group (AIG).

Why did AIG – primarily an insurance company powerhouse, with more than 100,000 employees around the world and $1 trillion in assets – require more than $100 billion ($100 billion!) in government funds? The company’s traditional insurance business continues to go strong, but its gigantic exposure to the world of “credit default swaps” left it teetering on the edge of bankruptcy. Government officials then intervened, because they feared that an AIG bankruptcy would crash the world’s financial system.

AIG’s eventual problem was rooted in its entering a very risky business but treating it as safe. First, AIG Financial Products, the small London-based unit handling credit default swaps, decided to insure “collateralized debt obligations” (CDOs). CDOs are pools of mortgage loans, but often only a portion of the underlying loans – perhaps involving the most risky part of each loan. Ratings agencies graded many of these CDOs as highest quality, though subsequent events would show these ratings to have been profoundly flawed. Based on the blue-chip ratings, AIG treated its insurance on the CDOs as low risk. Then, because AIG was highly rated, it did not have to post collateral.

Through credit default swaps, AIG was basically collecting insurance premiums and assuming it would never pay out on a failure – let alone a collapse of the entire market it was insuring. It was a scheme that couldn’t be beat: money for nothing.

After the bailout, it emerged that AIG did not even know all of the CDOs it had ensured.

Cargill: Food Profiteers
Continue reading

Give Me My Money Back, You Bitch

Hey, you big shot executives at AIG! Who the fuck do you think you are? You go whining and crying to the federal government that if you don’t get in on some of that free money that Hank Paulson is handing it (without getting receipts, it seems), the world will collapse and you’ll go out of business. So we pony up some money to aid your “flailing” company, and what do you do? You go on a “junket” to a luxury resort where you lived in the style to which you erroneously think you are entitled. You were wrong. Continue reading

Sunday News Highlights

U.S. Believes Nuns have a Habit for Terrorism

Two Roman Catholic nuns jailed for non-violent action against nuclear weapons were also listed as terrorists by US authorities. Link.

Tax rebate, Food Stamp Money possible in Aid Plan

After consulting with Barack Obama, Democratic leaders are likely to call Congress back to work after the election in hopes of passing legislation that would include extended jobless benefits. Link

Amy Poehler and Seth Meyers Put the Smack-Down on AIG

Okay, this is about a day late, but what the hell, it’s still funny. On Thursday, Saturday Night Live aired a special 30-minute midweek episode. Link

Alaska Pollock Fishery near collapse: Greenpeace

Stocks of Alaska pollock, a staple of the U.S. fast food industry, have shrunk 50 percent from last year to record low levels and put the world’s largest food fishery on the brink of collapse. Link

Fox News’ Faux Documentary sets New Low

Sean Hannity’s Sunday report, ‘Obama and Friends: The History of Radicalism,’ relied on innuendo and guilt by association to label the Illinois senator a dupe of the shadowy forces of the left. Link

Continue reading

Lawmakers Chastised AIG For Resort Junket – Plans For New One Next Week

Rep. Elijah E. Cummings (D-Md) castigates AIG for manicures, pedicures & facials while the American People pay the bill.

After lawmakers found out that AIG Execs spent $147,000 on Banquets and rooms that cost from $425 to $1,100 dollars a night – which Rep. Cummings pointed out is more than some people pay in mortgage payments a month – Rep. Elijah Cummings (D-Md) thundered away at them – is this fundamentally responsible. This week-long resort event cost $440,000; just days after the Feds had agreed to an $85 million dollar bailout.

To make matters worse another event has been planned for next week. According to Nicholas Ashooh, these sales meetings are very vital and that AIG has them around the world all the time.

The event, at the Ritz-Carlton in California’s Half Moon Bay, aims to “motivate and educate” about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh.

The White House, Congress and Barack Obama have lashed out at AIG for “wining and dining” executives at a weeklong conference last month at the St. Regis Resort in Monarch Beach, California. White House spokeswoman Dana Perino called “despicable” expenses that included $23,000 for spa services. President George W. Bush didn’t push for the bailout “to help top executives go to a spa,” Perino said today at the daily White House briefing.

CEO Edward Liddy, told Secretary Henry Paulson – AIG needs to reevaluate expenses like $400,000 Junkets. Now they are thinking about cutting costs; these measures should have been instituted at least several years ago. Obama had this to say at last night’s debate about AIG.

Continue reading

Michael Moore: Palin, Politics, & AIG Bailout

Michael Moore talks about Sarah Palin with Michigan Voters

Moore also said that John McCain’s selection of Sarah Palin as his running mate serves as little more than a distraction.

Vodpod videos no longer available.

Michael Moore discusses AIG and lender bailouts
Vodpod videos no longer available.

(H/T-MLive.com)

Black Monday

add to del.icio.us : Add to Blinkslist : add to furl : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

The turmoil in European stock markets caused by the implosion of US bank Lehman Bros. and the scurrying for shelter of Merrill Lynch and AIG is impressive. All indices are down by as much as 5% and still the NYSE has just only started trading.

Things are coming to a head earlier than I expected, I had thought the FED would somehow manage to keep the lid on it for another 52 days, say. But the pressure within the system is obviously too strong and honestly there is not much that the Fed can do anymore. With a federal debt of staggering proportions, no economic growth and soaring inflation, kick starting the money press once again, when it already is in overdrive, is hardly a good idea. So panic is the word.

The Times: ‘Black Monday’ threatens London

The $70 billion lifebelt organised by the banks over the weekend is clearly designed to boost confidence, while the Federal Reserve has also tried to calm jitters by extending the sort of collateral that banks can use to obtain loans.

The question must be whether this will be enough to head off the inevitable panic once Wall Street opens. The omens are not good. This could be the second phase of a global crisis that started a year ago. London will inevitably not be immune.(read this and more here and here)

The Telegraph: Everybody is going to be laid off

Nevertheless, a few of those passing out from the high-rise office’s glass doors did stop to explain the mood inside the building. Koen Thijsson was the first employee out the door. He was carrying his belongings in a cardboard box and said: “This is it. I think it’s going to be all of us”. (read this)

The Independent sees UK jobs at risk as the financial markets are fully global

Thousands of jobs were at risk today after the UK arm of troubled investment bank Lehman Brothers was placed into administration.

The move follows Lehman’s US holding company filing for Chapter 11 bankruptcy protection this morning.

Tony Lomas, partner with administrator PricewaterhouseCoopers, said: “Because the group managed its funding on a global basis, the UK trading operation found itself unable to meet its obligations when the flow of funds dried up last night.”(read this)

The Guardian provides you with an Q&A on the goings on, but employees have more pressing concerns:

The bank employs around 4,000 staff in London, and another 1,000 in High Wycombe. A rumour even swept the City that the bonuses already handed to staff could be clawed back, if it could be proven that Lehman was no longer solvent when the money was paid. (read this)

It is not even two years, but the financial markets and their employees have come a long way from here.

Next time someone asks me, why I was so intensely interested in the US Presidential elections, I will bite the person’s head off. It is not the financial markets alone that worry me so much, I’m too poor to own shares anyway, but the global economy, which is in danger by  the mindless capitalism-gone-hogwild of the Bush years.  It did some people a lot of good, but those are clearly a chosen few. All of you and us have been fooled into thinking “it’s good for the economy – it’s good for me”. Hogwash. There are investments out there which are structured, hedged, derivative and what not. But where are the investments in innovation in the car industries, in the energy industries, in your infrastructure and ours? Where are the investments into your and our future? The middle class families will somehow struggle through this crisis as they have done in others. Some will fall off the face of the earth and end up not being middle class anymore. Very few will somehow crash through the glass ceiling and make fortunes. The affluent however, will not be touched at all by this. For them the party goes on. But like an unruly kid the economy and it’s players need rules, or they will do damage to themselves and to others. And them is not really who I am worried about.