Sunday, July 12, 2009

Michael Lewis In Vanity Fair On AIG

Michael Lewis writes the most extensive article yet on AIG in the new issue of Vanity Fair.

Believe it or not, he - gasp - actually talked to people that work at AIG FP. Amazingly, Ed Liddy had never visited FP prior to his infamous March testimony. Bernanke, Paulson and Geithner have never visited. Congressmen have never visited. The article is a must read. Below is Michael Lewis's recounting of the AIG bonus witch hunt:

The perception was that the very same people who had made these insane, greed-driven decisions that might cost the U.S. taxpayer $182.5 billion were still paying themselves big bucks! An exchange between C.E.O. Liddy and Florida congressman Alan Grayson captured the spirit of that moment:

grayson: Mr. Liddy, you said before that there’s 20 or 25 people who were involved in the credit default business. What are their names, please?

liddy: I don’t have their names at my disposal, sir. grayson: Well, I’m sure you remember a few of the names. I mean, they did cause your company to crash.

liddy: You know, I’ve been at the company, as you know, for six months. I don’t know all the people that were in AIG F.P., and many of them are gone.

grayson: Well, there or gone, it doesn’t really matter. I want to know who they are. Names, please.…

liddy: If it’s possible to provide you the names, we will. We will cooperate with you.

grayson: That’s good, but I want to know the names that you know right now.

liddy: I don’t know them, sir.

grayson: Not a single one. You’re talking about a group, a small group of people who caused your company to lose $100 billion, as you sit here today, you can’t give me one single name.

liddy: The single name I would give you is Joseph Cassano, who ran …

grayson: That’s a good start. You already gave that name. Give me another name.

liddy: I just don’t know them. I do not know those names. I don’t have them all at my command.

grayson: Well, how can you propose to solve the problems of the company that you’re now running if you don’t know the names of the people who caused that problem? … I would expect you’d at least know more than one name. How about two names? Give us one more name.

liddy: I’m just not going to do that, sir, because that will provide—that’ll be the—that could be a list of people that we could do—individuals who want to do damage to them could do that. It’s just not …

grayson: Well, listen, these same people could now be working right now today at Citibank. Is it more important to protect them, the ones who caused the $100 billion loss, or protect us? Which is more important to you right now?

For a brief moment you had a glimpse of how harshly financial people might be treated if Wall Street ever lost its political influence. Just days before, Larry Summers had gone on the morning talk shows to explain that a contract is a contract and the government couldn’t just go in and void it and take back A.I.G.’s paychecks, but that “every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve System.” Then Obama himself went out of his way to denounce the greed at A.I.G. F.P. and say he was looking for a way to get the bonus money back—and even that failed to slake the public anger. “On A.I.G.,” a journalist asked Obama at a press conference, “why did you wait—why did you wait days to come out and express that outrage? It seems like the action is coming out of New York and the attorney general’s office. It took you days to come public with Secretary Geithner and say, Look, we’re outraged. Why did it take so long?”

“It took us a couple of days because I like to know what I’m talking about before I speak,” Obama said testily. “All right?”

It’s unlikely that he actually did know what he was talking about, except in the broadest outlines. Nor, for that matter, did the people who had engineered the bailout. How could they? At no point did anyone from the U.S. Treasury or the U.S. Congress, or any of the various New York State authorities that had gotten involved, call them up, much less visit A.I.G. F.P.—as, say, someone might who was genuinely curious to know what, exactly, had happened there. Not even A.I.G. C.E.O. Ed Liddy had bothered to make the drive from Manhattan to Wilton, Connecticut, where many of the offending trades had been done, and most of the offending bonuses were being paid, to ask questions of the people still on the scene—people who could have told him a great deal about what had happened and why. Everyone seemed to be operating on whatever they read in the newspapers—and the people inside A.I.G. F.P., who had the best view of the action, did not appear to be talking to reporters.