When a commission probes the economic meltdown, Michael Lewis' Vanity Fair piece "The Man Who Crashed the World" will serve as a rough draft of what went wrong at AIG and started the financial landslide.
In chronicling how the company built a tower of risk that tumbled around Wall Street's ears, Lewis in passing reveals the role of Eliot Spitzer, then New York Attorney General, in enabling it all.
Lewis' close questioning of "the silent, shell-shocked traders of the AIG Financial Products unit...finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the US economy, and the global financial system to their knees"--Joe Cassano, a hard-charging but relatively unsophisticated former back-room operator who drove credit default swaps to perilous heights.
When he got the job in 2001, Cassano was a pale imitation of the despotic CEO Hank Greenberg, who built AIG into an insurance powerhouse over 37 years, earning a AAA credit rating for prudence to go along with his aggressive tactics.
AIG FP’s employees, Lewis writes, "suspect that the only reason Greenberg promoted Cassano was that he saw in him a pale imitation of his own tyrannical self and felt he could control him. 'So long as Greenberg was there, it worked,' says one trader, 'because he watched everything Joe did.'"
But then in 2005 along came Spitzer, in his own relentless drive to build the reputation that led to his election as New York governor, to hound Greenberg out of AIG while treating Warren Buffet, whose General Re subsidiary was involved in the same questionable deals, with extreme deference.
After that, Lewis reports, "as one trader puts it, 'the new guys running AIG had no idea.' They thought the money machine ran on its own, and Cassano did nothing to discourage the view. By 2005, AIG FP was indeed, in effect, his company."
In building his own reputation as a white knight, Eliot Spitzer, later forced to resign for failings of his own, seems to have been instrumental in starting the avalanche that threatened to bury us all.
Showing posts with label economic meltdown. Show all posts
Showing posts with label economic meltdown. Show all posts
Thursday, July 09, 2009
Sunday, February 22, 2009
How to Feel About the Meltdown
Suddenly, prescribed treatments for the ailing economy have turned psychiatric.
*Dr. Bill Clinton calls himself in for consultation and urges Dr. Obama to dole out anti-depressants: “I just want the American people to know that he’s confident that we are going to get out of this and he feels good about the long run.”
The new Physician-in-Chief immediately announces plans to cut the budget deficit in half.
*Professor Frank Rich analyzes national stages of grief and finds no movement past the first: "Obama’s toughest political problem may not be coping with the increasingly marginalized G.O.P. but with an America-in-denial that must hear warning signs repeatedly, for months and sometimes years, before believing the wolf is actually at the door."
*Elsewhere CNBC's clinic for the money-mad produces its version of Paddy Chayevsky's loony "Network" anchorman in Rick Santelli's rant against rewarding bad behavior with bailouts against a backdrop of cheering inmates at a Chicago trading ward.
All this may simply reflect postpartum depression after Washington's giving birth to trillion-dollar bailout babies with no more assurance of future financial security than the Suleman octuplets.
In their dismay, some Americans seem to have stopped listening to politicians and pundits and turned to a more traditional source of guidance, getting financial advice in church.
As it gets crazier out there, Dr. Obama is going to have to find new ways of dispensing hope.
*Dr. Bill Clinton calls himself in for consultation and urges Dr. Obama to dole out anti-depressants: “I just want the American people to know that he’s confident that we are going to get out of this and he feels good about the long run.”
The new Physician-in-Chief immediately announces plans to cut the budget deficit in half.
*Professor Frank Rich analyzes national stages of grief and finds no movement past the first: "Obama’s toughest political problem may not be coping with the increasingly marginalized G.O.P. but with an America-in-denial that must hear warning signs repeatedly, for months and sometimes years, before believing the wolf is actually at the door."
*Elsewhere CNBC's clinic for the money-mad produces its version of Paddy Chayevsky's loony "Network" anchorman in Rick Santelli's rant against rewarding bad behavior with bailouts against a backdrop of cheering inmates at a Chicago trading ward.
All this may simply reflect postpartum depression after Washington's giving birth to trillion-dollar bailout babies with no more assurance of future financial security than the Suleman octuplets.
In their dismay, some Americans seem to have stopped listening to politicians and pundits and turned to a more traditional source of guidance, getting financial advice in church.
As it gets crazier out there, Dr. Obama is going to have to find new ways of dispensing hope.
Sunday, December 21, 2008
How Bush Pushed Housing Heroin
If he were still with us, our departed president might be trying to figure out how he made this mess. But as his ghostly presence emanates interviews and speeches about how he stuck to his principles in the face of reality, journalists are piecing together the tale of the Bush housing bubble that has now splattered over the world economy.
"White House Philosophy Stoked Mortgage Bonfire" is the headline in today's New York Times over a 2002 picture of a smiling George W. Bush selling his new plan for minority home ownership against a backdrop of "A Home of Your Own" logos, the domestic equivalent of "Mission Accomplished" in Iraq:
"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, 'faced with the prospect of a global meltdown' with roots in the housing sector he so ardently championed...
"From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.
"He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent--and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards."
In effect, the President became the pusher-in-chief for a housing heroin cartel of banks, mortgage brokers and Wall Street sharks that was hooking millions of Americans with nothing-down, low-start variable rate loans that would get them high on home ownership and send them crashing when inflated prices inevitably started falling.
The Times takeout is full of head-shaking statements by the "experts" who helped him foster and for years ignore the growing bubble, but it ends with an image that sums it all up:
"With 31 days left in office, Mr. Bush says he will leave it to historians to analyze 'what went right and what went wrong,' as he put it in a speech last week to the American Enterprise Institute.
"Mr. Bush said he was too focused on the present to do much looking back.
“'It turns out,' he said, 'this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.'”
But that is exactly what George W. Bush will be doing next month as he leaves behind a nation in the throes of financial withdrawal and heads, smiling and sober, for the two homes he owns free and clear in Texas
"White House Philosophy Stoked Mortgage Bonfire" is the headline in today's New York Times over a 2002 picture of a smiling George W. Bush selling his new plan for minority home ownership against a backdrop of "A Home of Your Own" logos, the domestic equivalent of "Mission Accomplished" in Iraq:
"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, 'faced with the prospect of a global meltdown' with roots in the housing sector he so ardently championed...
"From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.
"He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent--and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards."
In effect, the President became the pusher-in-chief for a housing heroin cartel of banks, mortgage brokers and Wall Street sharks that was hooking millions of Americans with nothing-down, low-start variable rate loans that would get them high on home ownership and send them crashing when inflated prices inevitably started falling.
The Times takeout is full of head-shaking statements by the "experts" who helped him foster and for years ignore the growing bubble, but it ends with an image that sums it all up:
"With 31 days left in office, Mr. Bush says he will leave it to historians to analyze 'what went right and what went wrong,' as he put it in a speech last week to the American Enterprise Institute.
"Mr. Bush said he was too focused on the present to do much looking back.
“'It turns out,' he said, 'this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.'”
But that is exactly what George W. Bush will be doing next month as he leaves behind a nation in the throes of financial withdrawal and heads, smiling and sober, for the two homes he owns free and clear in Texas
Wednesday, October 08, 2008
3 A.M. for the Economy
The red phone is ringing, not for a nuclear attack, but a total meltdown of the world's financial system and there is no one in the White House to answer it.
As the Federal Reserve, along with central banks in Canada, England, Sweden, Switzerland and the European Central Bank, cuts key interest rates--crossed fingers trying to plug the dike--George W. Bush is packing his bags, taking time out yesterday to visit an office supply plant in a Washington suburb for a pep talk.
"I wish I could snap my fingers and make what happened stop," he told the workers there. "But that's not the way it works."
Meanwhile, the Gallup Poll reports Bush approval ratings as the worst ever and that only 9 percent of Americans are "satisfied with the way things are going," dipping under the all-time low of 12 percent in 1979, the time of rising prices and gas shortages when Jimmy Carter was president.
No word on where the Gallup people found that 9 percent or what they have been smoking.
As the Federal Reserve, along with central banks in Canada, England, Sweden, Switzerland and the European Central Bank, cuts key interest rates--crossed fingers trying to plug the dike--George W. Bush is packing his bags, taking time out yesterday to visit an office supply plant in a Washington suburb for a pep talk.
"I wish I could snap my fingers and make what happened stop," he told the workers there. "But that's not the way it works."
Meanwhile, the Gallup Poll reports Bush approval ratings as the worst ever and that only 9 percent of Americans are "satisfied with the way things are going," dipping under the all-time low of 12 percent in 1979, the time of rising prices and gas shortages when Jimmy Carter was president.
No word on where the Gallup people found that 9 percent or what they have been smoking.
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