Former AIG CEO: We Should Have Let It Fail

[FlyingTiger]

I mean... I'm speechless.

MALONEY: I'd like to ask you, do you believe if we had had that process in place, a receivership would have been better for AIG and the American taxpayer and the economy.

GREENBERG: Thank you for that question. Given the terms, the original terms that the government gave AIG for $85 billion of a loan, which funneled money almost immediately out the back door to counterparties, charged 14 percent interest and took 79.9 percent of the company, clearly, everybody would have been better off, in my judgment, if they had declared Chapter 11.

http://digg.com/business_finance/Former_AIG_CEO_Says_Bailouts_Were_Bad_Idea">Link with more. Lots more.

This wasn't some sort of out-of-context mistake. There's a LOT more at the link. Greenberg basically says OVER AND OVER AGAIN that letting AIG fail instead of handing them hundreds of billions of OUR dollars would NOT have caused the economic catastrophe that the Treasury has told us it would.

I'm getting madder every day....

[Mike 03]

1. You are right. This is what Hank Greenberg has been saying for months.

But it's not as simple as "let it fail."

He was for partitioning off the AIGFP, providing guarantees, allowing counterparties to vitiate contracts. His argument is that the insurance companies under the AIG umbrella are healthy.
It's quite complicated, not as simple as "let it fail." Bankruptcy is not the same as failure. His major concern is how to do an orderly deleveraging.


On Edit:

This was my take

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5379348

[FlyingTiger]

2. Isn't bankruptcy the definition of "failure" that the Treasury's been using?

I don't think anyone was saying, "Hey, let's just poof AIG out of existence!" They were saying that it'd be better to let it go into bankruptcy, which is what the bailouts have been trying to avoid.

[Mike 03]

3. In a sense, but it is the counterparty issue that is really in dispute.

The rebound effect of allowing AIG to fail is a bit unpredictable due to the counterparty issue.

What Greenberg seems to be saying is, "Let the counterparties fail" or "provide guarantees for some of them."

This issue is like a live wire shivering across a road, so I am not tied down to any particular answer, but I am reading all opinions on it.

I am only expressing what I felt Hank Greenberg was saying during his testimony. I think he has one option, but that there are other possibilities.

But this is a great conversation... I am fascinated by what others think about this.

[FlyingTiger]

5. Well, the whole economic doomsday was supposedly...

...going to be caused because of what would happen to the counterparties, not because of AIG itself going bankrupt. Greenberg was directly asked if that would have caused the disaster we've been told it would, and he said no, and he explained why. I assume that a few counterparties would also go under because they invested so much in the derivatives AIG offered, but I also assume that most of the doom and gloom scenario was based on those who relied upon AIG's insurance divisions also going under, which Greenberg is saying wouldn't have happened in bankruptcy court.

I'm inclined to believe him more than I'm inclined to believe the current execs at AIG, who aren't exactly unbiased when it comes to telling the government what would happen in different scenarios.

[marketcrazy1]

6. incredible

at first I was adamantly opposed to the AIG bailout, then I took a look at their report to congress and had second thoughts ( it was a very scary report ) NOW i am back to being RIPPING PISSED!! what the FUCK is wrong with our government!!! it`s OUR FUCKING MONEY THEY ARE THROWING AWAY!!! paying off the fucking banks at 100 cent on the dollar!!! who the FUCK do they think they are!!! next election cycle vote NO INCUMBENTS!! NONE!! clean the fucking house, I dont care who runs, Democrat or Republican if it is a choice between an incumbent DEM with no opposition and a freshman Republican then i WILL vote against the DEM!! fuck em all!! incumbents MUST GO!!!!

[soothsayer]

4. I think AIG insures a bunch of bank stuff (and maybe GM stuff) so if they pump money into AIG

all these other a-holes get paid off