AIG, Updated as found....

The regulators said that while they might have been slow to step in, they had been hampered by regulatory rollbacks enacted by Congress a decade ago, provisions that kept them from seeing A.I.G. in its entirety and appreciating its risks.

After Congress knocked down the walls that once separated banking, insurance and capital-markets activity in 1999, these diverse businesses began knitting themselves together within A.I.G., creating unpredictable combinations. Regulators, still working in their narrow domains, did not keep up with the changes.

http://www.nytimes.com/2009/03/06/business...agewanted=print

March 6, 2009
Senators Ask Who Got Money From A.I.G.
By MARY WILLIAMS WALSH

WASHINGTON — Trying to draw a line in the sand, a Senate panel told the vice chairman of the Federal Reserve to identify all the parties made whole by the bailout of the American International Group or forget about coming back to ask Congress for more rescue money.

“You will get the biggest no you ever got,” Senator Jim Bunning, Republican of Kentucky, warned Donald L. Kohn, vice chairman of the Fed board of governors, in a hearing on Thursday. “I will hold up the bill.”

The hearing, led by Senator Christopher Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee, was called to examine the regulatory patchwork that had allowed huge risks to build up at A.I.G. Since the insurance conglomerate’s near collapse in September, the federal government has committed $160 billion to keep it afloat.

Tens of billions of those dollars have merely passed through A.I.G. to its derivatives trading partners, shielding them from losses. The Fed has refused to provide the names of those financial institutions, and senator after senator, Democrat and Republican, said that was an outrage.

“We need to know who benefited, and we’re going to find out,” said Senator Richard C. Shelby, Republican of Alabama and the ranking member of the committee. “The Fed can be secretive for a while but not forever.”

Mr. Kohn said the Fed believed that the only hope of recovering the taxpayers’ money was to get A.I.G. back on its feet, doing business as usual — and that meant respecting its customers’ privacy.

“I would be very concerned that if we gave out the names, people wouldn’t want to do business with A.I.G.,” he said. But at Senator Dodd’s urging, he agreed to go back to the Fed and ask the other governors to reconsider.

“We’re in a new world, and new types of transparency are required,” he said.

Committee members also pressed regulators from the Office of Thrift Supervision and the New York State Insurance Department to concede that they were at least partly at fault for failing to prevent A.I.G.’s crisis.

The regulators said that while they might have been slow to step in, they had been hampered by regulatory rollbacks enacted by Congress a decade ago, provisions that kept them from seeing A.I.G. in its entirety and appreciating its risks.

After Congress knocked down the walls that once separated banking, insurance and capital-markets activity in 1999, these diverse businesses began knitting themselves together within A.I.G., creating unpredictable combinations. Regulators, still working in their narrow domains, did not keep up with the changes.

“The creation of financial supermarkets can have what I would call a knock-on effect,” said Eric R. Dinallo, the New York State insurance superintendent.

He said state insurance regulators had done a good job keeping A.I.G.’s insurance subsidiaries solvent. But then A.I.G.’s derivatives business — A.I.G. Financial Products, the purveyor of the now-notorious credit-default swaps — got into trouble. The financial products unit was not an insurance company and was beyond state purview, Mr. Dinallo said. But it was under the same umbrella with the insurance companies, and in the crisis, it threatened to strip the insurers’ capital away.

“Thank God, there are still some separations intact,” Mr. Dinallo said.

Mr. Shelby expressed doubts that A.I.G.’s state-regulated insurance companies were entirely innocent. He said they had engaged in a risky securities lending business and ended up needing $35 billion of the Fed’s bailout last fall.

“Are you trying to evade your responsibility?” he asked Mr. Dinallo. “You can claim here today that you have little responsibility for all of these problems?”

Mr. Dinallo said that it was true that the securities in the lending program were the property of A.I.G.’s insurance companies, but that the lending activity had been orchestrated by another part of A.I.G. — a special unit set up and controlled by A.I.G. the holding company. State regulators had no jurisdiction over the special unit, but it could layer big risks back onto the insurers, he said.

In any case, Mr. Dinallo said that the New York State Insurance Department spotted the problem in 2006 and began quietly working with A.I.G. to unwind the risky investments. But they ran out of time. Only about a quarter of the portfolio had been cleaned up by the time last September’s crisis struck.

Mr. Dinallo’s testimony contrasted with statements made by Scott M. Polakoff, acting director of the Office of Thrift Supervision. Mr. Polakoff readily acknowledged that his office was A.I.G.’s primary regulator. And he agreed that his agency had failed to head off the crisis, because it had not recognized the giant risks building up in A.I.G.’s swaps business.

A.I.G. came under the Office of Thrift Supervision because it bought a savings and loan in 1999. The conglomerate had assets of more than $1 trillion at its peak, and the savings and loan was worth only about $1 billion. So the transaction forced a guppy to regulate a whale.

Mr. Polakoff said one of the first things his office had had to do was identify the regulators of A.I.G. subsidiaries in more than 100 countries and start gathering information from them.

The more the office learned about A.I.G., he said, the more it found problems. It tried, with increasing urgency, to work with other regulators, with the A.I.G. corporate board and with the company’s auditor, [b]PricewaterhouseCoopers.

Eventually it was joined by the Securities and Exchange Commission and the Justice Department.

But by then the die was cast.

Billions for AIG to Protect the Speculative Profits of Goldman Sachs/Morgan Stanley

The dysfunction of our financial institutions is almost beyond belief.

In November of 2008 with the nation's economy unraveling, Morgan Stanley and Goldman Sachs (one of the top five U.S. municipal bond underwriters) were infuriating politicians and public finance officials by recommending the purchase of credit-default swaps (CDS) thereby betting against debts of eleven states, including New Jersey, California, Wisconsin, Florida, and Ohio among others. Many of these were municipal bonds that they had originally underwritten. Thereby, through an act of blatant opportunism they were adding to the destabilization of the financial markets already at the edge.

CDS are in effect insurance policies. Insurance policies are normally taken out to cover loss against the occurrence of an event such as fire, or flood, or accident, and so on. But CDS, rather than being called "insurance," became, in the parlance of the Street, "derivatives," making them much more elegant to deal with and for the rest of us much more difficult to understand. They were, in this case, simply insurance bets on the bankruptcy or inability of municipalities throughout the country to meet their debt obligations. A bit like taking out insurance against fire on the house next door and having a lottery on the proceeds should it burn down.

Now to buy "insurance" one would naturally go to an insurance company to cover the risk. And the insurance company would sell you an insurance policy and would set an amount on their balance sheet that would represent a reserve against the potential loss/payout. An insurance company likely to write a policy covering this would be AIG. After all, AIG had become the king of CDS. In all likelihood this was the case for the likes of Goldman and Morgan-Stanley.

Except it gets worse. You see, in the mumbo-jumbo of the term "credit-default swaps," the word "insurance" is not mentioned. And according to the good souls at AIG, if you don't use the word insurance, you don't have to set aside any reserves in case of loss. And if you don't set aside any reserves, you can issue all the CDS the market can bear (understood to be in the range of $400 billion at AIG), cash in the policy premiums as a humongous supplement to your usual insurance business, allowing for zillions in paychecks and bonuses. And of course, if it all comes crashing down you can put up the "systemic risk" flag and your Wall Street friends in Washington will charge to the rescue with taxpayer dollars. (What did Goldman CEO Lloyd Blankfein say to Treasury Secretary and ex-Goldman CEO Hank Paulson when he was party to the discussions on the first AIG bailout, or as Bloomberg reported yesterday, is this also part of the government's refusal "to disclose names of the borrowers and the loans"?.

During his testimony this week, Fed Chairman Bernanke felt compelled to say, and I quote:

"AIG exploited a huge gap in the regulatory system; there was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses"

One knows the folks at Goldman are no fools. Were they going to put good money down for CDS that their counterparty (AIG) might not be able to honor because it made no reserve provisions? Or was the temptation of another big pay day just too tempting not to risk Other People's Money to play the game?

To date we have poured $160 billion into AIG -- this while others see the value of their homes cut in half, the better part of their 401(k)s wiped out, their government services significantly reduced, and other lending institutions diligently try to work out past due credits, taking significant mark-downs and extending due dates to keep industries and corporations alive.

This, as Goldman Sachs and Morgan Stanley are being covered 100 cents on the dollar on their speculative positions of intrinsically flawed CDS derivatives on which they gorged themselves to the bursting point. It is past time that a distinction be made between that part of AIG's business that was a "large and stable insurance company," and that part that was a "hedge fund," or better put, a casino. So the big question becomes, why should AIG's CDS be paid down 100 cents on the dollar when the rest of the country is taking at or near 50% haircut on the value of its assets?

But then again the rest of the country doesn't have those well-oiled K Street lobbyists pursuing their special interests in Washington. They just vote and pay.

http://www.huffingtonpost.com/raymond-j-le...html?view=print

Who Are The AIG Counterparties? Here Are Some...
By Zachary Roth - March 5, 2009, 4:58PM

Over at TPM, Josh has been doggedly highlighting the refusal of both AIG and the federal government to reveal the identity of AIG's counter-parties in its disastrous credit default swaps. And several lawmakers have in recent days pressed Tim Geithner and Ben Bernanke on the issue.

The question matters, of course, because AIG needed to make its most recent multi-billion dollar trip back to the public trough (that's over $160 billion in all for AIG, if you're counting) in order to pay back its creditors on those disastrous swaps -- and thereby, we're told, prevent a wider financial collapse. So identifying who those swaps were made with will tell us, in effect, who this latest portion of our money is ultimately going to.

It's worth noting, then, that, thanks to some great reporting from the Wall Street Journal and the New York Times, we do in fact have some preliminary information about who AIG's partners were on the swaps.

This Journal story from October 2008 names the following nine American and foreign banks as having bought swaps from AIG: Goldman Sachs; Merrill Lynch; UBS of Switzerland; Credit Agricole SA of France; Deutsche Bank of Germany; Barclays, and Royal Bank of Scotland Group, of Britain; and CIBC, and Bank of Montreal, of Canada.

Merrill is described by the Journal as a "big client" of the AIG unit that did the swaps.

By the end of 2007, with the value of the underlying assets plummeting, many of these banks had asked for collateral on the swaps, according to the Journal.

For instance, the paper reports that Goldman held swaps that insured about $20 billion of securities. In August 2007, Goldman demanded $1.5 billion in collateral from AIG. It ultimately got $450 million, then another $1.5 billion last October. At that point, says the Journal:

Goldman hedged its exposure by making a bearish bet on AIG, buying credit-default swaps on AIG's own debt.

That picture of Goldman's exposure jibes with a New York Times story from September 2008 about the credit default swaps, which reported that Goldman was AIG's "largest trading partner," and likewise gave a figure of $20 billion for Goldman's exposure to AIG.

The Times also implicates another domestic firm: JP Morgan (now JP Morgan Chase). In fact, it recounts that it was derivatives traders from that company that a decade ago, first brought to AIG's London-based financial products unit, run by Joseph Cassano, the ill-fated idea of doing credit default swaps.

It reports:

Ten years ago, a "watershed" moment changed the profile of the derivatives that Mr. Cassano traded, according to a transcript of comments he made at an industry event last year. Derivatives specialists from J. P. Morgan, a leading bank that had many dealings with Mr. Cassano's unit, came calling with a novel idea.

Morgan proposed the following: A.I.G. should try writing insurance on packages of debt known as "collateralized debt obligations." C.D.O.'s. were pools of loans sliced into tranches and sold to investors based on the credit quality of the underlying securities.

It's not 100 percent clear, then, that JP Morgan Chase is a current counter-party of AIG on the swaps -- but it certainly wouldn't be surprising.

That same Times story offers another hint, albeit a vague one, about the identity of the counter-parties.

While clients and counterparties remain closely guarded secrets in the derivatives trade, Mr. Cassano talked publicly about how proud he was of his customer list.

At the 2007 conference he noted that his company worked with a "global swath" of top-notch entities that included "banks and investment banks, pension funds, endowments, foundations, insurance companies, hedge funds, money managers, high-net-worth individuals, municipalities and sovereigns and supranationals."

What to make of all this? Well, here's one thing. As Josh has noted, the usual argument given against disclosing the identities of the counter-parties is that it would reduce public confidence in the banks that were named, with potentially disastrous consequences for their positions. But there's little evidence we're aware of that any of the banks named above suffered such an effect when, for instance, the Journal and the Times published their stories -- whose accuracy have not been questioned.

In fact, Geithner and Bernanke haven't deigned to explain their position in even this much detail -- so it's difficult to know whether there are factors we're not considering. But in the absence of a fuller explanation, we'll keep pressing...

http://tpmmuckraker.talkingpointsmemo.com/...re_are_some.php

From Citizens for Legitimate Government:

Top U.S., Foreign Banks Got $50 Billion in AIG Aid --

Beneficiaries of the government's bailout of American International Group Inc. include dozens of U.S. and foreign financial institutions that have been paid roughly $50 billion.

07 Mar 2009

[According to Fox News http://www.foxnews.com/politics/2009/03/07...illion-aig-aid/ ] The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant. Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.


two dozen U.S. and foreign financial institutions: http://www.legitgov.org/essay_southwell_ar...now_102203.html

***

Financial reports show 5 biggest banks are 'dead men walking'
09 Mar 2009

America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show. Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives surged to $587 billion as of Dec. 31.

http://www.mcclatchydc.com/homepage/story/63606.html

AIG has insured $1.6 trillion in derivatives
Posted by Cory Doctorow, March 9, 2009 2:58 PM

And you thought AIG's $62 billion quarterly loss last month was bad -- turns out that the company has a further $1.6 trillion in outstanding derivatives exposure, according to this leaked memo (via The Dynamics of Cats) that AIG sent to the US Treasury in order to beg for another $30 billion.

http://www.boingboing.net/2009/03/09/aig-h...sured-16-t.html

Previously:

CNN's Peter Wilkinson has been running the numbers on AIG's record-smashing $62 billion quarterly loss, the largest corporate loss in history (AIG lost about $460,000 per minute in the last quarter). In addition to being sufficient to carpet an area the size of Baghdad in $1 bills, $62 billion ... :

It could pay off the combined national debts of China, Australia, Mexico and Ukraine, according to 2008 estimates by the CIA Factbook, and still have plenty left over for a good night out.

Britain's Queen Elizabeth II might not be moving any time soon, but the money could buy 46 Buckingham Palaces, according to a 2008 estimate of its market value by the Daily Telegraph newspaper. And still leave some remaining to buy her weekend retreat, Windsor Castle.

http://www.boingboing.net/2009/03/03/what-...ml#previouspost

Treasury Official Who Let AIG Cook Books Is Allowed to Retire
March 10th, 2009

Via: ABC News:
[remembering, says Magmak1, that ABC is owned by Capital Communications begun by Wall Street insider and CIA Director William Casey....]

The man at the center of a fraud scandal at the Treasury Department has been allowed to quietly quit and retire from his job as a government regulator, despite allegations that he allowed a bank to falsify financial records and amidst outcries from investigators who say the case shows how cozy government regulators have become with the banks and savings and loans they are supposed to be checking on.

Darrel Dochow, the West Coast regional director at the Office of Thrift Supervision who investigators say allowed IndyMac to backdate its deposits to hide its ill health, quit last Friday. Prior to his leaving, Dochow was removed from his position but remained on the government payroll while the Inspector General’s Office investigates the allegations against him.

Treasury Department Inspector General Eric Thorson announced in November his office would probe how Dochow allowed the IndyMac bank to essentially cook its books, making it appear in government filings that the bank had more deposits than it really did. But Thorson’s aides now say IndyMac wasn’t the only institution to get such cozy assistance from the official who should have been the cop on the beat.

Investigators say Dochow, who reportedly earned $230,000 a year, allowed IndyMac to register an $18 million capital injection it received in May in a report describing the bank’s financial condition in the end of March.

“They [IndyMac] were able to maintain their well-capitalized threshold and continue to use broker deposits to make loans,” said Marla Freedman, an assistant Inspector General at Treasury. “Basically, while the institution was having financial difficulty, it kept the public from knowing earlier than it otherwise should have or would have.”

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules -- even if it disguised the bank’s health to the public.



http://cryptogon.com/?p=7411

Bailing Out America's Most Corrupt Capitalists
Bottom Feeders at the Trough
By SHARON SMITH
March 12 , 2009

The federal bailout of insurance giant American International Group (AIG) swelled to $170 billion in early March after a third infusion of taxpayer dollars. Yet even as the final details were being ironed out on February 28th, AIG filed a lawsuit against the government, claiming the IRS owes it $306 million in previous overpayments on taxes, interest and penalties. "AIG is taking this action to ensure that it is not required to pay more than its fair share of taxes," a company spokeswoman explained to the Wall Street Journal without a hint of irony.

AIG’s stunning lack of gratitude toward its rescuers demonstrates the degree to which greed still pays on Wall Street. AIG executives, of course, emerged as the unwitting personification of unbridled corporate opulence after the company’s first two federal bailouts in September and October, when AIG hosted a $440,000 luxury spa vacation in California and then flew another group of executives to England for an $86,000 partridge hunt. AIG’s chief executive officer, Edward Liddy, finally agreed to cancel more than 160 subsequent executive entertainment events with a price tag of more than $8 million -- leaving observers to wonder when these corporate parasites bothered to even show up at the office.

The Federal Reserve has engaged in much hand wringing over AIG’s responsibility for its own demise. Federal Reserve Chairman Ben Bernanke minced no words, arguing, “AIG exploited a huge gap in the regulatory system… This was a hedge fund basically that was attached to a large and stable insurance company.” AIG particularly favored providing guarantees for collateral debt obligations (CDOs), or bonds backed by debts -- including subprime mortgages. But when Federal Reserve Vice Chairman Donald Kohn appeared before the Senate Banking Committee on March 5th, he refused to disclose the names of AIG’s top corporate trading partners, who have been among the biggest beneficiaries of the AIG federal bailout, arguing, "I would be very concerned that if we started giving out the names of counterparties here, people would not want to do business with AIG.”

The Wall Street Journal has discovered the names of some of the recipients of AIG bailout money. The cast of characters is familiar, mainly large U.S. and European banks that were AIG’s top traders, which have together received roughly $50 billion in taxpayer money since September. The U.S. firms include investment giants Goldman Sachs and Merrill Lynch, with each receiving 100 cents on the dollar for their CDOs, although market value was only 47 cents on the dollar, according to the Financial Times. For these Wall Street insiders, AIG’s bailout proved to be a cash cow.

* * *

Merrill Lynch has meanwhile been embroiled in yet another unfolding scandal -- along with its new owner, Bank of America (BofA), which received $35 billion from the Treasury's Troubled Assets Relief Program (TARP) and another $20 billion in loans last fall. Just weeks before Merrill passed into BofA’s hands on January 1st, it paid out $3.6 billion in bonuses -- four top executives alone shared $121 million in cash and stocks -- while the company posted a fourth quarter loss of $15.84 billion. The bonuses were given about a month ahead of Merrill’s normal schedule, without explanation.

BofA CEO Ken Lewis initially told Congress he had “no authority” over Merrill’s decisions until January and even feigned disapproval of the bonus payments. He told the House Committee on Financial Services in February, “We urged Merrill Lynch execs involved in this compensation issue to reduce the bonuses substantially particularly at the top.” Evidence soon emerged, however, that the merger agreement that Lewis signed on September 15th explicitly authorized bonuses of up to $5.8 billion to Merrill employees. New York Attorney General Andrew Cuomo announced in March that his office is investigating whether the early bonus payments motivated Merrill’s traders to mark down their positions in order to exaggerate their success once under BofA control in January. BofA has refused to turn over a list of Merrill’s 2008 individual bonus payments to prosecutors, arguing it would be an invasion of employee privacy.

Interestingly, the federal government helped to arrange the acquisition of Merrill by Bank of America on the same September weekend that it refused to rescue the equally troubled investment bank, Lehman Brothers.

* * *

The Federal Reserve and Treasury Departments have not merely rewarded the system of reckless betting with other people’s money that caused the banking crisis; they have also resuscitated the careers of some of the same executives who lost the biggest bets. A dozen former executives from mortgage lender Countrywide (which is also now owned by BofA), whose predatory lending practices played a key role in precipitating the subprime mortgage crisis, have launched a new corporate entity, the Private National Mortgage Acceptance Company -- with a strategy to make exorbitant profits from individuals unable to keep up with their monthly mortgage payments.

Known as PennyMac, the company buys overdue mortgages at steep discounts from the federal government, which took them over from distressed banks. PennyMac then contacts the homeowners to negotiate new terms -- and either pushes them into foreclosure or negotiates lower interest rates. It’s a win-win equation for PennyMac.

One of PennyMac’s leaders, Stanley L. Kurland is a former president at Countrywide and an architect of the classic sub-prime mortgage formula -- mortgages with low “teaser” interest rates that later rose sharply. During the six years before Kurland left Countrywide in late 2006, Countrywide’s portfolio increased from $62 billion to $463 billion. Kurland sold $200 million in stocks shortly before leaving Countrywide. Now he stands to make many millions more reaping profits from the same category of people whose lives he helped to destroy. Federal banking officials nevertheless defend recruiting executives like Kurland to rebuild the financial system. As the New York Times explained: “[Federal officials] said that it was important to do business with experienced mortgage operators like Mr. Kurland, who know how to creatively renegotiate delinquent loans.”

Now the Federal Reserve and Treasury Departments are seeking to forge “an alliance with the very outfits that most benefited from the bonanza preceding the collapse of the credit markets: hedge funds and private-equity firms,” as the Washington Post reported on March 6th. The government’s new program, Term Asset-Backed Securities Loan Facility (TALF) states as its primary aim to resurrect the “shadow banking system” -- the entirely unregulated investment-banking sector that proved responsible for much of the banking crisis.

Nevertheless, the government hopes to lure these same wealthy investors to start lending money again by offering the promise of easy profits without the risk of major losses. In what it is calling a “public-private partnership,” hedge funds would keep all profits, but the government would use taxpayer dollars to pick up the entire tab except for the investors’ initial down payments, in the case of a loss.

* * *

The credibility of the financial system was already on the skids when the most recent phase of the AIG and Merrill Lynch scandals began to break. Yet Wall Street powerbrokers thus far remain remarkably insulated from the class anger they have provoked on a scale not witnessed in many decades. Obama’s Treasury Secretary Timothy Geithner’s own failure to pay $34,000 in taxes while a self-employed staffer at the International Monetary Fund surely added to the sense of irony on March 3, when Geithner informed the House Ways and Means Committee that the Obama administration plans to crack down on tax evaders. Within days after Obama announced plans to slightly reduce tax rates on deductions for the wealthiest 1.2 percent of taxpayers (from $35 to $28 for every $100 of deductions), Geithner quickly suggested that the Obama administration would be willing to drop or reduce the tax hike.

The federal government’s ability to bail out the nation’s most corrupt capitalists appears inexhaustible, yet only crumbs have been made available for those who have produced all their profits. Wall Street insiders are still feeding at a bottomless trough funded by the millions of workers now facing mass layoffs, losing health insurance and confronting home values that are lower than their mortgages. But it is only a matter of time before the dam begins to break.

At a time when one in every nine U.S. homeowners with a mortgage is either in arrears on monthly payments or in some stage of foreclosure, as was the case by the end of 2008, not a single financial expert has considered the one measure that might bring relief on par with the scale of the mortgage crisis: a national moratorium on foreclosures. With official unemployment in a tailspin at 8.1 percent (and the actual combination of unemployment and underemployment at least double that figure), the government should, at minimum, offer unemployment benefits to anyone who is unable to find work for the duration of this financial crisis. Such measures would only begin to rectify the vast discrepancy between federal government support to Wall Street and Main Street. But we should expect no substantial change in policy with massive pressure from below.

Sharon Smith is the author of Women and Socialism and Subterranean Fire: a History of Working-Class Radicalism in the United States. She can be reached at: sharon@internationalsocialist.org

http://www.counterpunch.org/sharon03122009.html

"From what is known, it certainly does not appear that A.I.G’s trading partners were entirely innocent victims of extraordinary circumstances. A.I.G. was a key player in a type of unregulated derivative called a credit default swap. Such swaps are often defined as a form of insurance because the seller guarantees payment to investors in case their investments go bust. They are not safe insurance in any familiar sense, however, because A.I.G. was not required to set aside reserves in the event of a claim. That is why, when the bubble burst and defaults rose, A.I.G. was unable to make good, provoking the bailouts.

Still, the trading partners knew, or should have known, how dangerous the swaps were."


March 15, 2009
Editorial
Following the A.I.G. Money

The bailouts of American International Group are also rescues of its trading partners — banks and other financial firms — that would have lost out if the insurer had been allowed to fail. But even after four bailouts between last September and this March, no one knows with certainty who those partners are or how much of the bailout money, now totaling $160 billion, has gone to make them whole.

A.I.G. has not said who they are, and neither have government officials in charge of the A.I.G. bailouts — mainly Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke — despite repeated inquiries from Congress. (The Wall Street Journal, citing confidential documents, reported recently that about $50 billion in 2008 bailout money from A.I.G. went to at least two dozen firms, including Goldman Sachs, Merrill Lynch, Bank of America and European banks.) Late last week there was talk that more official information was forthcoming, but no one has seen it yet.

The secrecy is unacceptable. Taxpayers have a right to know how their tax dollars are being spent. Equally important, understanding how the financial crisis happened is crucial to ensuring that it does not happen again. To that end, Congress and the public alike need to know which firms are on the receiving end of the bailouts, how they came to require a government lifeline, and what responsibility they bear for the financial mess.

From what is known, it certainly does not appear that A.I.G’s trading partners were entirely innocent victims of extraordinary circumstances. A.I.G. was a key player in a type of unregulated derivative called a credit default swap. Such swaps are often defined as a form of insurance because the seller guarantees payment to investors in case their investments go bust. They are not safe insurance in any familiar sense, however, because A.I.G. was not required to set aside reserves in the event of a claim. That is why, when the bubble burst and defaults rose, A.I.G. was unable to make good, provoking the bailouts.

Still, the trading partners knew, or should have known, how dangerous the swaps were. And that is not necessarily the whole story. In the manic years of this decade, credit default swaps took off as a way to bet on the likelihood of default by a firm or an investment portfolio, without having to own any financial interest in the firm or portfolio. That is definitely not insurance, it is gambling. The reason it is not illegal gambling is that, in 2000, Congress specifically exempted credit default swaps from state gaming laws.

The result? Eric Dinallo, the insurance superintendent for New York State, has said that some 80 percent of the estimated $62 trillion in credit default swaps outstanding in 2008 were speculative.

It is unknown how much of the credit default swaps between A.I.G. and its partners were for speculation. That is a question that demands an answer. Also unknown is how much had been wagered on the demise of A.I.G. By intervening to prevent the insurer’s failure, the government prevented those bets from having to be paid. Who was let off the hook?

It is not enough to simply know more about A.I.G., its trading partners and their activities. What is needed is transparency going forward. Banks resist the idea of requiring that all trading in credit default swaps be conducted on exchanges, in the open and subject to full regulatory scrutiny. It is an idea, however, that is long overdue.

http://www.nytimes.com/2009/03/15/opinion/...agewanted=print

* September 16, 2008, 2:57 PM ET

The AIG Crisis, By the Numbers

As the fate of American International Group is decided in a complicated dance that includes the Federal Reserve, J.P. Morgan Chase and the governor of New York, the markets are scavenging for perspective and information on the massive insurer. Deal Journal tracked down some key numbers that offer a view into AIG, how much it has, how much it owes and what it could sell.
$1.04 trillion

The size of AIG’s balance sheet as of June 30, down from $1.06 trillion in December.
$712 billion

The approximate size of AIG Investments, a 500-staff fund-management arm that puts money into private-equity funds and so-called funds of funds. AIG Investments was founded in 1996 with 300 staff to oversee $75 billion of AIG’s assets. Total assets under management rose by $14 billion in the first eight months 2007, or about equal to the total value of assets that came in during all of 2006. It is unclear how much has been added since.
$70 billion-$75 billion

The size of the loan the Fed asked to be arranged for AIG by J.P. Morgan and Goldman Sachs Group. The investment banks said today that attempt has failed.
$15.2 billion

The amount of excess capital AIG had going into the second quarter, after a $20.2 billion capital raising that helped fund a $5 billion shortfall.
0

The amount of excess capital now on hand.
$14.5 billion

The amount of money AIG needs to pay to its trading partners as a result of Monday night’s credit-rating downgrades by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch. AIG Financial Products may need to put up another $5 billion to $10 billion of collateral on its debt, which would bring the total to $20 billion-$25 billion, according to Credit Suisse Group estimates.
$20 billion

The amount of cash AIG could pull from its own insurance subsidiaries as a result of a change in New York State insurance regulations announced Monday. Friedman Billings Ramsey analyst Bijan Moazami argued today that AIG could make a bridge loan to itself with that money.
$23.8 billion

Year to date unrealized losses on AIG’s total portfolio, according to Morgan Stanley estimates last week. Morgan Stanley said deteriorating residential mortgage-backed securities and commercial mortgage-backed securities have likely led to an escalation in these losses in the third quarter.
As much as $42 billion

What AIG could raise from the sale of a handful of businesses, according to Citigroup analyst Joshua Shanker. It includes $2 billion for the transatlantic reinsurance business, $1 billion for its investment in the Property Insurance Co. of China, $10 billion for the ILFC aircraft leasing businesses, $5 billion for the value of $100 billion in third-party investments managed under AIG Investments, $5 billion to $15 billion for VALIC and other annuities in the U.S. including 21st Century, $7 billion for its personal insurance lines, and just under $2 billion for its Blackstone Group assets and investments.
10%

The odds Shanker put on AIG being able to sell assets in time to boost its short-term liquidity.
3,500

The number of basis points that spreads on AIG credit-default swaps jumped recently, according to derivatives research firm CDR. CDSs are like insurance policies on AIG’s survival, and when spreads widen it means more investors are betting the firm will fold within a certain amount of time.
74 million

The number of AIG customers world-wide. The firm also has offices in 130 countries and is listed on three stock exchanges, including the New York Stock Exchange and the exchanges in Ireland and Tokyo.

http://blogs.wsj.com/deals/2008/09/16/the-...bers/tab/print/

Deutsche Bank, AIG Trading and JPMorganChase to Collaborate on Foreign Exchange Prime Brokerage.
Date: Apr 7, 2003
Words: 1076
Publication: Business Wire


Business Editors

NEW YORK--(BUSINESS WIRE)--April 7, 2003

AIG Trading, JPMorganChase and Deutsche Bank select Traiana Inc.

for service to automate Prime Brokered trades

Leading foreign exchange prime brokers JPMorganChase (NYSE:JPM), Deutsche Bank (NYSE:DB) and AIG Trading Group today announced a collaborative effort to dramatically streamline foreign exchange (FX) trades. The collaboration will improve upon and replace manual processes used by executing brokers to "give up" trades to prime brokers.

Using a new online service from Traiana® Inc., the effort allows the firms to integrate systems using a secure, shared, Internet-based service, eliminating manual processes which slow trade booking and introduce errors. Institutional clients of the three firms will benefit from increased efficiency from straight through processing (STP) for all FX prime brokerage trades and real-time access to trade information. Prime brokers and executing brokers using the service are able to lower costs, significantly reduce operational risk and increase service levels to clients.

Deutsche Bank, AIG Trading, and JPMorganChase will use the Traiana Harmony(SM) service to integrate their foreign exchange prime brokerage systems with each others' FX trading systems, eliminating the need to re-key give up trades into a dealing system. Executing brokers will be able to give up their trades via electronic messaging including XML, IBM MQSeries, or SWIFT over the Internet and secure private networks. A simple web give-up and monitoring interface is also provided for smaller or lower volume brokers. Executing brokers who give up trades to the three firms can register at www.traiana.com/harmony to receive more information and begin the integration process. The three firms expect to be fully integrated in the second half of this year.

Important Industry Initiative

"AIG Trading Group is committed to providing superior service and products to our Prime Brokerage clients. By collaborating with JPMorganChase and Deutsche Bank, we enhance our e-Prime Brokerage solution. With Traiana, AIG provides connectivity technologies that offer superior trade processing capabilities and client service functionality. Clients benefit from simplicity and efficiency," said John Wareham, AIG Trading Group's Executive Vice President and Global Head of Foreign Exchange and Emerging Markets.

"Deutsche Bank has led the industry in electronic FX prime brokerage as we have deployed a fully automated STP solution for handling client trade information. Integrating the executing brokers into our Traiana-based prime brokerage system was the next logical step. With the combination of a robust e-prime brokerage system, this collaboration and Traiana's capabilities, we are better positioned to handle greater volume while maintaining our high level of client service." said Andy Coyne, Director, Global Liquidity Services, Deutsche Bank.

"JPMorganChase has made a significant commitment to our FX prime brokerage business, and this strategic initiative takes it one step further. Our collaboration with Deutsche Bank and AIG Trading will improve service levels to our clients and create efficiency in our industry. Traiana's focus on FX prime brokerage and strong technology made Traiana the right provider for this initiative." David Puth, Global Head of Foreign Exchange & Commodities, at JPMorganChase said.

"Traiana is pleased to be selected for this industry initiative. As the leading software provider for institutional client service and trade operations, our Trading Relationship Management (TRM) solution has already integrated over 40 of the largest buy-side firms into their prime broker. Seamless integration to the executing brokers was the final piece of the puzzle," said Gil Mandelzis, CEO, Traiana Inc. "With Traiana Harmony, the trade lifecycle will be fully automated to benefit our customers' institutional clients."

Reinforcing the importance of industry collaboration, Sang Lee, Manager, Securities and Investments Research, Celent Group, states, "The collaboration of AIG Trading, Deutsche Bank and JPMorganChase is significant in that it has a head start in the industry. Compared to standards-based approaches, this initiative is well-positioned with its pragmatic, adoption focus. The compelling piece is that while Traiana Harmony increases the integrity of the trade process, Deutsche Bank, AIG Trading and JPMorganChase are increasing service levels to clients."

About Deutsche Bank

With roughly EUR 758 billion in assets and approximately 77,000 employees, Deutsche Bank offers its 13 million clients unparalleled financial services in 76 countries throughout the world.

The Bank aspires to be a leading global provider of integrated financial solutions for demanding clients and the pre-eminent bank in Germany generating exceptional value for its shareholders and people.

Deutsche Bank ranks among the global leaders in corporate banking and securities, transaction banking, asset management, and private wealth management, and has a significant private & business banking franchise in Germany and other selected countries in Continental Europe.

www.deutsche-bank.com

About AIG Trading Group Inc.

AIG Trading Group Inc., through its subsidiaries, engages in trading and market making in foreign exchange, emerging markets, precious and base metals, energy products and commodity indices.

AIG Trading provides highly personalized customer service and creates innovative risk management products for multinational corporations, financial institutions, commercial producers and users, institutional investors and sovereign entities.

AIG Trading's breadth of service includes currency and commodities prime brokerage, client-tailored back-office support, and access to e-commerce trading portals and insightful political and economic research from leading figures in the financial services industry.

AIG Trading operates through a worldwide network of offices including its Greenwich, Connecticut headquarters, London, Paris, and Singapore.

For further information regarding AIG Trading, contact Beth Cutler, Director of Corporate Marketing at 203-861-3804 or bcutler@aigtrading.com.

About JPMorganChase

J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $759 billion and operations in more than 50 countries.

The firm is a leader in investment banking, asset management, private banking, private equity, custody and transaction services, and retail and middle market financial services.

A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients.

Information about JPMorganChase is available on the internet at www.jpmorganchase.com.

About Traiana Inc.

Traiana Inc. provides global banks and broker/dealers with Trading Relationship Management solutions which improve relationships with trading partners and clients and streamline trade operations to lower costs.

Traiana's FX Prime Brokerage solution is in use today by leading banks to deliver streamlined, exception-based trade processing combined with superior client service, trading partner integration and real-time reporting.

Traiana is headquartered in San Mateo, California, with offices in major financial centers around the globe.

For more information visit the Traiana web site at www.traiana.com or contact us at info@traiana.com.
COPYRIGHT 2003 Business Wire
Copyright 2003, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.



http://blogs.wsj.com/deals/2008/09/16/the-...bers/tab/print/

AIG BIGGEST COUNTERPARTIES...

Update | 6:23 p.m. The American International Group on Sunday released the names of financial institutions that benefited last fall when the Federal Reserve saved it from collapse with an $85 billion rescue loan and then 3 subsequent bailouts.

The disclosure included counterparties to both its credit default swap operations and its securities lending businesses, both of which contributed heavily to A.I.G.’s troubles, as well as to muncipalities who participated in certain investment programs. All told, Sunday’s statement detailed payments of more than $78 billion, all made using government loans. (Read the disclosure by A.I.G. after the jump.)

Many critics of the company have demanded the names of A.I.G.’s counterparties as the insurer received government money totaling $170 billion. A.I.G. said in a statement that it made the disclosure in consultation with the Federal Reserve.

“Our decision to disclose these transactions was made following conversations with the counterparties and the recognition of the extraordinary nature of these transactions,” Edward M. Liddy, A.I.G.’s government-appointed chief executive, said in a statement.

Time and again, the rationale given for bailout out A.I.G. was that its credit default swap agreements — essentially insurance contracts on mortgage-backed securities — were so interwoven into the global financial web that to let the insurer fail would create chaos.

As the mortgages underlying the credit default swap agreements decayed, A.I.G. was required to post collateral to its counterparties. By September, the firm warned that it would run out of money, prompting the government to swoop in with its initial $85 billion loan. That money was used to post collateral to counterparties, including France’s Société Générale, Germany’s Deutsche Bank and Goldman Sachs.

All told, the posting of collateral for the swap agreements cost $22.4 billion, A.I.G. said. The money was paid to the counterparties between Sept. 16 and Dec. 31.

A subsequent government bailout provided money for the Federal Reserve to buy the securities underpinning these credit default swap agreements, canceling the contracts. Nearly $30 billion was spent to do so.

Foreign banks, including Deutsche Bank, France’s Societe Generale and Calyon and Britain’s Barclays, figured prominently among the firm’s credit default swap counterparties.

Deutsche Bank, Goldman Sachs and others also were owed money under securities lending agreements with the insurer. In this business, A.I.G. lent out shares in companies, primarily to hedge funds that sold short. While the business is normally considered safe, A.I.G. had reinvested proceeds from the business into mortgage-backed securities to earn a higher return. Those investments have since sunken in value.

Nearly $44 billion was paid out to 20 firms, most of which were banks. (One non-bank that appeared on the list was the Citadel Investment Group, the giant hedge fund based in Chicago. It received about $200 million.)

A.I.G. also disclosed $12.1 billion in payments to municipalities, including about $1 billion each to California and and Virginia, under guaranteed investment agreements. These were essentially places for municipalities to hold money raised from the likes of bond issuances until the cash was needed.

The insurer has already taken fire this weekend for its plans to pay out more than $165 million in bonuses to employees in the unit that brought A.I.G. down to its knees. Despite the consternation of the Obama administration and Republicans alike, the company was allowed to make the payments because of contractual obligations.

At a Senate Banking Committee hearing earlier this month, legislators demanded to know who was on the opposite side of the table from A.I.G. on these contracts.

”We need to know who benefited, and we’re going to find out,” said Senator Richard C. Shelby, Republican of Alabama and the ranking member of the committee. ”The Fed can be secretive for a while but not forever.”

–Michael J. de la Merced

DOWNLOAD FROM SITE:

http://www.scribd.com/doc/13294757/AIGs-Bi...-Counterparties

http://www.aig.com/Related-Resources_385_136430.html

HERE'S A WHOLE NEST OF THEM TO WATCH WHEN 'DADDY GOES TO JAIL' FOR AIG...


The Geneva Association also acts as a forum for its CEO members who gather at the annual General Assembly. It further provides a series of platforms for senior insurance executives so they can exchange ideas and discuss key strategic issues. As a non-profit organisation, The Geneva Association serves as a catalyst for progress and as an information creator and multiplier.
http://www.genevaassociation.org/

WHO IS AIG?
Part 2 of Investigative Series
By Mike Ruppert
August 14, 2001

Reprinted from FROM THE WILDERNESS

RELINKED BY REQUEST
Wednesday, 18 March 2009

This series is dedicated to Mark Swaney of the Ozark Gazette for his intellectual courage and tenacity; to John McGlaughlin, the straightest and toughest man who ever honestly carried a badge; to Celerino Castillo III, with a heart bigger than his beloved Texas; to all the young men and women, mostly minorities, who are serving up to life in prison for crimes that don't remotely compare to those of Carlos Lehder; and to all the innocents in Colombia who stand at the brink of the next Vietnam War.

##

There are mounting holes in the story of a woman, Coral Talavera Baca (henceforth referred to by her maiden name Talavera), who has claimed to be the wife of Medellin Cartel co-founder, Carlos Lehder, deepening the mystery about relationships between her, Lehder himself, the insurance giant American International Group (AIG), and the Central Intelligence Agency. These new discrepancies, including her prior confirmation of the authenticity of documents now suspected of being forged, have raised the possibility that the U.S. Government, in partnership with AIG, has been deliberately planting false information in the press to support the woman's claims about Lehder's reported freedom and activities. Talavera has been simultaneously described as either Staff Counsel for AIG's in house San Francisco law firm or as its office manager.

In Part I of this series we reported that other journalists, who have asked not to be identified, had received the same documents we continue to examine here. Some of those documents purport to be official reports from the U.S. Treasury and U.S. Attorney's offices. As FTW moves deeper into its multi-part investigation - inspired by revelations of possible 1987-92 drug money laundering involving AIG, Goldman Sachs and the Arkansas Development Financial Authority (ADFA) - attention now focuses on Talavera's employer, AIG. These events increased my interest in the 1987 founding of Coral Reinsurance (Coral Re) by AIG, Goldman Sachs (whose then Vice Chairman Robert Rubin served as Treasury Secretary in the Clinton Administration) and ADFA. Lehder, arrested in 1987, was allowed to keep almost $3 billion in assets in a move severely criticized by Merkle. Where did that money go? Was it hidden it in a major insurance company with cash flows large enough to conceal it? This question, more than any other, except establishing Lehder's current status, prompted me to begin this investigation.

What is known about the firm which employs Talavera, who is not a lawyer, and permits her to represent herself as "Staff Counsel" for its San Francisco legal office while simultaneously representing herself as the wife of a one-time cocaine cartel head? On June 22, just two days after I had lunch with her and confirmed that I was writing a story, a receptionist at Brown and Boland, AIG's San Francisco in-house counsel, told me and others that Talavera had fled her employment and gone to Cuba. Yet the firm, located in the AIG building and using AIG e-mail addresses, is currently announcing in new, dated voice mail messages, that she is still the office manager.

FTW has also conducted an extensive investigation into AIG and its predecessors, including the C. V. Starr Insurance Companies, revealing deep connections to US intelligence dating back to the Office of Strategic Services (OSS) in World War II. These connections include documented CIA operatives connected to drug smuggling from Southeast Asia and a current board member, Frank Wisner, Jr., whose father was a key figure in the creation of the CIA. History, as well as AIG's current operations, suggest that these relationships continue unabated today.

These connections may go a long way toward explaining the behavior of Talavera, a woman whose education, work experience and history apparently do not qualify her to manage a legal office which, according to AIG spokesman Michael Murphy, specializes in the international operations of a company operating in 130 countries and with year 2000 revenues of $46 billion.

While the mystery deepens about the woman claiming to be his wife, the key question as to whether or not Lehder is free remains unanswered.

In Part I of this series I reported that through a number of vehicles including correspondence, e-mails, a telephone listing in the name of Carlos Lehder, tape recorded conversations and in-person statements Coral Talavera had represented to a number of people, including a retired DEA agent, me and others that she was the wife of Medellin Cartel co-founder Carlos Lehder. In an on-the-record interview and a legally tape recorded conversation she has also vouched for the authenticity of documents that have either been shown to be forged or are now seriously suspected of being forged. She additionally made it clear that Lehder was out of prison, working for the United States government and directly connected to the CIA and the U.S. Treasury. This scenario was circumstantially, but well supported by statements from a number of credible sources, including reporters, Congresswoman Maxine Waters and Lehder's prosecutor (former U.S. Attorney Robert Merkle). Their independent statements gave credibility to many of Talavera's assertions. And suspicion or belief has been widespread that Lehder is, in fact, free -- regardless of Talavera's actions. All this is in spite of the fact that Lehder has been officially serving 55 non-parolable years in prison after giving testimony of questionable value in the 1990 trial of former Panamanian dictator Manuel Noriega. Noriega's prosecutor, Robert Mueller, who put Lehder on the stand, has just recently been confirmed to head the FBI.

During a lunch meeting with Talavera on June 20 of this year, she went on the record with me stating that she had worked for AIG since 1994 and that she also owned a currently existing company named Capital Investment Group, Ltd. (CIG) in the Bahamas. She had earlier written me, speaking for Lehder, stating that neither she nor Lehder had any connection to Coral Re. In a 1999 tape recorded conversation she had discussed her marriage to Lehder and e-mail notifications allegedly sent by him introducing her as his wife. My investigation since that time has proven all of these assertions, and many others allegedly made to colleagues or social contacts, are lies at worst, or seriously suspect, at best.

One of the critical documents discussed in Part I of this series was a U.S. Treasury "Report of Investigation," the authenticity of which I had been unable to ascertain despite repeated contacts with Treasury. Since publication of Part I have received communication from "Kincaid," a confidential legal source, who has obtained an evaluation of that document from Lehder's current legal team, that the document is not authentic. This was the same document that, at the June 20 lunch meeting, Talavera went on the record to evaluate, line by line, and state was a real document that had been filed in a court case that she would not disclose to me.

The purpose of this portion of the on the record interview was to clarify Talavera's relationship with a Bahamian investment company known as Capital Investment Group, Ltd.

Although Bahamian law provides great secrecy for corporations, I was able to learn in late July that CIG in the Bahamas was "not listed" on government records. Through a confidential source with Caribbean banking connections, I was told that a banking official offered four possible explanations for CIG's "lack of registry." They include: the company was never formed; the company failed to pay dues; the file was lost; and, the file was lost intentionally at the request of the Prime Minister or the Attorney General. Coincidentally, the largest single shareholder in AIG, the Starr International Company (SICO), owning 13.62% of AIG stock, is also headquartered in the Bahamas.

Information, developed while looking further into Talavera's background now casts suspicion on the 1999 reported birth of a son, allegedly fathered by Lehder, as well as her employment history, education and qualifications to manage a legal office. So, with the exception of the statement that neither she nor Carlos Lehder had anything to do with the founding of Coral Re, almost all of Talavera's statements regarding her history have been shown to be false. This now calls the Coral Re denial into question as well.

All of this begs the question as to why AIG would protect and employ a woman engaged in these and other behaviors and with a history that could only damage the company's reputation. The one fact of Coral Talavera's life that has not been called into question by any of the sources I have contacted is that Coral knew and had a relationship with Carlos Lehder in the 1980s. The suspicions of many that Lehder is free have not yet been allayed. So these disturbing developments also drive home the importance of a question that the US government still has not answered. Where is Carlos Lehder and what motive could the government -- or AIG -- have for wanting some people to believe, or know, that he is free? If I am so patently wrong in what I have reported in this investigation, including the publication of the tape- recorded conversation wherein Talavera openly talks about Lehder's freedom and says that she is his wife, why doesn't the government just deny it, produce Lehder, discredit Talavera and state that the rest is pure bunk? Is there a legend -- a cover story -- that the CIA and AIG are trying to protect for the benefit of unknown third parties in other parts of the world?

Why would AIG spokesman Michael Murphy have stated, after speaking with me and learning of Talavera's representations regarding Lehder, that he mentioned them briefly to her but did not pursue them because he, "didn't want to pry"?

Deconstructing Coral

Coral Talavera's life has improved dramatically since 1995, the year that she provided San Jose Mercury News reporter Gary Webb with documents including federal grand jury transcripts that started an investigation which subsequently established, through government records and a CIA Inspector General report, that the CIA was a hands-on player in the drug trade during the Contra war years of 1982-88. According to records filed in a protracted and contentious 1994 divorce case involving a previous husband -- which I obtained from the court -- Talavera was working as a legal secretary for the Oakland law firm of Hanna, Brophy et al. Her salary was approximately $26,000 per year and, according to a spokesperson for the firm which I also visited recently, she was employed there for two years until February, 1994. Hanna, Brophy specializes in Workman's Compensation defense of insurance companies in California.

Confidential sources familiar with Talavera led me to another law firm, Schmit, Morris, Bitner and Schmit where she reportedly worked throughout 1995 and into 1996, also as a secretary. Representatives of that firm refused to disclose any information unless I presented written authorization from Talavera for them to do so. Schmit, Morris is also a law firm exclusively devoted to Workman's Compensation defense. It may be a single-client firm representing AIG which may explain Talavera's "promotion" to the in-house firm but I have been unable to confirm this.

Briefs and petitions filed in Talavera's divorce also indicate that she was the mother of one female child whose paternity was ultimately questioned and later verified as being of Talavera's then husband. In a dispute over the property settlement it was alleged that she had stolen the seal of a notary public and forged a deed giving her sole title to a piece of real estate that was later judged to be community property. This fact lends credibility to allegations made by a number of people, who asked not to be identified, that she was the likely source of the forged documents. Those include forged newspaper stories and magazine articles, alleged memoranda from an unspecified U.S. Attorney's Office, a faked custom printed invitation to a birthday party allegedly sent by Lehder, photographic surveillance reports (including one purporting to be of her newborn son, Carlo), and the Treasury report which was described as "consistent with similar reports" by a source familiar with Lehder's case. [Some of these documents are posted on the FTW web site at www.copvcia.com. ]

It was also alleged in the divorce settlement that Talavera had deliberately placed the name of someone other than the real father, her then husband, on the birth certificate of her daughter. Even though she told me, during a 1998 unsolicited phone call, initiated by her, that she was going to have a child by Lehder, people who knew her during the period state that she was never pregnant. As Talavera's story fell apart I checked birth records in two Bay Area counties and found no recorded births listing Talavera as the mother aside from the 1992 birth of her one known daughter. Yet, in the 1999 taped conversation with Castillo, Talavera specifically referred to a purported news story entitled Beauty and the Beast which described a society function which Talavera and Lehder allegedly attended in 1999, "just three days after the birth of her son." During the conversation with Castillo, Talavera did not dispute this reporting about the birth. Instead she went to lengths to castigate the mean-spirited people who had written the story for calling Lehder, her husband, a beast. Asked by Castillo what paper had written the story Talavera stated on the tape, "Aw, who the hell knows?"

One document that seems beyond Talavera's ken, however, is a completely rewritten and re-typeset article from the August, 2000 issue of Architectural Digest, in which the 1,000 word story about the Ixtapa, Mexico home of a Levi Strauss executive was completely rewritten with copy about the new home of Mr. and Mrs. Carlos Lehder. In numerous conversations and in written correspondence I found Talavera to be a good communicator, at times very good, but her writing did not reach the style and skill of the professional journalist who had to rewrite the story and make the copy fit exactly into the same photograph-filled layout before faxing it to me. Indeed, there is nothing in Talavera's educational or employment background, that I have found, to indicate such skill. In fact, her statements to colleagues about her education also reveal more glaring holes in her story.

Acting again on information from confidential sources who have worked with Talavera, I learned that she had allegedly told people that she had BA and MBA degrees from St. Mary's college in the Bay Area. Lacking the ability to quote these sources by name I cannot confirm whether she made the representations or not.

However, a check with the registrar at St. Mary's has revealed that she earned a BA in Liberal Arts in 1988 but has subsequently earned no advanced degrees of any kind. The registrar's office also stated that Talavera was currently enrolled in a graduate program but that it is not an MBA program.

All of these revelations prompted me to recontact Coral's "former" employer on August 3 to see what I could learn about her employment at AIG. It was then that I heard the voice messages informing me that she was still there. These messages, recorded within the last three weeks by senior attorneys Robert Brown and Larry Kloenhamer, both specifically refer callers to Office Manager Coral Talavera if the caller needs immediate assistance. A switchboard operator also confirmed Talavera's current status with AIG. Another interesting fact is that, on his current resume with the California State Bar Association, Robert Brown states that he is a Vietnam-era veteran of U.S. Army Special Forces. There is abundant evidence linking Special Forces to covert CIA operations and drug smuggling during the Vietnam War.

Credible sources with longstanding legal and business experience are perplexed to explain Talavera's apparent meteoric professional rise between 1992 and 1996.

Asked about the transition from legal secretary at a Workman's Comp defense firm to office manager for the firm handling some of AIG's international operations, a legal expert with more than 20 years of experience in a variety of law offices summed up general reactions to Talavera's rise saying, "It's unprecedented."

The question as to what AIG knew and when it knew it gets stickier with the fact that, in no less than ten e-mail messages to me, Talavera had a signature block reading, "Coral Talavera, AIG Staff Counsel, 121 Spear Street, Suite 410, San Francisco, CA 94105. [An example of this can be viewed on my web site at www.copvcia.com]. The legal expert told me that this practice would be illegal in the state of Florida. A spokeswoman for the California State Bar Association told me on August 5 that the use of the term was, at best, misleading. She referred me to the San Francisco County District Attorney's office which subsequently stated that the action could be a violation of California's Business and Professions Code. Although Talavera was quick to point out in a number of conversations that she was not an attorney, the use of the term in official correspondence, might give AIG's overseas clients a different impression.

I have left three messages at AIG's law offices in San Francisco seeking clarification. At press time no calls have been returned. The current voice mail messages refer to Talavera as the "office manager."

So what is known then about the firm which employs Talavera and permits her to represent herself as Staff Counsel for its San Francisco legal office while simultaneously representing herself as the wife of a one-time cocaine cartel head?

Is it possible that AIG's CEO Hank Greenberg, a legendary stickler for detail and hands-on manager, would permit such activity, including the representation about owning an offshore investment company that might compete with AIG? In a June interview, AIG spokesman Michael Murphy, head of AIG operations in the Bahamas and reported to be Greenberg's right-hand man said, "Whenever there's the slightest hint of anything improper or of misuse of funds, [AIG CEO Hank] Greenberg is the first guy to lead the posse and clean house." I placed one follow-up call to Murphy's office for further clarification but it was not returned.

I was able to locate two sources in the insurance industry who were familiar with AIG and ask them if Talavera could be doing all this without Greenberg's knowledge. One response was short and direct, "The possibility that this is going on without Greenberg knowing is less than zero."

The second source was a bit more diplomatic. "M.R. Greenberg is a legendary leader. All current and former AIG employees know he is not only a visionary but a detail oriented person on all aspects of the firm's business activities worldwide. The General Counsel of AIG, Ernest Patrikis, was the senior legal officer of the Federal Reserve Bank of New York, and given the scrutiny AIG is subject to, it would surprise me if Mr. Greenberg was not aware. Sometimes, however, in a big company things slip by, but when he becomes aware, the situation is addressed quickly."

Deconstructing AIG

The seemingly mundane insurance business is, in fact, one of the primary weapons of intelligence gathering around the world. And the founder of AIG, Cornelius Starr, was an architect of its use in World War II.

Consider these quotes from a September 22, 2000 story by Los Angeles Times reporter Mark Fritz entitled, "The Secret (Insurance) Agent Men."

"COLLEGE PARK, Md. -- They knew which factories to burn, which bridges to blow up, which cargo ships could be sunk in good conscience. They had pothole counts for roads used for invasion and head counts for city blocks marked for incineration.

"They weren't just secret agents. They were secret insurance agents. These undercover underwriters gave their World War II spymasters access to a global industry that both bankrolled and, ultimately, helped bring down Adolf Hitler's Third Reich.

"Newly declassified U.S. intelligence files tell the remarkable story of the ultra-secret Insurance Intelligence Unit, a component of the Office of Strategic Services, a forerunner of the CIA, and its elite counterintelligence branch X-2.

"Though rarely numbering more than a half dozen agents, the unit gathered intelligence on the enemy's insurance industry, Nazi insurance titans and suspected collaborators in the insurance business. But, more significantly, the unit mined standard insurance records for blueprints of bomb plants, timetables of tide changes and thousands of other details about targets, from a brewery in Bangkok to a candy company in Bergedorf. 'They used insurance information as a weapon of war,' said Greg Bradsher, a historian and National Archives expert on the declassified records. That insurance information was critical to Allied strategists, who were seeking to cripple the enemy's industrial base and batter morale by burning cities."

"Germany had 45% of the worldwide wholesale insurance industry before the war began and managed to actually expand its business as it conquered continental Europe. As wholesalers, or 'reinsurers,' these companies covered other insurers against a catastrophic loss that could wipe out a single company. In the process, the wholesaler learned everything about the lives and property they were reinsuring [emphasis, mine]."

"The men behind the insurance unit were OSS head William "Wild Bill" Donovan and California-born insurance magnate Cornelius V. Starr. Starr had started out selling insurance to Chinese in Shanghai in 1919 and, over the next 50 years, would build what is now American International Group, one of the biggest insurance companies in the world. He was forced to move his operation to New York in 1939, when Japan invaded China. In the early years of the war, the German insurance industry expanded its business as it conquered continental Europe. Nazi insurance brokers who traveled with combat troops during invasions also scoured local insurance files for strategic data."

On the special value of reinsurance as a vehicle for intelligence gathering Fritz wrote:

"Such convoluted business dealings were traced largely through the work of Ernest Stiefel, a member of the intelligence unit who diagrammed the way insurance companies pooled their risks, invested in and insured each other and, as a result, willfully or witlessly shared data about nations at war. 'Stiefel mapped the entire system, said [Timothy] Naftali, a historian at the University of Virginia's Miller Center of Public Affairs. "Each time I take a piece of your risk, you've got to give me information. I am not going to reinsure your company unless you give me all the documents. That's great intelligence information."

Later in the story Fritz confirmed the value of reinsurance as a vehicle for money laundering:

"With the Axis defeat imminent, U.S. intelligence officials focused greater attention on ways the Nazis would try to use insurance to hide and launder their assets so they could be used to rebuild the war machine..."

And how did Starr benefit from his service? Fritz writes:

"Starr sent insurance agents into Asia and Europe even before the bombs stopped falling and built what eventually became AIG, which today has its world headquarters in the same downtown New York building where the tiny OSS unit toiled in the deepest secrecy.

Starr died in 1968, but his empire endures. AIG is the biggest foreign insurance company in Japan. More than a third of its $40 billion in revenue last year came from the Far East theater that Starr helped carpet bomb and liberate.

"In The Shadow Warriors: OSS and the Origins of the CIA (Basic Books, 1983) author Bradley F. Smith shed more light on Cornelius Starr and the OSS.

"It [a secret intelligence operation in China] was formed in April 1942, when [Bill] Donovan persuaded British insurance magnate C.V. Starr to let C.O.I. (Covert Operations Intelligence) use his commercial and insurance connections in occupied China and Formosa to create a deep cover intelligence network. Although the State Department was nervous about the operation, Donovan went ahead and, with the cooperation of the U.S. Army, bypassed the diplomats in operating the communications system. Starr's people handled their own internal communication, then turned over their intelligence findings to [General Richard] Stillwell's headquarters for dispatch to the U.S. Starr, who was residing in the U.S. at the time, provided these services to the Allied cause. Later Starr became disgusted with what he considered Donovan's inefficiency and transferred his services to the British S.I.S. But the Starr-Donovan connection worked in China at least until the winter of 1943-44.

"The establishment of the Starr intelligence network, an operation so secret that it even escaped the attention of Chiang's [Kai Shek] security police (and of historians heretofore), was a major accomplishment for an intelligence operation barely six months old" [p.133]

Drug Connections

The War Conspiracy (Bobbs-Merrill, 1972) by Peter Dale Scott, Ph.D. of UC Berkeley is a book few Americans have seen. The compelling and meticulously documented history of the creation of the Vietnam War was rushed from bookstores and shelves almost as soon as it was published. Scott, author of Deep Politics and the Assassination of JFK, The Iran-Contra Connection and Cocaine Politics is an expert on the interface between covert operations and the international drug trade. In Chapter Six of The War Conspiracy, entitled "Opium, the China Lobby, and the CIA," Scott traces the connections between drug trafficking in Southeast Asia and American intelligence operations. There are detailed references to C.V. Starr and connections with some figures, like CIA veteran Paul Helliwell, who have been irrevocably and blatantly tied to the drug trade. Those connections also lead directly into the so-called "China Lobby" and firms identified as either CIA proprietaries or "affiliates" such as Sea Supply, Inc. (run by Helliwell), Civil Air Transport (CAT), a CIA proprietary, Civil Air Transport Co., Ltd. (CATCL) -- a separate firm not owned by but affiliated with the CIA through CAT-- and Air America, an evolution of Civil Air Transport. In 1957 the Airdale Corporation which owned 100 per cent of Air America changed its name to Pacific Corp. In 1976 CIA General Counsel Lawrence Houston testified before the Senate's Church Committee looking into intelligence abuses about CIA Air operations. When asked what the one single holding company, above all others, was at the top of CIA proprietary and contract air operations, he identified Pacific Corporation. According to published reports, Houston also testified that the CIA also had interests in investment and insurance companies.

Pacific Corp -- which one source has told me is currently insured by AIG -- and the CIA have, in the 1990s, been connected with the "laundering" of some 28 C-130 military transport aircraft into the hands of private, forest fire, air tanker contractors in the U.S. Subsequently, many of those C-130s turned up all over the world. Some were directly involved in drug trafficking and one in particular, operated by Aero-Postale de Mexico, was seized with a billion dollars in cocaine aboard in Mexico City in 1996. [See FTW, Vol I, No 10 - Dec, 1998]

A key figure in the post-war operations was lawyer Tommy Corcoran, a legendary "fixer" in the Roosevelt Administration, who went on to represent Nationalist Chinese financial interests after the Communists took power in 1949. Corcoran and Helliwell worked closely together in Asia. One of the critical and well-documented U.S. responses to the Communist takeover was to fund remnants of the Chinese Nationalist army -- who had fled into Burma, Thailand and Laos -- with opium. Much of that money, along with the drugs, found its way into the U.S. As noted by writers like the late Jonathan Kwitny of The Wall Street Journal in The Crimes of Patriots (Penguin, 1987) and by Professor Alfred McCoy of the University of Wisconsin in The Politics of Heroin (1972, 1991, Lawrence Hill Books), Helliwell paid the troops using five-pound "sticky" bars of heroin. Helliwell later went on to head Castle Bank and Trust in Florida and the Bahamas and then was heavily involved with The Nugan Hand Bank in Australia and the U.S. Both banks have been heavily linked in official investigations to both drug trafficking and money laundering while also moving money for the CIA.

In The War Conspiracy Scott writes:

"For it is a striking fact that the law firm of Tommy Corcoran, the Washington lawyer for CATCL and [China Lobbyist] T.V. Soong, had its own links to the interlocking worlds of the China Lobby and of organized crime. His partner W.S. Youngman joined the board of U.S. Life and other insurance companies, controlled by C.V. Starr (OSS China) with the help of Philippine and other Asian capital. Youngman's fellow-directors of Starr's companies have included John S. Woodbridge of Pan Am, Francis F. Randolph of J. and W. Seligman, W. Palmer Dixon of Loeb Rhoades, Charles Edison of the postwar China Lobby, and Alfred B. Jones of the Nationalist Chinese government's registered agency, the Universal Trading Corporation. The [Senate] McClellan Committee heard that in 1950 U.S. Life [later part of AIG] (with Edison as a director) and a much smaller company (Union Casualty of New York) were allotted a major Teamsters insurance contract, after a lower bid from a larger and safer company had been rejected, [Jimmy] Hoffa was accused by a fellow trustee, testifying under oath before another committee, of intervening on behalf of US Life and Union Casualty, whose agents were Hoffa's close business associates Paul and Allen DorfmanÉ

"We find the same network linking CIA proprietaries, war lobbies, and organized crime, when we turn our attention from CAT to the other identified supporter of opium activities, Sea Supply, Inc. Sea Supply, Inc. was organized in Miami, Florida, where its counsel, Paul E. Helliwell, doubled after 1951 as the counsel for C.V. Starr insurance interests, and also as the Thai consul in Miami..."

The historical connections to CIA covert or proprietary air operations are interesting in light of the fact that AIG proudly announces in its 2000 annual report that with 494 full-sized jets -- 89 of which it manages itself -- it owns "the world's most modern fleet of aircraft." AIG customers include major airlines and a number of air transport companies. AIG also reported that in 2000 it leased additional aircraft "to a number of established customers" in South America.

CIA proprietary ownership or interest in companies is very difficult to detect. But, it has been proven by writers like Scott and many other researchers who combed through the paperwork that surfaced during the Iran-Contra scandals of the 1980s, where Air America assets were laundered into companies like Southern Air Transport and Evergreen Air. The single largest stockholder in AIG, the Starr International Company (SICO), holds 13.62% of AIG stock. Aside from knowing that Maurice Greenberg owns 21.86% of SICO (source, SEC) we may never be able to find out who, or what, owns the rest.

They Even Put It In Writing

In September 1997 a group of business and labor executives* reviewed and made recommendations on the use of sanctions by the President of the United States to influence world events. One of those executives was Oackley Johnson of AIG. The group, called the Sanctions Working Group (SWG) of the Department of State's Advisory Committee on International Economic Policy, having completed its review of the way the White House has imposed sanctions on foreign governments, completed a detailed report which was sent to the State Department by the Committee head, Michael Gadbaw of General Electric. The advisory panel called for massive revisions in the way sanctions were selected and imposed in foreign affairs to punish or induce foreign governments to behave the way the U.S. wants.

Approval of the recommendations was unanimous from the business community and opposition was unanimous and acerbic from organized labor representatives who sent their dissent separately to the State Department. The report, they said, cared about nothing but the financial interests of major U.S. Corporations.

As an Appendix to the report, which was found at http://www.usaengage.org/studies.html, Footnote 4 following Tab 5 listed valid U.S. foreign policy objectives. It states: This report addresses sanctions undertaken pursuant to laws or regulations that authorize or mandate unilateral economic sanctions in order to achieve a foreign policy objective.

"The foreign policy objectives may include the transition to democracy, opposing terrorism or support of terrorist activities, sanctioning drug production and transit or trafficking, supporting human and worker rights and religious freedom, opposing proliferation of weapons of mass destruction, and protecting the environment."

The language "support of terrorist activities" is ambiguous. It could mean that the U.S. would punish those who support terrorist activities or that it might support terrorist activities itself. The drug trafficking language also catches the panel on the horns of a dilemma. As defined in the American Heritage dictionary, to sanction something means to "grant authoritative permission or approval." A secondary meaning means "to punish." In government documents and reports, especially those laying out or recommending policy, every word is reviewed dozens of times. Lawyers and decision makers sign off on every aspect. Drafts usually circulate for weeks before final approval. This language may mean exactly what it says. And if there is ambiguity then it must have been intended.

The whole purpose of From The Wilderness is to teach the world that it is a specific intent of Wall Street and the U.S. government to give authoritative permission and approval to the drug trade to ensure that drug profits -- the money -- comes back under the control of the people who sanctioned the trade to begin with. Is that what Coral Talavera is doing at AIG? I e-mailed Oackley Johnson at AIG and asked him to comment on the report. At press time he has not responded. I have also solicited (again) comment from AIG Corporate offices on the content of this story. Also no response. But I hope to have something from them for Part III in September.

AIG has also been connected, albeit indirectly, to a major money laundering case. As the insurance carrier for the Bank of New York (BoNY) they are defending BoNY in a suit filed this year by BoNY shareholders charging mismanagement of the bank. That suit arose from revelations (See FTW Vol II, No.7, 9/99) in the major media that BoNY had been involved in laundering between $7 and $10 billion in criminal money out of Russia during the 1990s under its Chairman, Thomas Renyi. A credible source has told me, but I have not been able to confirm it, that AIG also insures the U.S. Department of Justice which was charged with investigating BoNY and which decided not to file criminal charges in 1999.

Perhaps no one knows more about your life, not even your immediate family, than the various companies who insure you. Your health, finances, work history, medical records, driving habits and almost every other aspect of your life is recorded in insurance files and records. Is this necessarily something you want available to the CIA or any part of the government? Remember that the CIA doesn't operate under the law or respect privacy. What happens then when a giant like AIG winds up insuring parts of the government or major businesses that violate your rights or break the law?

--------------------------------------------------------------------------------

Members of the Sanctions Working Group of the State Department's Advisory Committee on International Economic Policy:

-- Mark Anderson, AFL-CIO * Harvey Bale, Pharmaceutical Manufacturers Assoc. * Steven Beckman, United Auto Workers * Seddik Belyamani, Boeing * Fred Bergsten, Institute for International Economics * Thomas Block, Chase Manhattan Bank * Carol Brookins, World Perspectives * Anthony Corso, Mobil *Greg Farmer, Northern Telecom * Isaiah Frank, Johns Hopkins (SAIS) * Don Fuqua, Aerospace Industries Association * R. Michael Gadbaw, General Electric * R. Harkin, United Technologies * Robert Hormats, Goldman, Sachs International * Nancie Johnson, DuPont * Oackley Johnson, AIG * Robert Johnson, Phelps Dodge & Morenci * Dale Jones, Halliburton * Robert Kapp, US-China Business Council * Frank Kittredge, National Foreign Trade Council * Mary Lou Lackey, Motorola * T. Lee, AFL-CIO *Charles Levy - Wilmer, Cutler and Pickering *Clement Malin, Texaco * Rebecca Mark, Enron Development *Joel Messing, Cigna *Robert Niemeth, Pfizer * G. Staley, Toys R Us * Roger Swanson, US-Japan Business Council * Sandra Taylor, Eastman Kodak * Robert Vastine, Coalition of Service Industries * Alan Wolff, Dewey Ballantine *

AIG Highlights

AIG has the largest market capitalization (total value of all shares) of any insurance or financial services organization on the NYSE -- $198.4 billion in 2000. It has operations in 130 countries.

Ranked #7 on Forbes Super 100 list of companies. After GE, Citigroup, BankAmerica, Exxon, IBM and Ford.

The largest U.S. underwriter of commercial and industrial insurance.

Operates AIG Financial Services Group, which sells investments, international asset management and "advisory" services.

The largest seller of retirement annuities in the U.S. through its acquisitions of SunAmerica and American General in 1999 and 2001 respectively.

AIG is licensed to operate banks in three countries, including the US (1999) and also issues credit cards.


History

Originally formed as the Asia Life/C. V. Starr Companies in the 1930s by founder Cornelius Starr who served with the OSS during World War II. The Starr corporation shared the same office building as OSS headquarters in New York, and functioned as an intelligence conduit on shipping, manufacturing and industrial bombing targets in Asia and Germany throughout WW II. [The Los Angeles Times, Sept. 22, 2000]

Early business centered primarily in China and Asia. Starr interests centered in Asia and Panama.

1951 - Changed name to American Life Insurance Company (ALICO).
Acquired major U.S. insurance companies in the 1950s and 60s.

1967 - Incorporated as American International Group (AIG).

1969 - First public offering.

First western insurance company to create joint ventures with Hungary, Poland and Romania in the 1960s.

In 1980 established joint venture with the People's Insurance Company of China.

First insurance company licensed to do business on its own in Japan (1952), Mainland China (1990), and Vietnam (2000).

Member and staunch supporter of the World Trade Organization. During 1997 WTO negotiations, AIG collaborated directly with Treasury Secretary Robert Rubin to negotiate Asian financial, investment and trade agreements covering 102 countries, which one report described as bullying and marked by "messages back and forth from Geneva to Washington, andÉ reports, between the US Treasury and American International Group." [Third World Economics, No. 175, 16-31, 12/97].

During the 1990s involved with U.S. investment in Russia (overseen by Goldman Sachs and The Harvard Endowment) through Brunswick Brokerage. Secured a $300 million OPIC (Overseas Private Investment Corporation) guarantee for a Russian investment fund. [Paul Likoudis, Editor, The Wanderer.]

AIG has "joint venture" interests in Latin America through ZonaFinanciera with Citibank which in May 2001 purchased Mexico's Banamex and will be placing reported drug money launderer and trafficker Roberto Hernandez on its board of directors.

AIG insures more than half of the major US airports.

The world's "market leader" in leasing and remarketing of advanced technology commercial jet aircraft - "the most modern fleet of aircraft in the world. " With 2000 revenues of $2.44 billion AIG owns a fleet of 494 jets, 89 of which it "manages" itself. Clients include airlines in U.S., Canada, Europe, Asia, the Middle East and South America where, in 2000, it leased, "additional aircraft to a number of established customers."


Maurice "Hank" Greenberg, 75 -- Chairman and CEO of American International Group (AIG)

WWII, Served with US Army Signal Corps and Army Rangers
LL.B., New York Law School, 1950
Korean War, Investigated reported massacres at POW camps run by UN/US personnel
Elected AIG President in 1962, CEO in 1967 and Chairman in 1989.
Former Chairman and Director of the New York Federal Reserve Bank.
Forbes 111th richest man in the world (More than $4 billion net worth)
Vice Chairman, Council on Foreign Relations
Vice Chairman, Center for Strategic and International Studies
Member, Board of Directors, New York Stock Exchange
Member, Trilateral Commission
Member, The Bilderberger Group
Chairman, The Nixon Center
Chairman, U.S.-China Business Council
Chairman, The Starr Foundation
Accompanied President George Bush on his trade mission to China in 1992
Major contributor to The Heritage Foundation
Name floated by Senator Arlen Specter to become CIA director in 1995 (Reported in U.S. News and World Report - 2/20/95)

AIG Board's Board of Directors as Reported to the SEC

M. BERNARD AIDINOFF -- SENIOR COUNSEL, SULLIVAN & CROMWELL (Attorneys). Director since 1984 -- Age 72. [NOTE: Sullivan and Cromwell is the legal firm that was home to Eisenhower Secretary of State John Foster Dulles and his brother Allen Dulles, who was a key OSS leader during WWII and who served as CIA Director under Presidents Eisenhower and Kennedy.]

ELI BROAD -- CHAIRMAN, SUNAMERICA INC (a wholly-owned subsidiary of AIG). Director since 1999 -- Age 67.

PEI-YUAN CHIA -- RETIRED VICE CHAIRMAN, CITICORP AND CITIBANK, N.A. Director since 1996 -- Age 62.

MARSHALL A. COHEN -- COUNSEL, CASSELS BROCK & BLACKWELL (Barristers and Solicitors); FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE MOLSON COMPANIES LIMITED. Director since 1992 -- Age 66.

BARBER B. CONABLE, JR. -- RETIRED; FORMER PRESIDENT, WORLD BANK, AND FORMER MEMBER, UNITED STATES HOUSE OF REPRESENTATIVES. Director since 1991 -- Age 78.

MARTIN S. FELDSTEIN -- PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY; PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL BUREAU OF ECONOMIC RESEARCH (Nonprofit Economic Research Center), Director HCA and TRW. Director since 1987 -- Age 61.

ELLEN V. FUTTER -- PRESIDENT, AMERICAN MUSEUM OF NATURAL HISTORY Director, Bristol-Myers Squibb Company Consolidated Edison, Inc. (also serves as Trustee of Consolidated Edison Company of New York, Inc.), J.P. Morgan Chase & Co. Director since 1999 -- Age 51.

MAURICE R. GREENBERG -- CHAIRMAN AND CHIEF EXECUTIVE OFFICER, AIG, Director, Transatlantic Holdings, Inc. ('Transatlantic'), which is owned 60.0 percent by AIG. Also serves as Chairman of Transatlantic, a director, President and Chief Executive Officer of C.V. Starr & Co., Inc. ('Starr'), and a director of Starr International Company, Inc. ('SICO') and International Lease Finance Corporation ('ILFC'); Starr and SICO are private holding companies (see 'Ownership of Certain Securities'); ILFC is a wholly-owned subsidiary of AIG. Director since 1967 -- Age 75.

CARLA A. HILLS -- CHAIRMAN AND CHIEF EXECUTIVE OFFICER, HILLS & COMPANY; FORMER UNITED STATES TRADE REPRESENTATIVE. (Hills & Company provides international investment, trade and risk advisory services). Director, AOL Time Warner Inc., Chevron Corporation, Lucent Technologies Inc. Director since 1993 -- Age 67.

FRANK J. HOENEMEYER -- FINANCIAL CONSULTANT; RETIRED VICE CHAIRMAN, PRUDENTIAL INSURANCE COMPANY OF AMERICA. Director, Carey Fiduciary Advisors, Inc. Cincinnati, Inc. Director since 1985 -- Age 81.

RICHARD C. HOLBROOKE -- FORMER UNITED STATES AMBASSADOR TO THE UNITED NATIONS; FORMER VICE CHAIRMAN, CREDIT SUISSE, FIRST BOSTON. Elected February 7, 2001 -- Age 59.

EDWARD E. MATTHEWS -- VICE CHAIRMAN -- INVESTMENTS AND FINANCIAL SERVICES, AIG. Director, Transatlantic. Also serves as a director of Starr, SICO and ILFC, -- Director since 1973 -- Age 69.

HOWARD I. SMITH -- EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, AIG. Director, Transatlantic, 21st Century Insurance Group ('21st Century'), which is owned 62.8 percent by AIG. Also serves as a director of Starr, SICO and ILFC -- Director since 1997 -- Age 56.

THOMAS R. TIZZIO -- SENIOR VICE CHAIRMAN -- GENERAL INSURANCE, AIG. Director, Transatlantic. Also serves as a director of Starr and SICO. -- Director since 1986 -- Age 63.

EDMUND S.W. TSE -- VICE CHAIRMAN -- LIFE INSURANCE, AIG. Also serves as a director of Starr and SICO. -- Director since 1996 -- Age 63.

JAY S. WINTROB -- PRESIDENT AND CHIEF EXECUTIVE OFFICER, SUNAMERICA. Director, Anchor National Life Insurance Company and First SunAmerica Life Insurance Company, wholly-owned subsidiaries of AIG. Also serves as a director of Starr and SICO -- Director since 1999 -- Age 44.

FRANK G. WISNER -- VICE CHAIRMAN -- EXTERNAL AFFAIRS, AIG. Director, EOG Resources, Inc. -- Director since 1997 -- Age 62. [NOTE: Wisner is the son of former CIA deputy Director, Frank Wisner, Sr. who was present at the creation of the CIA. As head of the Office of Policy Coordination, the forerunner of the CIA's Directorate of Operations. Wisner, Sr. once boasted, "I can play the media like a mighty Wurlitzer." In a 35 year career with the State department, Wisner, Jr. served as U.S. Ambassador to India, the Philippines, Egypt and Zambia.]

FRANK G. ZARB -- CHAIRMAN, NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. AND THE NASDAQ STOCK MARKET, INC. -- Elected February 7, 2001 -- Age 66

AIG is a client of Henry Kissinger and Associates. Kissinger is the Chairman of AIG's International Advisory Board.

[© Copyright 2001, Michael C. Ruppert and From the Wilderness Publications. All Rights Reserved.

UPDATE 3-Britain's Serious Fraud Office probing AIG unit
Thu Feb 12, 2009 12:58pm EST

(Adds background, additional comment from company)

LONDON, Feb 12 (Reuters) - Britain's Serious Fraud Office (SFO) has launched a preliminary inquiry into suspected irregularities at a British unit of American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz), the SFO said on Thursday.

The probe into dealings at the London office of AIG Financial Products Corp (AIGFP) does not concern the insurance operations of AIG in Britain or elsewhere, the SFO said.

"It is right for us to look into the UK operations of AIG Financial Products Corp to determine if there has been criminal conduct," Richard Alderman, director of the SFO, said in a statement.

"We will use our full range of powers to seek information and to speak to those with an inside knowledge of the company's operations," he added.

The SFO probe widens a multi-agency investigation into how AIGFP valued a derivatives portfolio that took heavy bets on toxic mortgage debt. Also investigating the company are the U.S. Securities and Exchange Commission, the U.S. Department of Justice and Britain's Financial Services Authority (FSA).

An AIG spokesman said the company was cooperating with the SFO investigation and would continue to cooperate with the other investigations.

AIG, once the world's biggest insurer by market value, averted bankruptcy last year after a $152 billion rescue package from the U.S. government.

Its troubles stemmed from losses within the Financial Products group.

AIG is winding down the businesses and portfolios of AIGFP and its subsidiaries. The unit is based in Connecticut and has a large office in London.

"There are approximately 370 employees in AIGFP worldwide who are working on the winding down of the business," AIG said in a statement.

The SFO said it was cooperating with the FSA and U.S. authorities in conducting its own probe. (Reporting by Michael Holden; Additional reporting by Lilla Zuill in New York; Editing by David Holmes and John Wallace)

http://www.reuters.com/article/euIpoNews/i...C61729220090212

March 27, 2009
Inquiry Asks Why A.I.G. Paid Banks
By MARY WILLIAMS WALSH

Members of Congress and the New York State attorney general demanded detailed information Thursday on how tens of billions of taxpayer dollars flowed through the American International Group during its crisis last fall and ended up in the coffers of several dozen big banks, shielding them from losses.

The new inquiries shine a spotlight on a question that is exponentially bigger, in dollars, than the $165 million in bonuses that A.I.G. paid out this month, but which has been overshadowed until now by the uproar over the bonuses.

“We would like to know if the A.I.G. counterparty payments, as made, were in the best interests of the taxpayers who provided the funding,” said Representative Elijah E. Cummings, Democrat of Maryland, in a letter to Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program. The letter was also signed by 26 other members of the House, all of them Democrats.

The representatives asked Mr. Barofsky to find out who had made the decision to shield A.I.G.’s trading partners from any losses during last fall’s crisis, and what factors had shaped the decision.

Their letter mentioned that Mr. Barofsky’s office had been created to investigate the uses of TARP money, and that A.I.G., the biggest recipient of government aid in recent months, was among the largest recipients of money from the TARP.

Andrew M. Cuomo, the New York State attorney general, meanwhile subpoenaed A.I.G. on Thursday for extensive information about its derivatives portfolio and how it is being managed, including the names of people in charge of the negotiations and other activity.

The new phase of Mr. Cuomo’s investigation is civil, although the subpoena was served under the Martin Act, a state law that gives the attorney general broad prosecutorial powers.

A spokesman for A.I.G. said the company had no comment on the new inquiries.

The banks and investment firms that ended up with A.I.G.’s bailout money last fall were, in many cases, counterparties to derivatives contracts it had sold, known as credit-default swaps, which guaranteed the value of assets in their investment portfolios. Had A.I.G. not been bailed out, and simply allowed to go bankrupt, they would have suffered investment losses running into the billions of dollars.

A.I.G. released the names of its major counterparties this month, at the urging of the Federal Reserve Board of Governors. They included Wall Street firms, like Goldman Sachs, JPMorgan Chase and Merrill Lynch, that have successfully resisted efforts to regulate credit derivatives in the past, on the argument that such contracts were valuable risk management tools, safe in the hands of the experts.

In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401(k) accounts and other investments.

Some have also been dismayed to learn that taxpayer money had ended up bailing out foreign banks. Some of the biggest beneficiaries of the bailout of A.I.G. were banks in Europe, including Société Générale of France and Deutsche Bank of Germany, each of which received nearly $12 billion, Barclays of Britain, which received $8.5 billion, and UBS of Switzerland, which received $5 billion.

Officials of the Federal Reserve and the Treasury have said they believed A.I.G.’s financial obligations had to be honored to prevent a domino effect. Had A.I.G. suddenly disappeared, banks and other financial institutions around the world would have suffered losses, bad enough in some cases to cause additional failures.

But in their letter, the representatives said that while they were aware of “systemic risk,” they still wanted to know who had decided that the way to contain such risk would be to completely insulate the banks from losses.

“We would like to know if assessments were made of the health and total exposure risks of counterparties, such as Goldman Sachs,” they wrote, pointing out that Goldman Sachs had claimed it had no material exposure to A.I.G., but turned out to have received almost $13 billion during the rescue. “If such assessments were made, by whom were they made and what were the criteria guiding the assessments? Further, was any attempt made to renegotiate and close out these contracts with ‘haircuts?’ If not, why not?”

A person briefed on Mr. Cuomo’s investigation said that A.I.G.’s list of its counterparties gave information only through the end of 2008, and the company was still winding down a vast portfolio of derivatives, including more swaps. He said the attorney general wanted to see whether the termination of the derivatives contracts was being done as efficiently as possible, given the federal resources available to A.I.G.

“Credit-default swap contracts were at the heart of A.I.G.’s meltdown,” Mr. Cuomo said in a statement. “The question is whether the contracts are being wound down properly and efficiently, or whether they have become a vehicle for funneling billions in taxpayers’ dollars to capitalize banks all over the world.”

http://www.nytimes.com/2009/03/27/business...IvAmXQHHIwbEYrQ