E-mails inside AIG reveal executives struggling with growing crisis

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/29/AR2009122903322.html?hpid=topnews

The probing e-mails came from every direction inside insurance giant American International Group during the summer and fall of 2007, all with the same underlying question:

Could Joe Cassano back up his assurances -- to auditors, rating companies, colleagues and shareholders -- that his Financial Products unit wasn't in trouble?

Cassano grew weary at times of the seemingly endless inquiries, even as he set about answering them. He was particularly impatient with the repeated requests from Elias Habayeb, an AIG executive at the parent company's headquarters who appeared unsatisfied with Cassano's assertions that the sinking subprime mortgage market posed no long-term risk to the firm.

"More love notes from Elias," Cassano wrote to his subordinates as he forwarded another set of Habayeb questions. "Please go through the same drill of drafting answers . . ."

The Cassano-Habayeb correspondence, along with thousands of other e-mails obtained by The Washington Post, as well as supporting interviews, reveal a company wracked by more division, doubt and turmoil than anyone on the outside realized during those tense months in 2007, a full year before the federal government undertook one of the largest corporate bailouts in U.S. history to prevent AIG's collapse.

The Financial Products unit had made AIG billions of dollars in the largely unregulated world of financial derivatives, operating primarily from Wilton, Conn., and London. But as the subprime mortgage boom began to deflate in 2007, some e-mails from New York took on an unfamiliar tone of concern.