Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

AIG

AIG Hires Peter Hancock to Oversee Risk, Financial Products

American International Group Inc. named Peter Hancock, described by former employer JPMorgan as an “architect” of the derivatives business, to oversee finance and risk, including the insurer’s money-losing credit-default swap unit on Monday, February 11th 2010. Mr. Hancock spent 20 years at one of the predecessor banks that now make up JPMorgan Chase & Co and eventually rose to be CFO and head of risk management before stepping down in 2000.

FBI Investigates AIG and Lehman Brothers Failures

On Wednesday September 24th 2008, The TimesOnline website is reporting that FBI Investigates Fannie Mae and Lehman Brothers. Apparently the Federal Bureau of Investigation ("FBI") has launched an inquiry into Fannie Mae and Freddie Mac, the mortgage companies; Lehman Brothers, the bust investment bank; and AIG, the nationalized insurance company.

"It is understood that investigators are trying to ascertain whether fraud helped caused some of the troubles at the four groups. The investigation includes whether executives deliberately misled the stock market about the health of their businesses." At AIG, news reports in the past ten days or so have suggested that the former senior management did not appreciate until just recently the full extent of the problems in their derivatives subsidiary AIG Financial Products. That led to the effective take-over of AIG.

Lehman Brothers apparently failed because market participants had little confidence in where its mortgage assets were marked-to-market. News reports about the meetings at the New York Federal Reserve Bank during the weekend of September 14th suggested that a number of market participants from other investment banks were surprised to see the relatively "rich" (or high) prices to which many of Lehman Brother's mortgage assets were marked. It has been suggested that from CEO Dick Fuld, President Bart McDade, (and former-COO Joe Gregory before him), former-CFO Erin Callan, and others down to the recently-retired global head of the Mortgage Capital division, Ted Janulis, all saw gold in what many others viewed as lumps of coal.

No doubt one or more of these executives will be answering questions for the FBI about possible allegations that there were mis-statements of asset values, particularly in the mortgage area. David Einhorn of the hedge fund Greenlight Capital raised numerous questions about the valuation of mortgage assets at Lehman Brothers after its first-quarter 2008 earnings report. At the time, various Lehman Brothers executives strongly rejected his allegations.

Palace Coup -- Some Background on AIG and the CEO Hank Greenberg ouster

The story of former CEO Maurice "Hank" Greenberg's reign and swift downfall at American International Group has yet to be fully told. The following story from the Friday, April 1, 2005 edition of the Wall Street Journal is a start. This is an excellent article written by Monica Langley, a staff reporter of The Wall Street Journal.

For those that do not have access to the full version of the article carriend via on-line version of The Wall Street Journal, let me highlight several of the more prominant paragraphs. These include:

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Palace Coup, After a 37-Year Reign at AIG, Chief's Last Tumultuous Days, Faced With Indictment Threat, Directors Move Quickly Against Mr. Greenberg

By MONICA LANGLEY, Staff Reporter of THE WALL STREET JOURNAL, April 1, 2005; Page A1

[...] The showdown set in motion a frantic 48 hours that ended Monday [March 28, 2005] with Mr. Greenberg's abrupt resignation as AIG's longtime chairman. Before it had ended, New York Attorney General Eliot Spitzer told AIG lawyers he was dismayed over what he called the "document caper," according to people familiar with the matter.

"As long as Hank's still the chairman, AIG is still accountable," Mr. Spitzer told AIG's outside lawyers on the phone Saturday night from his Colorado skiing vacation, these people say. "You have serious criminal exposure." Then, according to these people, Mr. Spitzer issued the ultimate threat: His office would indict AIG on Monday [Maarch 28th] if action wasn't taken.

No financial firm has ever survived a corporate indictment. Some of AIG's independent directors argued Mr. Greenberg had to go immediately in order to protect the company, according to those familiar with the situation. They had essentially already taken control of the company because of the sweeping regulatory probe into whether AIG bolstered its financial condition with improper accounting.

Non-traditional insurance products snare AIG and General Re???

Many participants in the capital markets seem to miss the significence of the combined Securities and Exchange Commission and New York State reviews of the non-traditional insurance products, an area that the article below notes was "until recently [an] obscure class of financial transactions that authorities believe some companies have used to manipulate their financial statements." This article seems to confirm some of the persistent rumors that AIG and General Re were very active participants in this area. Further, there may well be some truth to the rumors that have been quietly circulating about mis-deeds. Very clearly the last shoe has not yet dropped on indictments of either companies or individuals, including some very senior executives...

An astute reader might want to keep a keen eye out for more news and articles regarding the role of the off-shore insurers in non-traditional insurance products. The full story is far from completely told yet...