These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
Derivatives are as ancient as civilization.
Greek farmers insured crops with investors prepared to speculate on the weather, just as life insurers hedge mortgage-backed securities by purchasing credit default swaps.
When written against real assets, whether farmers’ crops or homes, derivatives spread risk, lower capital costs and foster growth.
Like any other financial contract, derivatives can be abused, and the big-bonus culture on Wall Street has given us some high-profile shenanigans.
How derivatives are regulated or overregulated is central not just to curbing excess, but to ensuring that farmers can plant, home buyers can borrow and businesses can invest.
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Tags: AIG, Banking, Banks, General Comments, U.S. Economy
By PETER EAVIS
A DOW JONES COLUMN
In Robert Benmosche, the U.S. Treasury has gotten exactly the CEO it deserves for American International Group.
Benmosche recently considered stepping down from his post because of government pay restrictions. Wednesday, he said he was staying. But toying with resignation, the latest controversy in his three months at AIG, has created more instability at the company–not to mention extra headaches for the government, which has an effective 80% stake in the insurer.
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Tags: AIG, Dow Jones Newswires Column
These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
Wall Street greed and irresponsibility have nearly destroyed the U.S. economy. Big bonuses for bankers encourage reckless risk taking and were a principal cause of the credit crisis and Great Recession.
Pay must be regulated to avoid another calamity.
A generation ago, banks took deposits, made loans and collected payments. Bankers quickly felt the consequences of money lent to folks unlikely to repay.
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Tags: AIG, bank bailout, Banking, Banks, FDIC, Federal Reserve, Goldman Sachs, TARP, U.S. Economy
NEW YORK — The Securities and Exchange Commission’s agreement with Hank Greenberg marks the second time in a week the agency has announced, simultaneously, charges and a settlement in a serious matter involving misled investors.
It says the truth is being served. Not everyone agrees.
In fact, the pacts raise questions about how much — or how little — the public will ever know about events that may have contributed to one of the most serious financial crises in U.S. history.
In Thursday’s announcement, the SEC says it charged Greenberg, former chairman and chief executive of AIG, and Howard Smith, the company’s former vice chairman and chief financial officer, with accounting violations over inflated financial results reported by AIG between 2000 and 2005.
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Tags: AIG, Dow Jones Newswires Column, Securities & Exchange Commission
Posted by Pat Sullivan
on July 09, 2009
AIG American Intl Group /
4 Comments
By Ed Welsch
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–There’s a significant chance that American International Group Inc.’s (AIG) equity may be worthless, a Citigroup analyst said Thursday.
Analyst Joshua Shanker wrote in a research note that there’s a 70% chance that AIG’s equity is worthless due to more losses on credit default swaps, and “management’s increased openness to disposing of businesses at low valuations.”
An AIG spokeswoman wasn’t immediately available to comment.
AIG shares have lost more than half their value since the stock underwent a reverse stock split at the end of June. Shares were up 1.4% premarket to $13.28, as of July 9, 2009.
Tags: AIG, American International Group, Reverse Stock Split
By Brett Philbin and Annie Gasparro
A DOW JONES NEWSWIRES COLUMN
NEW YORK (Dow Jones)–The heat over bonus payouts at American International Group Inc. (AIG) is spreading to Morgan Stanley (MS) and Citigroup Inc.’s (C) Smith Barney, and some brokers are starting to feel it.
Many brokers are bristling over a threat to what they see as customary and legitimate compensation. Securities industry lawyers contend that, just as was argued with AIG, the law obliges the brokerages to make good on promised bonuses.
Morgan Stanley has fallen under political scrutiny for its plan to dole out $3 billion in retention bonuses to 6,500 top financial advisers at the firm and Smith Barney, with which it is forming a joint venture. Morgan Stanley and Citigroup both received taxpayer funds from the Troubled Asset Relief Program.
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Tags: Broker's World, Retention bonuses
Troubled insurer American International Group Inc., now 80% owned by U.S. taxpayers, spent the weekend deflecting mounting criticism of how government funds have been funneled to various banks and used to pay employee bonuses at the business unit that almost sank the company.
After calls for more transparency, AIG disclosed Sunday that roughly two-thirds of the $173.3 billion in federal aid it received has been paid out to trading partners such as banks and municipalities in the U.S. and abroad.
The disclosures came as AIG was lambasted for about $450 million in bonus payments planned for employees at a business unit that lost $40.5 billion last year. The unit’s woes pushed the company to near-collapse, forcing the government bailout.
Do you think AIG should be paying out bonuses after taking $173.3 billion in federal aid?
Tags: bank bailout, Banking, Retention bonuses
