AIG acted like a hedge fund, Bernanke says

Source: Sydney Morning Herald

US Federal Reserve Chairman Ben Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the insurer made him ``more angry'' than any other episode during the financial crisis. ``If there is a single episode in this entire 18 months that has made me more angry, I can't think of one other than AIG,'' Bernanke told lawmakers today. ``AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.''

Bernanke's comments foreshadow tougher oversight of systemically important financial firms, and come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul. The US government has had to deepen its commitment to prevent AIG's collapse three times since September as the company accumulated the worst losses of any US company.

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The company ``made huge numbers of irresponsible bets, took huge losses, there was no regulatory oversight because there was a gap in the system,'' Bernanke said. At the same time, officials ``had no choice but to try and stabilize the system'' by aiding the firm.

In another sign of tighter regulation to come, Bernanke said supervisors should have authority to bar new financial products that may be destabilizing to markets. Bernanke made the AIG comments in response to a question from Senator Ron Wyden, an Oregon Democrat, at a Senate Budget Committee hearing today in Washington.

Read more: http://business.smh.com.au/business/world-business/aig-acted-like-a-hedge-fund-bernanke-says-20090304-8nl5.html

so now we have to cover their bets.

...over anything, you can bet that the issues are not being presented honestly.

Basically, in this case, the mantra of "we gotta save them to save ourselves" is being dredged up in order to lull us into believing there is no choice.

The real question is this: WHO has to take the losses? These assholes want it to be the taxpayers. I say, let the bastards fail and let the shareholders take the hit. At the very least, nationalize them so that we OWN their asses.

AIG is 80% owned by the government now, so a failure now means that the hundreds of billions we have poured into the company will evaporate (not that much of the books existed in reality anyway).

...having poured as many billions as we have into AIG and other failed institutions, the real question is: why didn't we just buy them outright, like any private entity would have done, and have ownership and control? In other words, these zombie financial institutions should be nationalized and now.

The bottom line as I see it is this: the U.S. taxpayers are being asked to foot a great big bill that is not of their own making. And the reason this is happening is that a gigantic fraud was perpetrated, mostly by U.S. financial institutions, although the Brits were right in there too at AIG. Our government is hoping beyond hope that the American people can make good on the fraud, thereby keeping the whole system afloat to live -- and thieve -- another day.

In other words, we are being asked to make good on a fraud so that the U.S. does not get called on it -- because if the U.S. is ultimately exposed and the whole world sees that the emperor has no clothes, then the system will not hold.

There is absolutely no doubt whatsoever that the taxpayers will take a hit, however this plays out. The real question now is, will there be any accountability for the thieves and fraudsters?

getting 200,000.00+ a year in salary for doing absolutely nothing, other thasn to blame everyone else!!...I would like to see financial losses of every congressman and senator and upper federal government employee to see if they are all sharing this burden and they have hadfinancial losses or if they all just happened to time ther market right to get out!

Lack of regulation allowed all this to occur.

There are myriad federal criminal statutes on the books that might come into play.

They look mundane of the surface- but they're pretty broad, and a dedicated prosecutor shoudn't have much trouble applying them to people behind AIG -or BOA -or Citi.

The question is- will the administration have the political fortitude to demnd accountability?

I've taken a similar attitude up to now, that it's enraging but may not have broken any laws.

Would love to hear about possible angles for pursuing prosecutions. I bet other DUers would, too. Would be good material to start a new thread.

False statements to federal officials, mail fraud, wire fraud, etc.

No way these guys perpetrated a debacle of this magnitude without running afoul of some those laws at one point or another.

The huge amounts of highly-leveraged assets tied to real estate prices were completely irresponsible, but I hadn't know that the institutions misrepresented them.

A lot of failing businesses get sued by stocholders for hiding information, but most of the time the suits never get anywhere unless there's obvious malfeasance like Enron.

Let a jury decide whether their behaviors were dishonest or fraudulent.

What is most effective is civil lawsuits. These companies, by ignoring their fiduciary responsibility to manage their assets responsibly and ethically, are opening themselves up to a waves of class-action lawsuits. In the end, after the lawsuits have run their course, nobody will end up with much except for the mega-law firms. Tort law is back in style, baby!

It'll take a while to get all their toxic debt sorted out, but AIG has a stable insurance biz, like the OP said, and right now insurance is one of the rare things bringing a good return on investment. Hell, we own the company, so how about we slice it up and sell the insurance biz to Warren Buffet for $100 billion. I bet he'd but it.

Like where Bu*h orders FEC "regulators" to do nothing while his rich buddies get to rip off the American People?

Yeh, he must of meant "Bu*h Fund".