|
I've been thinking about this thread today, and I'm going to comment some more. This is something that I've been talking about at least once a day every working day since I was in San Diego in mid-September.
The vast majority of AIG was run very well and very profitably. When this first started last year, AIG was, without a doubt, the best run insurance company out there with the best talent in the industry (on the carrier side, at least). Unfortunately, a lot of very smart people have been tarred with the same brush used on the Financial Services guys.
If you think that the Financial Services guys are scum of the earth, think again. Basically, the guys at Goldman Sachs et al came up with the credit default concept. They convinced the Financial Services guys, who were a very small unit, to write the coverage for the swaps. The same folks had also convinced Congress that the concept was legal AND a good idea. The head of AIG at the time, Hank Greenberg (IMO one of the great insurance minds in history) personally signed off on each and every deal they wrote until he was basically pushed out in the Spitzer investigations about 5 years ago (something completely unrelated to this). His successor, Michael Sullivan, signed off on the rest of the swaps.
It turns out that the checks that they all thought were in place actually weren't. In reality, a bunch of very smart people were swindled in one of history's greatest cons. Even better, the Goldman guys were so brazen that they started buying the swaps at the end, only on the side that bet that the mortgages that this whole mess drew from were actually worthless. They made money on the front end AND the back end, and they had the foresight to make sure Congress made that completely legal.
As I posted in the other thread, AIG declaring bankruptcy would have been horrific. First, the rating agencies would have been forced to downgrade AIG. In my world, if you go below "A-", you might as well be dead. At the time, they were "A". A bankruptcy, in the best of circumstances, would have seen them go to "B++" (more likely "B"). A lot of commercial loans require insurance by an "A" or better carrier. In Florida alone, AIG writes about 20% of the commercial Property market. Think about the turmoil of all of those loans having to be either rewritten or the insurance replaced.
But that's just inconvenient. The real problem is that the 50% of the commercial air passenger planes are covered by AIG (they also own a bunch of them). The same rules apply (because as the owner, AIG insisted on it). That would have grounded about half of the commercial airplanes in this country. Think about that.
It goes on, too. Ships. The cargo on them. Trains in some countries. Big construction projects that have to stop. It would have been a nightmare.
I have more, but it's time to take the boys to the playground. I may revisit this, though.
__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo
|