AIG: The American Idol of Greed

The New York Fed, under Mr Geithner's leadership until he was appointed US Treasury Secretary in January 2009, instructed the troubled insurer to withhold details of the payments from the American public, which bailed out AIG by as much as $182bn at its financial nadir.

According to a series of emails obtained and made public by Congressman Darrell Issa, AIG had planned to inform investors in a regulatory filing published on December 24, 2008, that it had paid counter-party banks owed money at a rate of 100 cents on the dollar. The banks were owed the money for credit-default swaps they had entered into, mainly on behalf of clients.

However, according to the emails, an official from the NY Fed crossed out the reference ahead of publication, and there was no mention of the payments, which came to light five months later, in the filing.

"It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information," said Congressman Issa.

Publication of the potentially embarrassing emails comes two months after it emerged that it was the New York Fed that was behind a decision to pay the banks in full, rather than at a discounted rate.

"Our position has always been that if AIG's securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do," said a spokesman for the New York Fed.

AIG ( AIG - news - people ) fell 17%, Sanford C. Bernstein dropped the stock to "underperform," on concerns that Washington will pull back on financial assistance as AIG recovers. The firm is still on the hook for $80 billion in federal loans.

MetLife ( MET - news - people ) is down sharply, off 6%. The life insurer was downgraded by Raymond James to "market perform" from "strong buy." MetLife has enjoyed a bullish run since March; the stock has nearly tripled.

The big banks were all lower, Bank of America ( BAC - news - people ) dropped 4%; Citigroup ( C - news - people ) fell 6%. Bank of America was in the headlines on reports that the firm is offering to repay part of its federal bailout loans. BofA may repay the $20 billion it received to help it complete its acquisition of Merrill Lynch....

Shares soar nearly 27% Thursday on reports that salary for new CEO Robert Benmosche has been approved by Obama's pay czar.

NEW YORK (CNNMoney.com) -- AIG's stock closed at $47.84 on Thursday. At the start of the month, shares were trading at a mere $13.14.

AIG's stock has nearly quadrupled in August, but the company is no closer to paying back the $80 billion it owes taxpayers.

Investors got all wound up after the company announced in the past few weeks that it had appointed a new CEO and returned to profitability.

Shares gained another 27% Thursday after The Wall Street Journal reported that new Chief Executive Robert Benmosche's $10.5 million pay package has been fast-tracked for approval by Obama administration "pay czar" Kenneth Feinberg. AIG pressed for a quick decision on Benmosche's compensation, over concerns he might leave the company if it wasn't immediately approved, according to the report.

The news actually came as little surprise, since AIG had previously announced that Feinberg gave the pay package a preliminary nod of approval.

A spokeswoman for AIG said the company would not comment on the status of Benmosche's pay package or on the stock price.

Investors' excitement about AIG began to build on Aug. 3, when the company announced it would replace retiring Chief Executive Ed Liddy with Benmosche, the former MetLife (MET, Fortune 500) CEO. Shares gained a modest 3.5%.

The stock skyrocketed on Aug. 5, with shares soaring 63% on hints that the company would post its first quarterly profit since October 2007. On Aug. 7, when AIG announced it earned $1.8 billion in the second quarter, shares gained another 20.5%.

On Aug. 20, Benmosche said that he was optimistic the company would be able to pay back the more than $80 billion it owes the U.S. taxpayers and return to the company's former glory. Shares rocketed 21% higher that day.

"People really like this guy Robert Benmosche, because he's really a salt-of-the-earth New York financial guy," said Damon Vickers, managing director of Nine Points Management & Research fund, which has bought up AIG's stock in recent days. "He looks like he's got the spirit to take on this situation and make the best of it."

Since the beginning of the month, shares of AIG (AIG, Fortune 500) are up 264%. The company held a 20-1 reverse stock split on June 30, when shares closed at $1.16.

Vickers said AIG's stock has a chance to hit $60 in the near term and $100 in the coming months. He noted that after the stock split, AIG's all-time high stands at $1,400, so the stock has plenty of room to grow.

Since the government holds its 79.9% interest in AIG in preferred shares, taxpayers don't stand to gain from a steep rise in the company's common stock price.

Instead, the preferred shares pay a dividend. But the dividends on the TARP part of the bailout -- $41.6 billion, or about half of its overall loan -- are "noncumulative." That means that the company can skip dividend payments without the obligation to make up the difference later.

And that's just what AIG did on Aug. 3, failing to declare its dividend payment to Treasury.

Should AIG miss three more dividends, the government will have the right to nominate two more directors to the insurer's board.

Despite Benmosche and investors' enthusiasm, AIG is still a very troubled company with a sizeable debt to repay to the government.

The insurer has said it did not make enough profit to repay the taxpayers, and AIG said it won't likely be able to sustain a string of profitable quarters anyway, as it will take hefty restructuring charges for its looming core asset sales.

AIG plans on paying back the government by selling off pieces of the company. But those asset sales have been slow-going and sold at depressed values thus far, as credit remains tight. AIG has made just over $9 billion on those deals to date. As a result, AIG has agreed to spin off three huge chunks of its business, selling stakes in two of them to the Federal Reserve to reduce its loan by $25 billion.

Before his retirement on Aug. 10, Liddy reiterated that the company would likely be able to repay the government in full in three to five years, which Benmosche echoed last week.

The company also has to deal with the ongoing distraction of hundreds of millions of dollars in bonuses that have still yet to be paid to employees of its troubled Financial Products unit. The company became the subject of a public uproar after the revelation in March that AIG paid $165 million in bonuses to employees of the division that nearly brought the company to its collapse.

"As risky as AIG seems, it has the full backing of the U.S. government," he said.

"Apparently you can take that to the bank. I'm comparing AIG to a U.S. Treasury, and I know it's insane, but it's nonetheless true."

NEW YORK – The Securities and Exchange Commission said Thursday that former American International Group Inc. CEO Maurice "Hank" Greenberg agreed to pay a $15 million fine to settle fraud charges.

The charges are tied to an accounting scandal earlier this decade at AIG that led to Greenberg's ouster in 2005. The following year, AIG paid more than $1.6 billion to settle charges of improper accounting.

The case is unrelated to the government bailout of AIG, which is in the process of trying to sell off assets to pay off the $182.5 billion in loans it has received since last September.

The SEC said AIG's former chief financial officer, Howard Smith, will pay a $1.5 million fine tied to the investigation.

In complaints against Greenberg and Smith, the SEC said the pair were responsible for making misstatements that falsely showed AIG met or exceeded earnings and growth targets between 2000 and 2005. The pair did not admit or deny any wrongdoing as part of the settlement.

Greenberg was forced out of AIG after charges that the company had engaged in deceptive accounting practices surfaced.

A statement on behalf of Greenberg said the ex-CEO believes the settlement was appropriate to help put the matter behind him. A statement on behalf of Smith said settling the case allows the former CFO to move on and avoid future legal costs and the distraction of a lawsuit.

Greenberg, who built AIG over his 35-year career from a small company into the world's largest insurer, has been fighting the insurer in court in an unrelated case over who controls an employee retirement fund. AIG had accused Greenberg of plundering the AIG retirement program composed of $4.3 billion in stock through a company called Starr International Co., which Greenberg controls. A jury last month sided with Greenberg in the civil case saying he did not have to reimburse AIG for the stock, but the decision was only an advisory recommendation.

The judge hearing the case will make a final ruling on who controls the fund, and its purpose, by the end of the month. This case is also unrelated to the insurer's bailout by the government.

AIG is currently in the middle of a major overhaul as it looks to repay the government for the loans it received to avoid collapsing last fall at the peak of the credit crisis. In return for the loan package, which is worth up to $182.5 billion, the government received about an 80 percent stake in the insurance giant.

You may remember American International Group (AIG). The U.S. government gave it $182 billion of taxpayer money last fall in exchange for a 78 percent stake. Of that money, $165 million went for bonuses to a handful of people in its Financial Products Group (FPG), which sold Credit Default Swaps (CDSs) on which AIG lacked the capital to make good. And $200 million more is slated for those good folks in 2009.

Another $12.9 billion of our taxpayer money went to Goldman Sachs Group (GS) so AIG could pay Goldman 100 cents on the dollar for its CDSs. Hank Paulson wanted to keep the names of Goldman and the other recipients secret -- since so many of them were foreign banks, but the information leaked out in March 2009 after Paulson left office.

Now, thanks to some solid reporting in The New York Times, it looks like the rot at AIG is not limited to FPG. While AIG officials have claimed that its problems were isolated to FPG, the reality is that AIG seems to have been running something akin to a shell game of massive proportions. Its shell game version took the form of selling insurance and assigning the resultant risks among its 71 different North American insurance companies.

Thanks to AIG's regulatory arbitrage -- taking advantage of the fact that its 19 state insurance regulators never conduct examinations at the same time -- AIG may have been able to shift assets among the companies to fool state regulators. If one its companies did not have enough money set aside as reserves against future claims, AIG could move assets to that reserve-deficient company right before the state insurance examiner moved in. And once that examiner was gone, AIG could in theory shift the extra cash to the next reserves-deficient company.

Want an example? Consider AIG affiliate National Union (NU). AIG indicated to Pennsylvania state insurance investigators that it had $33.7 billion in assets at the end of 2008 -- more than enough to protect against $21.9 billion in liabilities. But what the Pennsylvania regulators did not see is that $10.9 billion worth of NU's assets were investments in other AIG affiliates, which are not publicly traded and whose value is hard to measure. Subtract that and you have only $22.8 billion in assets.

But wait -- there's more. NU had $42 billion more in liabilities that the Pennsylvania regulators missed. How so? NU had obligations to pay claims of other AIG insurance affiliates -- the biggest of which was $23.1 billion that it owed AIG affiliate American Home (AH). NU owed another $19 billion to several other AIG afiiliates.

Meanwhile, AH had crushing obligations of its own. While the New York state regulators thought it had $26.3 billion in assets to a mere $19.9 billion in liabilities, the reality was far more dire. How so? AH was on the hook for an additional $120.7 billion in guarantees to 16 other AIG affiliates. Thus AH's liabilities really exceeded its assets by $114 billion.

To summarize, AIG's core insurance companies seem to be like a shell game which AIG was able to continue operating because it was able to keep the cash moving from the affiliate that one state regulator had just examined to the one that another state regulator was about to examine.

Unfortunately, it would not surprise me if this was happening and continues to happen at all big U.S. insurance companies. Moreover, I would be shocked if former AIG CEO Hank Greenberg -- who has heaped scorn on his successors -- was unaware of this practice.

New Jersey has never been short of corruption scandals, but the one that unfolded yesterday was surprising even by the standards of the state that inspired "The Sopranos."

The key to the investigation: a real-estate developer who became an informant after being arrested on bank-fraud charges in 2006, according to a person familiar with the case. The developer, Solomon Dwek, wore a wire for the Federal Bureau of Investigation while offering to bribe New Jersey mayors and other public officials, that person said.

While the state has a long history of dirty politics -- in Newark alone, three ex-mayors have been convicted of crimes unrelated to the latest sweep -- the scale of the allegations shocked veterans of New Jersey's political crises....

The arrests place an added burden on Gov. Jon Corzine, a Democrat in his first term who is running for re-election this year. Mr. Corzine ran four years ago promising to quash corruption. "The scale of corruption we're seeing as this unfolds is simply outrageous and cannot be tolerated," he said in a statement....

American International Group is preparing to pay millions of dollars more in bonuses to several dozen top corporate executives after an earlier round of payments four months ago set off a national furor.

The troubled insurance giant has been pressing the federal government to bless the payments in hopes of shielding itself from renewed public outrage.

The request puts the administration's new compensation czar on the spot by seeking his opinion about bonuses that were promised long before he took his post.

AIG doesn't actually need the permission of Kenneth R. Feinberg, who President Obama appointed last month to oversee the compensation of top executives at seven firms that have received large federal bailouts. But officials at AIG, whose federal rescue package stands at $180 billion, have been reluctant to move forward without political cover from the government.

"Anytime we write a check to anybody" it is highly scrutinized, said an AIG official, who declined to speak on the record because the negotiations with Feinberg are ongoing. "We would want to feel comfortable that the government is comfortable with what we are doing."

The payments coming due next week include $2.4 million in bonuses for about 40 high-ranking executives at AIG, according to administration documents from earlier this year. Though the actual sum may have changed since then, the payments are much smaller than those that caused the upheaval in March.

AIG's upcoming payments do not fall under Feinberg's official purview, as they involve bonuses delayed from 2008. Feinberg is charged with shaping only current and future compensation. As a result, some Treasury Department officials believe they are under no obligation to offer an advisory opinion in this case, which could leave AIG officials to decide the matter on their own, according to a person familiar with the talks.

In November, AIG's top seven executives, including Chairman Edward M. Liddy, agreed to forgo their bonuses through 2009. Then, in March, facing pressure from Treasury Secretary Timothy F. Geithner and other government officials, the company restructured its corporate bonus plans for the remaining top 50 executives.

As part of this agreement, the senior executives were to receive half their 2008 bonuses -- which totaled $9.6 million -- in the spring, with another quarter disbursed on July 15 and the rest on Sept. 15. The last two payments would depend on whether the company made progress in revamping its business and paying back bailout money to taxpayers.

The exact range of the payments due this month to AIG executives was unclear in company disclosure filings.

AIG's proxy statement filed last month explains why AIG initially instituted the retention payments. The company stated that after the federal bailout began in September, "we needed to confront the fact that many of our employees, perhaps the majority, knew that their long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away. . . . Allowing departures to erode the strength of our businesses would have damaged our ability to repay taxpayers for their assistance."

The Treasury declined to comment specifically on the bonuses due this month. In a statement, a department spokesman said, "Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives. . . . We are not going to provide a running commentary on that process, but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."

The recent discussions between the company and Feinberg illustrate how politically sensitive the bonuses have become, both for AIG and for the Obama administration. No development in the government's bailout of financial firms has angered lawmakers and ordinary Americans more than the disclosure in mid-March that the global insurer was paying more than $165 million in retention bonuses. They were aimed at retaining 400 employees at AIG Financial Products, the troubled unit whose complex derivative contracts nearly wrecked the global insurance giant.

Ultimately, some of these employees vowed to return more than $50 million -- but not before the resulting firestorm threatened to undermine the government's effort to rescue the financial system. Lawmakers, including key allies of the administration, sponsored bills that would have levied harsh taxes on AIG and other bailout recipients offering bonuses to their executives.

Afraid of such congressional action, firms rushed to pay back federal aid, while others shied away from cooperating with the government in some of its bailout programs. Some initiatives had to be scaled down as a result.

The issue of bonuses, which had earlier been viewed by officials as minor relative to the larger problems in the financial system, began to consume the attention of top officials within the Treasury and Federal Reserve. Geithner attended long meetings to review payments, even those for low-ranking AIG executives.

Separately this week, a Citigroup analyst warned that AIG might be worthless to shareholders if or when it ever pays back the billions it owes the U.S. government.

"Our valuation includes a 70 percent chance that the equity at AIG is zero," Joshua Shanker of Citigroup wrote in a note to investors. He cites the continuing risks posed by the company's exotic derivative contracts, called credit-default swaps, and its sale of assets at low prices.

NEW YORK – The former top executive of American International Group Inc. plundered an AIG retirement program of billions of dollars because he was angry at being forced out of the company, a lawyer for AIG told jurors Monday at the start of a civil trial.

"Hank Greenberg was mad. He was angry," Wells said in U.S. District Court of the emotional state of the man who, over a 35-year-career, built AIG from a small company into the world's largest insurance company.

Wells said that Greenberg, within weeks of being forced out in mid-2005, gave the go-ahead for tens of millions of shares to be sold from a trust fund. The fund was set up to provide incentive bonuses to a select group of AIG management and highly compensated employees that they would receive upon their retirement.

Greenberg, 84, has contended through his lawyers that he had the right to sell the shares because they were owned by Starr International, a privately held company he controlled.

Starr International was named after Cornelius Vander Starr, who created a worldwide network of insurance companies in the early 1900s.

AIG maintains that Starr and Greenberg, his protege and successor, decided in the late 1960s to organize the various companies under one holding company, AIG.

Starr International remained a private company and its shareholders decided in 1970 that the amount that its shares of AIG were worth above book value of about $110 million should be used to compensate AIG employees, AIG has said.

The embattled insurer is trying to reclaim the money from Starr it says was wrongly pocketed through stock sales by Greenberg.

HARTFORD, Conn. -- A former executive faces sentencing in connection with an accounting scandal that authorities say cost shareholders of American International Group Inc. more than $500 million.

John Houldsworth, former chief executive officer of Berkshire Hathaway's General Re affiliate, Cologne Re Dublin, is scheduled to be sentenced Tuesday in Hartford.

Prosecutors say AIG ( AIG - news - people ) paid Stamford-based Gen Re in a secret deal to take out reinsurance policies with AIG in 2000 and 2001. They say the scheme propped up AIG's stock prices and inflated reserves by $500 million.

Federal prosecutors are asking for a reduced sentence for Houldsworth, saying his extraordinary cooperation helped convict five other executives in the case....

NEW YORK – American International Group Inc. on Thursday said its chairman and chief executive plans to step down when a search for replacements is complete.

The company also said its board agreed with a recommendation from Edward M. Liddy, who took over the insurer in September, to separate the chairman and CEO roles.

AIG will start a search for permanent leadership after the company's annual shareholder meeting June 30. At that meeting, investors will vote on a slate of six new independent directors.

Shareholders will also vote on a company proposal for a reverse stock split of the company's outstanding common stock at a ratio of 1 for 20, according to a regulatory filing.

The plan to split the chairman and CEO comes as AIG's corporate governance practices continue to receive intense scrutiny, after it paid out millions in bonuses despite a huge bailout from taxpayers.

AIG has received $182.5 billion in financial support from the government since September. As part of the loan package, the government has also taken a roughly 80 percent stake in the huge insurance company.

The company said the search for new leadership will include participation by both the reconstituted board and the trustees of the AIG Credit Facility Trust, which was established to represent government interests in the company.

Liddy, former CEO of Allstate Corp., was named chairman and chief executive on Sept. 18, in connection with the federal bailout. He succeeded Robert B. Willumstad, who was chairman since November 2006 and held the CEO spot since June.

AIG shares closed Thursday trading up 2 cents at $1.80, then lost a penny in aftermarket electronic trading.

The court estimates that checks will soon be mailed to more than 257,000 AIG investors that were affected by an alleged accounting fraud at the company, the SEC said.

The company, which did not admit or deny the allegations, had repaid its ill-gotten gains, as well as penalties to the government. In 2007, a federal court authorized the SEC to establish a 'fair fund' to distribute the money to harmed AIG investors.

"The commission continues to utilize the tools that Congress provided to ensure that funds are returned to harmed investors to the greatest extent possible," said Dick D'Anna, director of the SEC's office of collections and distributions, in an agency statement.

In a response to detailed questions from Rep. Elijah Cummings (D-Md.), the company has offered a third assessment of exactly how much it paid out in bonuses last year.

And the new number, offered in a document submitted to Cummings on May 1, is the highest figure the company has disclosed to date.

AIG now says it paid out more than $454 million in bonuses to its employees for work performed in 2008.

That is nearly four times more than the company revealed in late March when asked by POLITICO to detail its total bonus payments. At that time, AIG spokesman Nick Ashooh said the firm paid about $120 million in 2008 bonuses to a pool of more than 6,000 employees.

The figure Ashooh offered was, in turn, substantially higher than company CEO Edward Liddy claimed days earlier in testimony before a House Financial Services Subcommittee. Asked how much AIG had paid in 2008 bonuses, Liddy responded: “I think it might have been in the range of $9 million.”

“I was shocked to see that the number has nearly quadrupled this time,” said Cummings. “I simply cannot fathom why this company continues to erode the trust of the public and the U.S. Congress, rather than being forthcoming about these issues from the start.”

AIG spokesman Ashooh said the company’s revised accounting is the result of different wording of the questions asked by Cummings and POLITICO.

The new figure of $454 million, Ashooh said, “reflects all types of variable compensation across all of our businesses,” while the $120 million figure he provided earlier reflected only bonuses paid to corporate headquarters executives and high-ranking officers at its major businesses around the world. Ashooh said the $454 million figure includes the $120 million he had previously disclosed.

All of the numbers provided are on top of the controversial $165 million in retention bonuses offered to employees of a division of the company known as AIG Financial Products. It was the disclosure of those payments that set off a political firestorm earlier this year. Washington was stunned that employees of the very unit that had brought AIG to its financial knees were being so richly rewarded — especially after the company received $170 billion in taxpayer bailout money.

The controversial payments were described by the company as “retention agreements” paid to keep employees from leaving.

But the disclosure of the bonus payments to one division of the company prompted confusion about how big the companywide bonus pool was for 2008. That’s the question that has prompted three different answers from AIG officials.

AIG’s Ashooh says the account AIG is now offering includes a larger group of employees than had been counted to tabulate the earlier disclosures.

“I think we’ve been pretty forthcoming,” Ashooh said. “AIG is not a simple organization. We’re answering the question that we think we’re being asked.”

On March 19th, POLITICO asked AIG in an e-mail, “What was AIG’s total bonus pool (outside the retention agreements) for 2008?” To that, after some back and forth, AIG offered the $120 million figure.

Later in March, Congressman Cummings submitted written questions to AIG, asking: “Please specify the exact amount in bonuses — not retention payments or any other form of compensation — paid by AIG to employees of any division of AIG in 2008 or paid in 2009 for work performed in 2008.”

To that question, AIG disclosed a division by division breakdown of payments totaling $454 million.

The company said it maintains “approximately 374” plans that pay variable amounts of compensation based on performance. Citing the large number of recipients and concerns over the safety of AIG employees, the company declined to provide a list of the names of bonus recipients....

The company also disclosed that it is developing a new bonus plan for 2009 in consultation with the Federal Reserve and Treasury.

Mr. Liddy earned most of his holdings in Goldman, worth more than $3 million total, as compensation for serving on the bank’s board and its audit committee until he stepped down in September to take the job at A.I.G. He moved to A.I.G. at the request of Henry M. Paulson Jr., then the Treasury secretary and a former Goldman director.

Details about his holdings were disclosed in Goldman’s proxy statement and confirmed by an A.I.G. spokeswoman, who said they constituted “a small percentage of his total net worth.” Mr. Liddy had already owned some stock in Goldman Sachs before joining its board in 2003.

He has said that he considers his work at A.I.G. to be a public service, performed on behalf of the taxpayers, who ended up with nearly 80 percent of the insurance company. His goal is to dismantle the company and sell its operating units, using the proceeds to pay back the rescue loans. On Thursday, A.I.G. said it had sold its car insurance unit, 21st Century Insurance, to the Zurich Financial Services Group for $1.9 billion.

Along the way, Mr. Liddy has clearly disclosed that A.I.G. was serving as a conduit, with much of the rescue money passing through and ending up in the hands of A.I.G.’s trading partners.

Goldman has said in the past that it had collateral and hedges to reduce the risk of its exposure to A.I.G.

Still, his stake could represent a potential conflict and is likely to reignite questions about Goldman’s involvement in A.I.G., and about why taxpayer money was used to shield A.I.G.’s trading partners from losses, when asset values plunged everywhere and most investors suffered greatly.

Had A.I.G. simply declared bankruptcy, the financial institutions doing business with it would have ended up in court, as they did in the case of Lehman Brothers, fighting to get pennies on the dollar for their claims.

Instead, Goldman Sachs received $13 billion of the Federal Reserve’s rescue money to close out various contracts it had outstanding with A.I.G. It was one of the biggest beneficiaries of the government rescue.

A spokeswoman for A.I.G., Christina Pretto, dismissed any suggestion that Mr. Liddy’s financial ties to Goldman might have shaped his actions at A.I.G.

“A.I.G. is a large institution that engages in standard commercial activity with companies all over the world,” Ms. Pretto said. “These activities are handled in the normal, day-to-day course of business and rarely, if ever, rise to the level of the C.E.O.”

She said in particular that Mr. Liddy was not involved in the discussions of how to close out the contracts of A.I.G.’s counterparties in derivatives and other forms of trading.

According to Goldman’s proxy, Mr. Liddy holds 18,244 units of restricted stock, which would be worth about $2.2 million if they were sold at today’s market price. The rest of his holdings are in common stock. Restricted stock cannot be sold without incurring significant tax penalties, but the proxy said that Mr. Liddy’s restricted units would be converted to common shares on May 9.

Officials at the Fed, which initiated the bailout of A.I.G. last September, have said they were not happy about having to pour public resources into private sector companies, but felt that they had to do so to avoid a chain of losses at financial institutions all over the world.

State's 3rd-largest automobile insurer will change names when deal is done in summer

AIG Hawaii, the state's third-largest automobile insurer, is being sold as part of a $1.9 billion deal as owner American International Group Inc. takes steps to repay some of the billions owed in government bailout money.

The deal announced yesterday involves Los Angeles-based Farmers Group Inc. buying AIG's auto insurance unit, a move that will expand Farmers into Hawai'i for the first time.

Yesterday Farmers Chief Executive Officer Robert Woudstra said that Farmers had no immediate plans to make any changes to AIG Hawaii's 310-person staff or operations.

"It's a good fit," Woudstra said from his Los Angeles office, explaining Farmers does not have any business in the state currently.

"I can't tell you right now what we're going to call it, but the AIG name will have to go away."

AIG Hawaii had been contemplating a name change on its own given the stigma of being associated with its parent company, which had severe financial problems and needed a Federal Reserve-led rescue to avoid collapse last year.

In October, AIG put its auto group on the market as it looked for ways to pay off some of the bailout, which now totals about $182.5 billion.

AIG Hawaii President and Chief Executive Officer Robin Campaniano yesterday called the sale a positive development for the local unit. In 2008 AIG Hawaii's premiums written fell to about $100 million, about $18 million less than a year earlier.

Campaniano said some of the decline may have been due to clients departing because of the parent company's problems. A downturn in the Hawai'i economy contributed also.

"We're hopeful and very optimistic that the strength of Zurich and Farmers will greatly add to the presence we have in Hawai'i."

Farmers is owned by Zurich Financial Services Group, a Swiss company that serves customers in 170 countries and has business customers in Hawai'i.

AIG Hawaii insures about 100,000 cars in Hawai'i, along with offering homeowners, life, commercial and other insurance. Only Geico and State Farm insure more cars in the state.

Woudstra said he became familiar with the Hawai'i operations in examining AIG's business and that "it has performed exceedingly well for AIG."

He said he had gotten good reports about Campaniano, with people saying nothing but positive things about his reputation.

The AIG automobile business was operated under a unit known as 21st Century Insurance Group, which owned AIG Hawaii as well as running operations in 28 other states. The sale will require the approval of state insurance commissioners.

Yesterday Hawai'i Insurance Commissioner J.P. Schmidt said he would closely look at the deal because of the role AIG Hawaii plays in the state.

"Farmers and Zurich are both good, solid companies, so that's a good thing," Schmidt said. "But we'll be looking at the details and specifics to ensure that the people of Hawai'i are taken care of in the best possible manner.”

The sale may be completed this summer. Schmidt said he and other insurance commissioners had been working on a uniform application process so that the sale approval can be processed efficiently.

Catbird Note: More pages related to “good, solid companies,” Farmers and Zurich:

What brought down AIG, the lumbering financial giant, and with it the nation's economy? If you said reckless trading in exotic mortgage-backed securities, you're only half right. Turns out that our nation's deeply flawed merger review policy contributed just as much to AIG's demise as the company's high-risk credit default swaps.

Once upon a time--only about 10 years ago, to be more precise--AIG was a successful, rock-solid commercial property and casualty insurer. In 1998, the company bought Sun America, a huge firm that specialized in savings instruments for retirement. Then, in 2001, AIG bought American General, an enormous life insurance and consumer loan company.

Last quarter, according to press reports, AIG lost a staggering $18 billion in its retirement and life insurance businesses--just about the same amount the company lost from credit default swaps. No one seems to know just how much bailout money has gone into propping up AIG's Sun America and American General subsidiaries. But without taxpayer assistance, say analysts, AIG would have declared bankruptcy, requiring state regulators to take over existing insurance policies.

Insurance companies are exempt from federal antitrust laws, so AIG's two big acquisitions (and many others like them) escaped serious merger review. Stringent antitrust enforcement might well have mitigated the AIG disaster by preventing some of the company's ill-conceived acquisitions. But more likely, antitrust enforcers, enfeebled by decades of laissez-faire attitudes, would have blessed the deals.

The most influential antitrust thinkers of the Reagan era believed in scrutinizing closely only mergers between direct competitors--and then only if the mergers resulted in an outright monopoly. In this view, mergers between companies that offer complementary products (sometimes called "vertical" mergers)--AIG's commercial property insurance and Sun America's retirement instruments, as an example--merit not a moment's worth of attention because an acquisition in a related market rarely augments a company's ability to charge higher prices.

In fact, so the reasoning goes, mergers between companies that offer complementary products far more often increase economic efficiency by avoiding duplicative management and distribution costs. Deemed benign at worst, and more often beneficial, mergers involving complementary products attracted little antitrust attention.

This approach continued even when the Democrats took control of the nation's antitrust enforcement apparatus in the 1990s. Citing increased efficiency and the potential for economic growth, President Clinton signed the repeal of the Glass-Steagall Act, permitting commercial banks to expand into new markets by acquiring investment banks. As a result of lax merger policies, markets of all types became increasingly intertwined--and therefore more efficient, government officials assured us.

Economic apocalypse followed. The "efficiencies" from these mergers never really materialized. Instead, the mergers produced untoward concentrations of economic power, forcing single-product competitors out of business and raising customer prices.

Worse yet, discrete management oversights that might have produced limited damage in earlier generations became systemic failures precisely because markets had been linked together in vertical mergers and other complementary transactions.

In March, Fed Chairman Ben Bernanke acknowledged the obvious. He defended the massive financial bailout by arguing that some companies were not simply too big to fail, they were "too interconnected to fail." The invocation of putative efficiencies to justify mammoth vertical mergers is no longer credible.

Bernanke's admission comes late in the day. Permissive antitrust attitudes have already set up much of the economy for systemic disasters by permitting the creation of vertically integrated behemoths. Whole industries, beyond financial services, are now dependent on a supplier or two, and the failure of management in even the smallest cog of one of these vertical monstrosities can bring the whole enterprise down and, with it, all of the market's customers.

In my book, Free the Market!, I point to the roughly 40 complementary acquisitions Oracle made to restructure the entire software market for applications used by big companies. Oracle's successful acquisition strategy forces customers to choose a single supplier for most components of an enterprise software solution, rather than picking the most desirable products for each separate function from among different suppliers.

Expectations are high in the legal profession and in Washington that President Obama's antitrust enforcers will scrutinize mergers between direct competitors more carefully than their predecessors ever did. But the litmus test for the new administration's enforcement policies--the real indication of how much Obama's team understands the new interconnected economy--will come from its evaluation of deals involving companies that don't compete directly with each other.

A couple of months ago, the world's largest ticket-selling network (Ticketmaster) and the world's biggest concert promoter (LiveNation) announced their intention to merge. Proponents of the deal claim that the greater efficiency of bringing both functions under a single management will help the new company cut ticket prices in the future. Critics predict higher consumer prices as a consequence of concentrating economic power.

If the new president actually intends to invigorate antitrust enforcement as he promised during his campaign, you should expect the new antitrust enforcers in Washington to declare the Ticketmaster deal dead on arrival at the Justice Department.

Gary L. Reback is a Silicon Valley attorney who led the private sector antitrust crusade against Microsoft Corp. during the 1990s. He is also the author of Free The Market!, published in April by Portfolio, the business imprint of Penguin Group USA.

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”

Fallout from AIG bonus controversy is beginning to be felt by the insurer’s local operations.

In a March 16 letter to customers, AIG Hawaii CEO Robin Campaniano wrote that “some of you have contacted us to express your concern, and we share your frustration.”

Campaniano distanced the local insurer from its Mainland parent, which was sharply criticized by Congress and activist groups for issuing huge bonus checks to executives after receiving more than $180 billion in taxpayer-funded bailouts.

“The bonus payout by the holding company does not have any financial implications to AIG Hawaii, nor does it have any effect on your insurance premium or policy coverage,” Campaniano wrote.

“Last year we made a decision to stand by our customers in these tough economic tiems and we did not grant any performance bonuses in 2008. In addition, we made the decision that no employee of AIG Hawaii will receive salary increases or performance bonuses in 2009.”

AIG Hawaii is the third-largest auto insurer here and employs more than 300 workers statewide.

The company has sold more than $131 million in life insurance products, $29 million in homeowners policies and $90 million auto insurance policies statewide, according to the state Insurance Division.

Campaniano’s move to distance the local company makes sense. The bonus furor puts a huge target on AIG and competitors like State Farm and Geico are likely to capitalize on the controversy.

Demonstrators marched in New York’s financial district Thursday
to protest corporate excesses.

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.’s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.

The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.’s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.

The remainder of A.I.G.’s claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that A.I.G. says it made to the I.R.S. but are now owed back. The claim also covers $119 million in penalties and interest that A.I.G. says it is due back from the government.

In part, A.I.G. says it overpaid its federal income taxes after a 2004 accounting scandal that caused it to restate its financial records. A.I.G. says in part that it is entitled to a refund of $33 million that SICO paid in 1997 as compensation to employees, which it now says should be characterized as a deductible expense.

A.I.G.’s lawyers in the case, at Sutherland Asbill & Brennan, referred calls to the company. Asked about the lawsuit, Mark Herr, an A.I.G. spokesman, said Thursday that “A.I.G. is taking this action to ensure that it is not required to pay more than its fair share of taxes.”

WASHINGTON – For a while, the disappearance of an executive bonus restriction from last month's economic stimulus looked like sleight of hand worthy of a Las Vegas stage. No one could explain how the provision faded into thin air. On Wednesday, Sen. Chris Dodd, D-Conn., acknowledged that his staff agreed to dilute the executive pay provision that would have applied retroactively to recipients of federal aid.

Dodd, the chairman of the Senate Banking Committee, told CNN that the request came from Obama administration officials whom he did not identify.

The provision was the subject of new attention this week because, had it survived, it would have prevented the American International Group Inc. from granting $165 million in bonuses to employees of its financial products division.

While the House and Senate reconciled their different stimulus bills last month, the Treasury Department expressed concern with a Senate restriction on bonuses, noting that if it applied to existing compensation contracts it could face a legal challenge.

"The alternative was losing, in my view, the entire section on executive excessive compensation," Dodd told CNN. "Given a choice, this is not an uncommon occurrence here, I agreed to a modification in the legislation, reluctantly."

An administration official said Treasury made Dodd's staff aware of the potential for litigation but did not demand that the provision be removed from the final bill. The official spoke on the condition of anonymity because he was not authorized to discuss the matter in public.

The legislation does include a provision that allows Treasury to examine past compensation payments to determine if they were "contrary to the public interest." Treasury Secretary Timothy Geithner on Tuesday said he was using that provision to determine whether the government could somehow recoup the AIG bonuses.

Over the years, Dodd has been the top recipient of campaign contributions from AIG employees. During 2007-2008, when he ran for president, he received nearly $104,000 from AIG employees and their families, according to the Center for Responsive Politics, a nonpartisan group that monitors money in politics.

In a statement, his office said Dodd only became aware of the AIG bonuses in the past few days. "To suggest that the bonuses affecting AIG had any effect on Sen. Dodd's action is categorically false," Dodd spokeswoman Kate Szostak said.

A mini-firestorm exploded Wednesday over U.S. Sen. Christopher Dodd's role in legislation regarding the huge bonuses at AIG, the highly controversial insurance giant that is receiving about $170 billion in federal bailout money.

Republicans and others are charging that Dodd was the main person behind the legislation that allowed the bonuses for the AIG employees.

But Dodd says he was never a member of the conference committee that inserted the legislation into the final version of the bill.

The bonuses have become a flashpoint over public anger regarding federal bailouts in general and AIG in particular. Everyone from President Barack Obama to Republican state legislators in Connecticut is decrying the bonuses.

Dodd's spokeswoman, Kate Szostak, is saying that the accusation that Dodd included the exemption for the bonuses is false, despite reports on Fox News, the Drudge Report, and the Rush Limbaugh radio show.

"Senator Dodd's original executive compensation amendment adopted by the Senate did not include an exemption for existing contracts that provided for these types of bonuses,'' she said.

The exemption that allowed the bonuses was crafted behind closed doors in a conference committee with top negotiators, including some of the most powerful members of Congress -- but not Dodd.

During the conference period, Dodd pushed for language that would require the U.S. Treasury Department to analyze any previous bonuses, according to Szostak.

"At the same time, Senator Dodd supported legislation by Senator Wyden that would tax the bonuses so that taxpayers could recoup some of this money,'' she said. "Unfortunately, that provision was removed from the stimulus bill in conference."

"Senator Dodd was completely unaware of these AIG bonuses until he learned of them in the past few days; to suggest that the bonuses affecting AIG had any effect on Senator Dodd's action is categorically false," Szostak said.

But Brian Walsh, a spokesman for the National Republican Senatorial Committee, had a sharply different view of the issue Tuesday afternoon.

"It is very disingenuous of Senator Dodd to suggest that he is now leading the fight to protect taxpayer money from going towards AIG bonuses when it was his own amendment to the stimulus bill last month that allowed AIG executives to receive these bonuses in the first place,'' Walsh said.

"It's even more disingenuous when you consider that Senator Dodd has received more political contributions from AIG than any other member of Congress. His rhetoric this week, which is only coming in the wake of public outrage, is typical Washington doublespeak, and the citizens of Connecticut deserve better."

In Connecticut, Republican legislators are trying to change the state law that AIG is citing, saying that the company is legally bound to pay the bonuses. The Connecticut state law says that if a company withholds payments that are due to employees, then those employees can file a civil lawsuit and win twice as much money. As such, AIG says that it could be forced to pay $330 million in bonuses – double the original amount of $165 million.

As long as everyone's talking today about AIG's payouts to its executives and foreign banks, let's remember the payouts AIG has made over the years to politicians. In the last 20 years American International Group (AIG) has contributed more than $9 million to federal candidates and parties through PAC and individual contributions. That's enough to rank AIG on OpenSecrets.org's Heavy Hitters list, which profiles the top 100 contributors of all time.

Over time, AIG hasn't shown an especially partisan streak, splitting evenly the $9.3 million it has contributed since 1989. In the last election cycle, though, 68 percent of contributions associated with the company went to Democrats. Two senators who chair committees charged with overseeing AIG and the insurance industry, Sen. Chris Dodd (D-Conn.) and Sen. Max Baucus (D-Mont.), are among the top recipients of AIG contributions.

Baucus chairs the Senate Finance Committee and has collected more money from AIG in his congressional career than from any other company--$91,000. And with more than $280,000, AIG has been the fourth largest contributor to Dodd, who chairs the Senate's banking committee. President Obama and his rival in last year's election, Sen. John McCain (R-Ariz.), are also high on the list of top recipients.

AIG has been a personal investment for lawmakers, too. Twenty-eight current members of Congress reported owning stock in AIG in 2007, worth between $2.5 million and $3.3 million. Sen. John Kerry (D-Mass.), one of the richest members of Congress, was by far the biggest investor in AIG, with stock valued around $2 million.

Last year AIG and its subsidiaries spent about $9.7 million on federal lobbying, or about $53,000 for every day Congress was in session in 2008. The company's spending on advocacy last year was down from an all-time high of $11.4 million spent on lobbying in 2007....

( http://www.opensecrets.org/news/2009/03/before-the-fall-aig-payouts-we.html )

It's not the bonuses. It's that AIG's counterparties
are getting paid back in full.

Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?

The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

So here are several questions that should be answered, in public, under oath, to clear the air:

What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?

Was it already known who the counterparties were and what the exposure was for each of the counterparties?

What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?

What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.

Why weren't the counterparties immediately and fully disclosed

Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.

WASHINGTON/NEW YORK (Reuters) - Goldman Sachs Group Inc and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer.

The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets.

The size of the payments also illustrates how seriously a potential collapse of AIG was viewed by the regulatory authorities. U.S. Federal Reserve Chairman Ben Bernanke said in an interview with CBS news magazine "60 Minutes" that the failure of AIG would have brought down the financial system.

AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.

As part of those efforts, Obama will announce steps on Monday to make it easier for small business owners to borrow money, officials said.

But the revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays could stoke further outrage at the entire U.S. bank bailout.

The fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary.

"It doesn't to me seem fair that the American taxpayer has got to bear the 100 percent of the downside," said Campbell Harvey, a finance professor at Duke University.

"A hedge is not a hedge if you did not factor in the counterparty risk. And the U.S. taxpayer should not be obligated to make people whole for hedges that were not properly executed."

Goldman Sachs, formerly led by Henry Paulson who was treasury secretary at the time of the original AIG bailout, said, as it has in the past, that its AIG positions were "collateralized and hedged."

Deutsche Bank and Barclays declined to comment. Societe Generale was not available for comment.

As it seeks to ease the credit crunch that was the original target of the Troubled Assets Relief Program (TARP), the Treasury will also offer more details this week about the workings of proposed public-private partnerships to take toxic assets off banks' books, including a timeframe, a senior department official said on Saturday.

"No taxpayer in these arrangements is going to lose money until the investor who put up the money has lost 100 percent," said Chief White House economic adviser Lawrence Summers.

Treasury officials have said the fund, or funds, would be a vehicle to provide as much as $1 trillion in financing for buying bad assets -- particularly mortgages gone bad as a result of the U.S. housing bust. The Federal Reserve and Federal Deposit Insurance Corp would participate.

As more Americans lose their jobs and homes, Obama's new administration is under heavy pressure to show that the rescue plan for AIG and major banks is working to free up lending and rein in the riskier excesses of Wall Street.

The payments to AIG counterparties include the provision of collateral to back up credit default swaps, a form of financial insurance that AIG's London office was writing; the purchase of the collateralized default obligations, a type of complex debt security that underlay that insurance; and payments to counterparties of a securities lending program.

Through three separate types of transactions, Goldman received an aggregate $12.9 billion. Among European banks, SocGen was the biggest recipient at $11.9 billion, Deutsche got $11.8 billion and Barclays was paid $8.5 billion.

The AIG disclosures are still incomplete in that they do not include payments to the banks since December 31.

The list of counterparties was made public by AIG amid growing pressure on the insurer to come clean about the true beneficiaries of the bailout ahead of a congressional hearing on Wednesday at which AIG chief executive Edward Liddy is slated to testify.

Democratic Congressman Paul Kanjorski, whose committee will quiz Liddy, said the counterparties and bonuses would both be topics for investigation at the hearing.

Summers -- speaking before the payments to banks were made public -- called the AIG bonuses "outrageous" but said contracts must be honored, even though Treasury Secretary Timothy Geithner had "negotiated very forcefully" with AIG and done all that was "legally permissible" to limit the payments.

"We're not a country where contacts just get abrogated willy nilly," Summers, a former treasury secretary, said on CBS's "Face the Nation" program. "What the lesson is, is this: We don't really have a satisfactory regulatory regime in place."

To help small businesses, officials said Obama intends to provide $730 million from the congressionally approved $787 billion economic stimulus program to cut lending fees, boost loan guarantees and expand other programs.

"We know that small businesses are the engine of growth," Christina Romer, who chairs the White House Council of Economic Advisers, said on NBC's "Meet the Press."

As part of the financial rescue, the Obama administration expects private investors to bolster government funds to help cleanse the banking system of bad assets, said Austan Goolsbee, a member of the Council of Economic Advisers.

"It's better to do this jointly with private capital," Goolsbee told "Fox News Sunday." "I believe there is a reasonable expectation that people will participate."

The idea of offering financing support from the government for private investors willing to buy the toxic assets was first put forward by Geithner in February but the lack of detail has disappointed financial markets.

AIG's Liddy said in a letter to Geithner the giant insurer was legally obligated to make 2008 employee retention payments but had agreed to revamp its system for future bonuses after the Obama administration objected.

"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Summers said.

Representative Barney Frank, the Democratic chairman of the powerful House of Representatives Financial Services Committee, said the government must see if the bonuses can be recovered, adding that the timing of AIG's commitment was important.

"We can't just violate law, legal obligations," Frank told Fox. "I understand that. But I do want to find out at what point these illegal obligations were incurred."

Mitch McConnell, the Republican minority leader in the Senate, called the AIG situation an "outrage" and said the nature of the contracts needed to be checked.

While the news that AIG bailout money went to foreign banks could further stoke political outrage, some experts said the alternative could have been worse.

"The nationality of the bank should not matter," said Peter Morici, professor at the Smith School of Business, University of Maryland. "We have an inter-related financial system. You do something to mess with that and all bets are off the table."

WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said.

But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.

“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.

Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”

An A.I.G. spokeswoman said Saturday that the company had no comment beyond the letter. The bonuses were first reported by The Washington Post.

The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said.

Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G. and none has infuriated lawmakers more with practices that policy makers have called reckless.

The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages.

The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and “retention pay” had been agreed to in early 2008 and were for the most part legally required.

The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance.

The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.

The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.

But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured.

A.I.G. did cut other bonuses, Mr. Liddy explained, but those were part of the compensation for people who dealt in other parts of the company and had no direct involvement with the derivatives.

Mr. Liddy wrote that A.I.G. hoped to reduce its retention bonuses for 2009 by 30 percent. He said the top 25 executives at the financial products division had also agreed to reduce their salary for the rest of 2009 to $1.

Ever since it was bailed out by the government last fall, A.I.G. has been defending itself against accusations that it was richly compensating people who caused one of the biggest financial crises in American history.

A.I.G.’s main business is insurance, but the financial products unit sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall....

AIG's collapse caused a lot of pain, but its bailout package offered sweet relief for some.

After months of stonewalling, government-controlled American International Group finally revealed the names of the counterparties that were funneled $108 billion in taxpayer funds. The largest recipients of AIG bailout funds were European banks, Wall Street firms and, to a lesser degree, municipal governments.

While some of the payments disclosed were run of the mill obligations for an insurance company, the $52 billion that was used to satisfy or exit credit default swaps, insurance contracts on securities, are at the center of a growing storm of controversy. Last week, Federal Reserve Chairman Ben Bernanke was grilled on Capitol Hill over AIG's refusal to divulge details about these transactions.

The fundamental concern is that favored firms may have been overpaid for assets using a large chunk of AIG's $170 billion bailout package. Though it is now known who the counterparties are, AIG refused to itemize what exactly it each of them brought to the table. As a result, it's impossible to know if some firms got better deals than others, or if taxpayers got a raw deal all together.

During the fourth quarter, AIG spent $27.1 billion of its bailout money trying to entice counterparties to exit their positions. European banks lead the list with Societe Generale receiving $6.9 billion; Deutsche Bank, $2.8 billion; and UBS, $2.5 billion. Meanwhile, stateside, Goldman Sachs and Merrill Lynch received $5.6 billion and $3.1 billion, respectively.

Per existing swap agreements, AIG had to post $22.4 billion in collateral where the underlying investments were downgraded. Societe General received $4.1 billion; Deutsche Bank, $2.6 billion; Goldman, $2.5 billion; and Merrill, $1.8 billion.

AIG also had to post $43.7 billion during the quarter to unwind its securities lending business (See "AIG's Play For Time") and $12.1 billion to different municipalities that had guaranteed investment policies. California and Virginia received $1 billion each.

AIG's main businesses involved insurance, but it got into trouble when it started guaranteeing risky financial instruments through credit default swaps. This was hugely profitable until AIG's swaps, many of which were written against mortgage-backed securities, turned into colossal losing bets amid the collapse of the mortgage market, and regulators had to pull it onto the federal balance sheet to save it from collapse. (See "Fed Rescues AIG")

In November, the New York Federal Reserve Bank used taxpayer funds to finance a special investment vehicle dubbed Maiden Lane III that would be used to buy up the underlying assets on these types of swaps, thereby canceling the contract. (See "AIG. CDO. CDS. It's A Mess.")

Since its September rescue, AIG's initial $85 billion bailout package has been restructured and sweetened several times. After losing $61 billion in its fourth quarter, Treasury pumped it up with an additional $30 billion on top of its existing $150 billion bailout package.

As AIG comes clean about some of its murkier dealings, it also needs to come up with a new game plan. The original strategy for the insurer to sell some of its best parts to pay back its taxpayer borrowings is proving more difficult than anticipated due to a worsening market. (See "Blowing Up AIG")

NEW YORK (Reuters) – Where, oh where, did AIG's bailout billions go? That question may reverberate even louder through the halls of government in the week ahead now that a partial list of beneficiaries has been published.

The Wall Street Journal reported on Friday that about $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions.

Morgan Stanley and Goldman Sachs declined to comment when contacted by Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed Wachovia, could not be reached for comment.

The U.S. Federal Reserve has refused to publicize a list of AIG's derivative counterparties and what they have been paid since the bailout, riling the U.S. Senate Banking Committee.

Federal Reserve Vice Chairman Donald Kohn testified before that committee on Thursday that revealing names risked jeopardizing AIG's continuing business. Kohn said there were millions of counterparties around the globe, including pension funds and U.S. households.

He said the intention was not to protect AIG or its counterparties, but to prevent the spread of AIG's infection.

The Wall Street Journal, citing a confidential document and people familiar with the matter, reported that Goldman Sachs and Deutsche Bank each got about $6 billion in payments between the middle of September and December last year.

Once the world's largest insurer, AIG has been described by the United States as being too extensively intertwined with the global financial system to be allowed to fail.

The Federal Reserve first rode to AIG's rescue in September with an $85 billion credit line after losses from toxic investments, many of which were mortgage related, and collateral demands from banks, left AIG staring down bankruptcy.

Late last year, the rescue packaged was increased to $150 billion. The bailout was overhauled again a week ago to offer the insurer an additional $30 billion in equity.

Bankruptcy for AIG would have led to complications and losses for financial institutions around the world doing business with the company and policy holders that AIG insured against losses.

Representative Paul Kanjorski told Reuters on Thursday that he had been informed that a large number of AIG's counterparties were European.

"That's why we could not allow AIG to fail as we allowed Lehman to fail, because that would have precipitated the failure of the European banking system," said Kanjorski, a Democrat from Pennsylvania who chairs the House Insurance Subcommittee.

As part of its business, AIG insured counterparties on mortgage-backed securities and other assets. The collapse of the U.S. subprime mortgage market, which triggered a global financial crisis, left the insurer and some of its policy holders facing possible ruin as the value of assets declined.

U.S. regulators failed to recognize how much risk AIG was piling on in credit-default swaps, and by the time they understood, they had no choice but to pour in billions of public dollars, Kohn and other officials told the Senate panel.

Senators were outraged by the lack of details about where the bailout money has gone.

"That we find ourselves in this situation at all is ... quite frankly, sickening," said Senator Christopher Dodd, the Democrat who chairs the committee. "The lack of transparency and accountability in this process has been rather stunning."

Eric Dinallo, superintendent of New York State's Insurance Department, railed on Friday against AIG's failed business model, likening its insuring credit-default swaps as gambling with somebody else's money.

"It's like taking insurance on your neighbor's house and even maybe contributing to blowing it up," he said at a panel sponsored by New York University's Stern School of Business.

U.S. lawmakers have said they are running out of patience with regulators' refusal to identify AIG's counterparties.

On Thursday, Richard Shelby, the top Republican on the banking committee, said: "The Fed and Treasury can be secretive for a while but not forever."

NEW YORK -- The former chief executive officer of American International Group on Monday sued the company he led for 38 years, saying AIG misled investors about its exposure to subprime mortgages.

Maurice "Hank" Greenberg, 83, claimed in papers filed in federal court in Manhattan Monday that the company, once the world's largest insurer, has ruined his fortune by lying about its financial health.

The lawsuit says Greenberg, who served as AIG CEO from 1967 until he retired in March 2005, was the New York-based company's largest non-institutional shareholder. Christina Pretto, a company spokeswoman, said: "We believe the suit is without merit and we will defend ourselves vigorously."

AIG's stock fell to 42 cents Monday, as the government threw a stunning new $30 billion lifeline to the insurance giant, even as it confirmed it lost more than twice that much, $62 billion, last quarter. The source of trouble for AIG, which has 74 million customers worldwide and operations in more than 130 countries, is its business insuring mortgage-backed securities and other debt against default. That business imploded once the credit crisis struck with force.

The government has now made four separate efforts to save the company, totaling more than $170 billion.

Greenberg was forced out of AIG amidst a controversy in spring 2005 when the company restated its financial statements for the previous five years, acknowledging accounting improprieties, including "improper or inappropriate transactions."

New York regulators later accused AIG, Greenberg and the company's former chief financial officer of orchestrating an accounting scheme that made AIG's financial picture appear brighter than it was, misleading both investors and regulators.

The Federal Reserve Bank of New York announced today, with the full support of the Treasury Department, the formation of the AIG Credit Facility Trust. The Trust is being established for the sole benefit of the United States Treasury to hold the 77.9 percent equity interest in American International Group, Inc. (AIG) that will be issued in connection with the previously announced credit facility extended to AIG.

Three independent trustees have been selected by the New York Fed, in close consultation with the Treasury Department, to oversee this equity interest in the best interests of the U.S. Treasury. They are Jill M. Considine, former chairman of the Depository Trust & Clearing Corporation; Chester B. Feldberg, former chairman of Barclays Americas; and Douglas L. Foshee, president and chief executive officer of El Paso Corporation.

Pursuant to the terms of the Trust Agreement, the trustees will have absolute discretion and control over the AIG stock, subject only to the terms of the Trust Agreement, and will exercise all rights, powers and privileges of a shareholder of AIG. The trustees will not sit on the board of directors of AIG. Day-to-day management of AIG will remain with the persons charged with such management.

To avoid possible conflicts with the New York Fed’s supervisory and monetary policy functions, the Trust has been structured so that the New York Fed cannot exercise any discretion or control over the voting and consent rights associated with the equity interest in AIG. The New York Fed will, however, continue to monitor closely the financial operations of AIG in connection with its role as lender....

Jill Considine served as senior advisor of The Depository Trust & Clearing Corporation (DTCC) and its subsidiaries (securities depository and clearing house) from August 2007 to May 2008, having served as chairman since August 2006, and as both chairman and chief executive officer from January 1999 to August 2006.

Prior to joining DTCC, Ms. Considine served as the president of the New York Clearing House Association, L.L.C. from 1993 to 1998. Ms. Considine served as a managing director, chief administrative officer and as a member of the Board of Directors of American Express Bank Ltd., from 1991 to 1993. Prior to that, Ms. Considine served as the New York State Superintendent of Banks from 1985 to 1991. Ms. Considine also serves as a director of the Atlantic Mutual Insurance Companies, The Interpublic Group of Companies, Inc., Ambac Financial Group, Inc. and is chairman of Butterfield FulcrumGroup, Limited.

Ms. Considine recently completed a six-year term as a member of the Board of the Federal Reserve Bank of New York where she served as chairman of the Audit and Operational Risk Committee.Ms. Considine is a member of the Council on Foreign Relations and the Economics Club of New York. She served on the Group of Thirty Steering Committee on global clearance and settlement and as a member and speaker at the World Economic Forum in Davos. Ms. Considine was a Presidential appointee to the Advisory Committee for Trade Policy and Negotiations from 2003-2004. She was named Six Sigma CEO of the Year Award in 2006 and one of Crain’s New York Business 100 Most Influential Women in Business.

Ms. Considine earned a Bachelor of Science degree, with honors, from St. John’s University and a Master of Business Administration degree, with honors, from Columbia University. She also attended Bryn Mawr College.

Chester B. Feldberg served as Chairman of Barclays Americas from 2000 until his retirement in 2008. Prior to joining Barclays Americas, Mr. Feldberg had been executive vice president in charge of the Bank Supervision Group at the Federal Reserve Bank of New York from 1991 through 2000. In total, Mr. Feldberg was an employee of the New York Fed for 36 years, starting as a lawyer in the Bank’s Legal Department before moving to the Credit and Capital Markets Group and then the Bank Supervision Group. He was also a member of the Basle Committee on Banking Supervision from 1993 through 2000.

Mr. Feldberg serves on the Board of Directors and Audit Committee of Mizuho Securities USA, a subsidiary of the Mizuho Financial Group. Mr. Feldberg earned a Bachelor of Laws degree in 1963 from the Harvard Law School and a Bachelor of Arts degree in economics in 1960 from Union College. He also attended the advanced management program at the Harvard Business School in 1974.

Douglas L. Foshee is president, chief executive officer and a director of El Paso Corporation, which owns North America’s largest natural gas pipeline system and one of North America’s largest natural gas producers.

Prior to joining El Paso in 2003, Mr. Foshee served as executive vice president and chief operating officer for Halliburton. He joined Halliburton in 2001 as executive vice president and chief financial officer. Prior to that, Mr. Foshee was president, chief executive officer and chairman of the board at Nuevo Energy Company. From 1993 to 1997, Mr. Foshee served Torch Energy Advisors Inc. in various capacities, including chief operating officer and chief executive officer. He held various positions in finance and new business ventures with ARCO International Oil and Gas Company and spent seven years in commercial banking, primarily as an energy lender.

Mr. Foshee earned a Master of Business Administration degree from the Jesse H. Jones School at Rice University in 1992 and a Bachelor of Business Administration degree from Southwest Texas State University in 1982. He is also a graduate of the Southwestern Graduate School of Banking and Southern Methodist University.

Mr. Foshee serves on the boards of Cameron International Corporation, Children’s Museum of Houston, Texas Business Hall of Fame Foundation and Greater Houston Partnership. He also chairs the board of directors of the Federal Reserve Bank of Dallas, Houston Branch, and Central Houston, Inc. He is a member of the Independent Petroleum Association of America, Houston Producers’ Forum, 25 Year Club of the Petroleum Industry, National Petroleum Council, the Council of Overseers for the Jesse H. Jones Graduate School of Management at Rice University, Rice University’s board of trustees and KIPP’s board of trustees. Mr. Foshee is a recipient of the 2007 Ellis Island Medal of Honor for his commitment to helping children succeed and his leadership role in the business community.

[American International Group is the latest in a series of large-scale enterprises whose fraudulent accounting practices have recently seen the light of day. AIG is a very big fish, not only because of the quantities of money involved but because of long-standing connections to US intelligence. This is deep stuff, reaching back to the Vietnam War, the Philippines, and the post-1989 looting of Russia. Chin provides abundant sources and links - a timely exposé. - JAH]

July 1, 2005 1300 PST (FTW) American International Group's Maurice "Hank" Greenberg is now the target of multiple investigations into the orchestration of sham transactions, the inflation of reserves, illegal stock trades, deception, and book-cooking.

In an April television interview, New York Attorney General Eliot Spitzer declared that his office had "powerful evidence" that AIG was "a black box run with an iron fist by a CEO who did not tell the public the truth". In May, Spitzer filed civil fraud charges against Greenberg, in a probe that has ensnared another Wall Street god, Berkshire Hathaway's Warren Buffett. Buffett cooperated with the investigation as a witness (not a target). On June 9, 2005, two executives at General Re (a Berkshire Hathaway unit) pleaded guilty to conspiring to file false financial information. Spitzer is also pursuing Hank Greenberg's son, Jeffrey, in a separate investigation of bid-rigging at Marsh & McLennan (a top Bush campaign contributor). Jeffrey Greenberg quit as Marsh & McLennan's CEO in October 2004.

Super-elite Hank Greenberg - a legendary member of world planning groups (Council on Foreign Relations, the Bilderberger Group, the Trilateral Commission) and the Heritage Foundation, a former candidate for CIA director (1995), Bush family crony, and high-level functionary for all US presidents stretching back to Kennedy - remains supremely confident, and defiant. His net worth is still at least $3 billion. Greenberg has transferred hundreds of shares of stock to his wife and Greenberg family trusts. Greenberg is being defended by the high-powered attorney David Boies (of Bush v. Gore fame).

Many long-time critics of AIG are justifiably skeptical that the Spitzer case is anything more than another limited hangout - a "whiter shade of Enron" - that will permit Greenberg to skate. Although recent activity leaves the prospect of criminal charges open, Spitzer "reassured" Wall Street that criminal charges are not likely.

Besides questions about how aggressively Spitzer will pursue the evidence, there are conflicts involving Spitzer himself. According to the New York Post, Spitzer received $18,500 in campaign contributions from 16 attorneys from Paul, Weiss, Rifkind, Wharton & Garrison, where Spitzer once worked as an associate - and which currently represents AIG.

Although Greenberg resigned as CEO and chairman of the AIG board, Greenberg still manages Starr International (SICO) and C.V. Starr. SICO and C.V. Starr (which was already under fire for millions in diverted commissions and questionable executive pay) are AIG private holding companies that control billions in AIG stock. More importantly, the Starr companies constitute the conglomerate's original roots as an intelligence-related proprietary founded by OSS agent Cornelius Vander Starr.

Building on Scott's research, Michael C. Ruppert's investigation "AIG" (From The Wilderness, August 14, 2001) exhaustively deconstructed Greenberg and AIG, exposing continuing connections to covert operations, narcotrafficking, money laundering, and AIG's central role in the Wall Street/Washington power nexus. In addition to explaining how "insurance" is used in intelligence operations, Ruppert tracked down then-AIG employee Coral Talavera, the wife of Medellin Cartel co-founder Carlos Lehder. The questions raised by Ruppert regarding AIG's connection to Lehder and millions in drug money (laundered between 1987-1992) remain unanswered, and the dark realities about the conglomerate, studiously ignored.

TIME magazine's June 20, 2005 profile of the irascible Greenberg, "Down But Not Out" is written like a tribute (evidenced by the title). Still, even this breezy piece confirms how Greenberg has functioned as a career agent and strongman, deeply involved in America's most important Eastern operations for decades, for anyone with a grasp of history:

Greenberg was routinely the first foreigner to penetrate "politically combustible countries like Romania, Iran, Vietnam, and other parts of the Far East", and usually the first to be permitted to open business offices in these countries.

Greenberg, a "private citizen" was involved in sensitive high-level negotiations with (and occasional bullying of) Asian leaders, from the Philippines' Ferdinand Marcos to China's Zhu Rhongji.

Greenberg was among the top Wall Street elite who spearheaded the "free market transformation" of Russia in the early 1990s (which ultimately looted the country). (Note: Ruppert's FTW investigation revealed that as insurance carrier for the Bank of New York, AIG was indirectly linked to the laundering of up to $10 billion in criminal money out of Russia by the BoNY. Tip of the iceberg?)

Greenberg is a trustee of the Asia Society, founded by John D. Rockefeller III, where he sits alongside the likes of Richard Holbrooke (an AIG director), John D. Rockefeller IV, Nicholas Platt, and other members of the elite. The Asia Society plays a significant role in global geostrategy. (A just-concluded conference on the future of energy-rich Kazakhstan is further evidence of this.)

Will any probe follow the trail from the Wall Street business-as-usual swindles, into the heart of an American empire that sustains itself on destruction?

"In portraying Enron as a 'scandal', and as an isolated case of overheated capitalism and 'unusual political influence', the American corporate media and congressional investigators are avoiding the truth: Enron, like many multinational corporations, has functioned as an operational arm of the US government, and as a weapon of economic, political and territorial hegemony.

"In a "free market world" in which the goals of the state, corporations and the national security apparatus are indistinguishable… and government and business elites, linked by longtime ties, move seamlessly between public and private sectors, the hydra that is Enron is nightmarishly uncontroversial - and quintessentially American."

But as noted by Michel Chossudovsky (CovertAction Quarterly, Fall 1996), "Global crime has become an integral part of an economic system with far-reaching social, economic and geopolitical ramifications… the international community turns a blind eye until some scandal momentarily breaks through the gilded surface." At such a level, business is crime, and crime is business. The players operate right out in the open. Their ticker symbols fill business pages, and crawl across television screens every weekday morning. Their names, photos, and backgrounds are printed in glossy annual reports.

In a totalitarian Bush World in which the judicial system is irrevocably corrupted, crimes of global magnitude occur on a daily basis (and go unpunished), and the media functions as the Empire's handmaid, what is the likelihood that "almighty" Hank Greenberg - "our man in Asia" - will get his just due?

This morning yet again we were outside the doors of the AIG building in Fenchurch Street demanding they sell their blood money shares in HLS. This company is spending US tax payer's money on supporting the torture of monkeys, puppies and kittens inside HLS - what a disgrace! We were there from half eight to greet the workers going in and stayed for about an hour and a quarter. They didn't like the "World's biggest ever losers" placard one bit, though it is completely accurate.

We the made our way out of the City of London to do a couple of demonstrations against Barclays branches. We spent about an hour at Barclays in Piccadilly Circus. A member of the public stated to us that he would definitely close his account, and the support was generally very good here. Then, after a quick vegan burger in Soho, we demonstrated the Barclays in Soho Square.

The staff were not happy at this location and called the police, even though we were only chanting and handing out leaflets. The police told us that the Barclays staff wanted us on the other side of the road. We told the police that we wanted Barclays to sell their shares in HLS! The police didn't follow through with any of their pathetic threats and we carried on the demo.

A good trio of demos today and reaction was very good at all locations. We will only stop against these two companies when they sell their shares in HLS.

The sector was also mostly lower as American International Group Inc. reported the worst-ever quarterly loss in U.S. corporate history and said it would receive additional government support. Despite the AIG loss, its shares were one of the few to rise in midday trading Monday.

The KBW Insurance index, which tracks 24 of the nation's largest insurers, fell 1.9 percent to 50.75.

AIG said early Monday morning it lost $61.7 billion during the final three months of 2008 amid the ongoing credit crisis and recession. AIG's loss spurred the government to provide a fourth round of support for what was one the world's largest insurer.

The government pledged an additional $30 billion in aid to the company, on top of the $150 billion loan package AIG already received in November.

Shares of AIG jumped 6 cents, or 14.3 percent, to 48 cents amid the news as the government continues to ensure the insurer stays in business.

Greg Case, president and chief executive of insurance broker Aon Corp., said in a statement the additional government support will help provide further stability to the sector.

"Aon supports any action taken in the marketplace where clients will benefit from reduced uncertainty and volatility in the commercial insurance industry, as there is an ongoing need for capital in order to provide a baseline of stability as well as a continued flow of innovative products to help clients through this crisis," Case said. But, the government support for AIG showed little effect on other insurers.

Most other insurers fell Monday as well, with life insurers leading the declines. Life insurers were hit hard last week as credit ratings agency Standard & Poor's cut key ratings on 10 companies that operate in the space.

All four were down sharply Monday after tumbling Friday, with Conseco leading the drop. Conseco shares were also hammered as the company said it lost $406.8 million in the fourth quarter and its independent auditors raised concerns about the insurer's liquidity.

Among other life insurers, MetLife shares declined $1.14, or 6.2 percent, to $17.32. Shares of Hartford Financial Services declined 65 cents, or 10.7 percent, to $5.45. Prudential Financial shares fell $1.40, or 8.5 percent, to $15.01.

The life insurers fell despite a positive report from Citi Investment Research analyst Colin Devine, who said the sell-off among the stocks "seems completely disproportionate to the risks the industry faces despite the deteriorating economic climate."

In a research note, Devine said most life insurer's balance sheets were strong enough to handle the current credit crunch and ongoing recession.

Aside from AIG, the few gainers were mostly property and casualty insurers, like Travelers Cos., which rose 60 cents to $36.75 and Cincinnati Financial Corp., which gained 8 cents to $20.62.

March 1 (Bloomberg) -- American International Group Inc., the insurer deemed too important to fail, may get a commitment for as much as $30 billion in new government capital after a record quarterly loss, said two people familiar with the matter.

The insurer may also be allowed to make lower payments on government loans, said the people, who declined to be identified because there was no public announcement. New York-based AIG may forfeit part of stakes in its two largest non-U.S. life insurance divisions to lower the firm’s debt, the people said.

AIG, first saved from collapse in September with a package that grew to $150 billion, had to restructure its bailout after failing to sell enough units to repay the U.S. Firms including banks relied on AIG to back more than $300 billion of assets through derivative contracts as of Sept. 30, making the insurer a “systematically significant failing institution” that has to be propped up, according to the Treasury.

“The government has accepted all the downside with little chance of upside,” said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. “They are trying to protect the global financial system from a complete meltdown.”

AIG, which agreed in September to turn over an 80 percent stake to the government, is set to announce a fourth-quarter loss of about $60 billion tomorrow, according to three people familiar with the matter. The company’s board was scheduled to meet today to vote on the revised bailout, according to two other people familiar with the matter.

The insurer had been in talks in the past week with regulators to restructure its bailout to stave off credit-rating downgrades that would have caused further costs tied to credit- default swaps. AIG had to seek an $85 billion federal loan in September after credit-rating downgrades left the company facing more than $10 billion in potential payments to debt investors who bought swaps from the insurer to protect against losses.

Downgrades by Moody’s Investors Service and Standard & Poor’s may force AIG to post more than $7 billion in collateral to counterparties, the insurer said in a November filing. AIG’s units could also lose access to the federal commercial paper program if they are downgraded, the company said. Rating agencies have signed off on the latest rescue, the Wall Street Journal reported today, citing unidentified people.

AIG may give up stakes in American International Assurance Co. and American Life Insurance Co., two life insurance divisions that operate in countries from China to the U.K. The holdings would go to a so-called special purpose vehicle to eventually position them for sale so AIG doesn’t have to divest them at distressed prices, according to one person familiar with the matter.

Chief Executive Officer Edward Liddy, appointed by the government to run AIG in September, had to scrap his strategy to repay a $60 billion government credit line by selling AIG units after potential buyers were hobbled by their own losses. AIG struck deals to raise about $2.4 billion through sales. Under Liddy’s plan, revealed in October, AIG was to emerge as a firm mostly providing property-casualty coverage to businesses.

The Standard & Poor’s 500 Insurance Index fell by half since Liddy announced his plan, reducing the prices AIG units could fetch and thinning the pool of companies strong enough to bid for them. The $60 billion credit may be reduced to under the latest revision, a person said. The company had tapped about $38.9 billion of the facility as of Dec. 31.

Liddy said AIG was on the “road to recovery” after securing a bailout valued at $150 billion in November. That package included the $60 billion credit line, a $40 billion capital investment and $50 billion to wind down liabilities tied to mortgage-backed securities the insurer owned or backed through swaps. Liddy said then that terms of the original rescue, disclosed a day after Lehman Brothers Holdings Inc. collapsed, were unsustainable.

Goldman Sachs Group Inc., Societe Generale SA, Deutsche Bank AG and Merrill Lynch & Co. are among the largest banks that bought swaps from AIG, according to a person familiar with the situation. The insurer handed over about $18.7 billion to financial firms in the three weeks after the September bailout, said the person, who declined to be named because the information hasn’t been made public.

AIG is winding down the trades and closing the unit that sold the swaps. The unit is under investigation by the U.S. Department of Justice, the Securities and Exchange Commission and U.K.’s Serious Fraud Office. The U.S. probes involve how AIG executives valued its swap portfolio and disclosed information about the contracts to investors, AIG said in a November regulatory filing.

AIG, once the world’s largest insurer, operates in more than 100 countries, providing protection to individuals and businesses. It insures against some of the biggest risks, covering planes and commercial shipping and providing protection against terrorist attacks.

The biggest insurers in North America posted more than $150 billion in writedowns and unrealized losses linked to the collapse of the mortgage market from the start of 2007, with AIG representing more than a third of that total. The company has units that insure, originate and invest in home loans.

The U.S. Senate’s banking committee has scheduled a hearing for March 5 to discuss AIG’s bailout and the government involvement. New York Insurance Superintendent Eric Dinallo and Donald Kohn, vice-chairman of the Federal Reserve Board of Governors, were scheduled to testify.

Rapidly tapping into taxpayers' money, American International Group has accessed about $90 billion from the government since the Federal Reserve came to its rescue last month.

AIG said Friday that as of October 22, it had outstanding borrowings of $72 billion under the two-year $85 billion revolving credit facility. It is using these funds primarily for collateral obligations related to the AIG Financial Products Corp. credit default swap portfolio and for general corporate purposes.

In addition, AIG subsidiaries had received $18 billion in cash collateral in exchange for third-party, investment-grade fixed-income securities borrowed by the New York Fed under AIG's $37.8 billion Securities Lending Agreement arranged with the Federal Reserve Bank of New York.

The name of the game in the financial-services business these days can be summed up in three words: assets under management. He who ends up with the most, wins.

Witness the $48 billion merger of Travelers Group with Citicorp. This combination will create a huge new financial-services company--one with an insurance arm (Travelers), a banking unit (Citibank), and an investment house (Salomon Smith Barney).

The new firm, to be called Citigroup, will have over 100 million customers worldwide and control roughly $1.36 trillion in client investment assets (not counting bank deposits). That barely edges out Merrill Lynch, which has $1.35 trillion in client assets under management. UBS, the product of this year's merger between Union Bank of Switzerland and Swiss Bank, controls $1.09 trillion in client assets.

More recently, rumors have been flying that insurance giant AIG will try to snap up Goldman Sachs after Wall Street's most prestigious investment bank goes public as early as this fall. There's also talk that securities firm Lehman Brothers or brokerage house PaineWebber could fall prey to a large European bank like Deutsche Bank.

Given the grab for client assets under way in the industry, Worth was surprised to learn there's no single source of reliable information that ranks the top firms. So we researched our own list of the top ten. Included in each firm's total are institutional assets, brokerage accounts, mutual funds, variable annuities, and private-banking accounts--everything but retail bank deposits. We also looked only at U.S. companies.

Client assets, of course, aren't the only measure of a financial company's clout. Revenue, equity capital, and the institution's own asset base all provide different pictures of a firm's size and strength. The new Citigroup, for instance, will have $44 billion in capital. But it won't stay on top for long.

When NationsBank completes its previously announced merger with BankAmerica (expected in early October), it will have $48.9 billion.

The following individuals contributed at least $50,000 to federal candidates and parties during one or more election cycles while affiliated with the organization.

Donor Name	Occupation	Date	Amount	Recipient
BROAD, ELI MR	AIG SUNAMERICA INC./CHAIRMAN	06/30/03	$25,000	Democratic Congressional Campaign Cmte
BROAD, EDYTHE	N/A/HOMEMAKER	03/31/04	$20,000	Democratic Congressional Campaign Cmte
BROAD, EDYTHE L MRS	HOMEMAKER	03/24/04	$20,000	DNC Services Corp
BROAD, ELI	SUN AMERICA INC	11/03/00	$20,000	DNC Services Corp
BROAD, EDYTHE	THE RALPH M PARSONS CO	03/30/04	$15,000	Democratic Senatorial Campaign Cmte
BROAD, ELI	SUNAMERICA INC	05/02/03	$11,000	Democratic Senatorial Campaign Cmte
BROAD ELI	SUNAMERICA INC.	10/10/02	$10,000	DCCC/Non-Federal Account 5
BROAD, ELI	SUNAMERICA INC	03/30/04	$10,000	Democratic Senatorial Campaign Cmte
BROAD, ELI	SUNAMERICA INC	05/13/02	$10,000	DSCC/Non-Federal Unicorp Assoc
BROAD, ELI		06/21/01	$10,000	DCCC/Non-Federal Account 7
BROAD, ELI	SUNAMERICA INC	03/28/01	$10,000	DSCC/Non-Federal Unicorp Assoc
BROAD, ELI	SUN AMERICA INC	10/14/99	$10,000	DNC Services Corp
BROAD, ELL	SUNAMERICA INC	03/28/01	$10,000	Democratic Senatorial Campaign Cmte
BROAD, ELL	SUNAMERICA INC	11/09/01	$10,000	Democratic Senatorial Campaign Cmte
BROAD ELI	N/A	06/19/02	$5,000	DCCC/Non-Federal Account 10
BROAD, EDYTHE L	HOMEMAKER	08/15/00	$5,000	DNC Services Corp
BROAD, ELI	SUNAMERICA CORP	02/24/99	$5,000	PAC for a Change
BROAD, ELI	SUNAMERICA INC./CHAIRMAN	02/08/02	$5,000	Responsibility/Opportunity/Community PAC
BROAD, ELI	SUNAMERICA INC./CHAIR	03/31/04	$5,000	Democratic Congressional Campaign Cmte
BROAD, ELI MR	CHAIRMAN RETIREMENT SERVICES INC./C	03/25/04	$5,000	DNC Services Corp
BROAD, EDYTHE L MRS	HOMEMAKER	08/18/04	$2,500	DNC Services Corp
BROAD, EDYTHE	HOMEMAKER	06/28/04	$2,000	Boxer, Barbara
BROAD, EDYTHE	NOT EMPLOYED/HOMEMAKER	09/30/03	$2,000	Clark, Wesley
BROAD, EDYTHE L	N/A	05/29/04	$2,000	Kerry, John
BROAD, EDYTHE L	N/A/HOMEMAKER	02/27/04	$2,000	Kerry, John
BROAD, EDYTHE L	N/A/HOMEMAKER	03/29/04	$2,000	Kerry, John
BROAD, ELI	AIG SUNAMERICA INC/CHAIRMAN	10/13/04	$2,000	Harman, Jane
BROAD, ELI	AIG SUNAMERICA INC/CHAIRMAN	09/30/03	$2,000	Clark, Wesley
BROAD, ELI	AIG SUNAMERICA INC	06/30/03	$2,000	Daschle, Tom
BROAD, ELI	AIG SUNAMERICA INC	06/30/03	$2,000	Daschle, Tom
BROAD, ELI	SUN AMERICA CORPORATION	06/01/03	$2,000	Dodd, Christopher J
BROAD, ELI	KAUFMANN AND BROAD HOME CORPORATIO/	02/27/03	$2,000	Kerry, John
BROAD, ELI	AIG SUNAMERICA INC/CHAIRMAN	01/20/03	$2,000	Lieberman, Joe
BROAD, ELI	SUMAMERICA	11/29/99	$2,000	Lieberman, Joe
BROAD, ELI MR	KAUFMANN AND BROAD HOME CORPORATIO	05/29/04	$2,000	Kerry, John
BROAD, ELI MR	KAUFMANN AND BROAD HOME CORPORATIO/	03/29/04	$2,000	Kerry, John
BROAD, EDYTHE	NOT EMPLOYED/HOMEMAKER	07/28/03	$1,000	Gephardt, Richard A
BROAD, EDYTHE	NOT EMPLOYED/HOMEMAKER	09/20/03	$1,000	Dean, Howard
BROAD, EDYTHE	HOMEMAKER	06/29/99	$1,000	Clinton, Hillary
BROAD, EDYTHE	HOMEMAKER	08/30/00	$1,000	Corzine, Jon S
BROAD, EDYTHE	HOMEMAKER	11/05/99	$1,000	Kerrey, Bob
BROAD, EDYTHE	HOMEMAKER	06/28/00	$1,000	Schiff, Adam
BROAD, EDYTHE	HOMEMAKER	06/12/00	$1,000	Carper, Tom
BROAD, EDYTHE		06/07/00	$1,000	Carnahan, Mel
BROAD, EDYTHE	HOMEMAKER	04/27/00	$1,000	Feinstein, Dianne
BROAD, EDYTHE L MS	NOT EMPLOYED	04/27/99	$1,000	Gore, Al
BROAD, EDYTHE MS	NOT EMPLOYED	04/27/99	$1,000	Gore, Al
BROAD, ELI	SUN AMERICA	06/07/99	$1,000	Conrad, Kent
BROAD, ELI	SUNAMERICA INC	01/27/99	$1,000	Feinstein, Dianne
BROAD, ELI	ELI BROAD CO/EXECUTIVE	03/21/02	$1,000	Hentschel, Noel Irwin
BROAD, ELI	ELI BROAD CO/EXECUTIVE	03/21/02	$1,000	Hentschel, Noel Irwin
BROAD, ELI	SUNAMERICA	02/20/02	$1,000	Boxer, Barbara
BROAD, ELI	SUNAMERICA	02/20/02	$1,000	Boxer, Barbara
BROAD, ELI	SUNAMERICA INC./CHAIRMAN	02/19/02	$1,000	Harman, Jane
BROAD, ELI	SUN AMERICA INC	05/31/02	$1,000	Torricelli, Robert G
BROAD, ELI	SUN AMERICA INC	05/31/02	$1,000	Torricelli, Robert G
BROAD, ELI	SUNAMERICA INC/CHAIRMEN/CEO	05/27/02	$1,000	Shriver, Mark Kennedy
BROAD, ELI	SUN AMERICA INC	05/22/02	$1,000	Feinstein, Dianne
BROAD, ELI	SUN AMERICA INC./CHAIRMAN	04/22/02	$1,000	Roybal-Allard, Lucille
BROAD, ELI	SUNAMERICA INC	09/29/99	$1,000	Carnahan, Mel
BROAD, ELI	BROAD INC	09/16/99	$1,000	Brown, Marta Macias
BROAD, ELI	SUNAMERICA INC./CHAIRMAN	10/15/01	$1,000	Harman, Jane
BROAD, ELI	SUNAMERICA INC	06/30/99	$1,000	Clinton, Hillary
BROAD, ELI	SUN AMERICA/CHAIRMAN	05/04/01	$1,000	Gephardt, Richard A
BROAD, ELI	INVESTMENTS	01/31/02	$1,000	Levin, Carl
BROAD, ELI	INVESTMENTS	01/31/02	$1,000	Levin, Carl
BROAD, ELI	SUN AMERICA	12/31/01	$1,000	Baucus, Max
BROAD, ELI	SUN AMERICA	12/31/01	$1,000	Baucus, Max
BROAD, ELI	SUN AMERICA INC	12/21/01	$1,000	Kerry, John
BROAD, ELI	AIG SUNAMERICA INC/CHAIRMAN	09/20/03	$1,000	Dean, Howard
BROAD, ELI	RETIRED CHAIRMAN	05/29/03	$1,000	Harman, Jane
BROAD, ELI	RETIRED CHAIRMAN	05/14/03	$1,000	Harman, Jane
BROAD, ELI	AIG SUNAMERICA INC./CHAIRMAN	05/06/03	$1,000	Solidarity PAC
BROAD, ELI	SUN AMERICA INC./CHAIRMAN	09/24/02	$1,000	Dingell, John D
BROAD, ELI	SUN AMERICA CORPORATION	04/10/03	$1,000	Dodd, Christopher J
BROAD, ELI	AIG RETIREMENT SERVICES INC./EXECUT	08/24/04	$1,000	Lewis, Jerry
BROAD, ELI	SUNAMERICA INC	04/27/00	$1,000	Feinstein, Dianne
BROAD, ELI	SUN AMERICA CORPORATION	04/25/00	$1,000	Dodd, Christopher J
BROAD, ELI	SUN AMERICA	04/24/00	$1,000	Kennedy, Edward M
BROAD, ELI	SUNAMERICA INC	01/18/00	$1,000	Harman, Jane
BROAD, ELI	SUMAMERICA	12/29/99	$1,000	Lieberman, Joe
BROAD, ELI	SUN AMERICA	12/20/99	$1,000	Kennedy, Edward M
BROAD, ELI	SUNAMERICA INC	12/13/99	$1,000	Roybal-Allard, Lucille
BROAD, ELI	SUNAMERICA INC	12/07/99	$1,000	Clinton, Hillary
BROAD, ELI MR	SUNAMERICA INC.	04/27/99	$1,000	Gore, Al
BROAD, ELI MR	SUNAMERICA INC.	08/31/99	$1,000	McCain, John
BROAD, ELI MR	SUNAMERICA INC.	04/27/99	$1,000	Gore, Al
BROAD, ELL	AIG RETIREMENT SERVICES	12/02/03	$1,000	Specter, Arlen
ELI BROAD	SUN AMERICA/CHAIRMAN	01/15/02	$1,000	Gephardt, Richard A
BROAD, ELI	SUNAMERICA INSURANCE C	12/03/01	$967	Harkin, Tom
BROAD, EDYTHE	HOMEMAKER	11/01/00	$900	Montana Democratic Central Cmte
BROAD, EDYTHE	HOMEMAKER	11/01/00	$900	Kentucky State Dem Central Exec Cmte
BROAD, EDYTHE	HOMEMAKER	11/01/00	$700	Michigan Democratic State Central Cmte
BROAD, EDYTHE	HOMEMAKER	11/01/00	$700	New Jersey Democratic State Cmte
BROAD, EDYTHE	N/A/HOMEMAKER	10/19/02	$500	Roybal-Allard, Lucille
BROAD, ELI	AIG SUNAMERICA INC./CEO	07/07/04	$500	DASHPAC
BROAD, ELI	AMERICAN INTERNATIONAL GROUP/EXECUT	04/08/04	$500	Larson, John B
BROAD, ELI	SUNAMERICA	03/15/99	$500	Lazio, Rick A
BROAD, ELI	SUNAMERICA INC	10/25/00	$500	DCCC/Non-Federal Account 5

NEW YORK (AP) — Concerns about the health of American International Group Inc. were renewed Thursday, a day after the insurance giant said it would receive an additional $37.8 billion loan from the Federal Reserve.

"The bottom line is, they need more liquidity than they thought," said Mark Lane, an analyst for William Blair & Co. The new loan is on top of a two-year, $85 billion loan AIG received last month from the Fed in an effort to stay in business.

AIG is apparently facing a liquidity crunch greater than was anticipated a month ago when the U.S. government first bailed out the company.

The new loan will help AIG cover requests from clients to redeem borrowed securities. In the past, these securities were previously loaned by AIG's insurance company subsidiaries to third parties in return for cash. The cash would then be reinvested in an attempt to increase returns.

Now, Lane said, clients who borrowed securities want to return them to AIG and get their cash back.

Amid the continuing credit crisis, financial firms have been hoarding cash for fear of future losses on investments. The situation has also spooked banks into nearly shutting off lending amongst each other.

The problem is, AIG "didn't have the money to give it back," Lane said. "That means that somebody else has to step in to take that other borrower out of the transaction."

That is where the new Fed loan comes into play. The New York Federal Reserve Bank will loan AIG the $37.8 billion and in return receive the securities that AIG now holds again, Lane said.

The arrangement will help AIG secure funds on an as-needed basis, the New York-based insurer said Wednesday in a statement.

On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the ongoing credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp. In return for the two-year loan, the government received warrants to purchase up to 79.9 percent of AIG.

As of Oct. 1, AIG had drawn $61.28 billion on the credit facility, of which about $54 billion has gone toward its securities lending and AIG's financial products area. The securities lending program, which is a common program among financial institutions, is the portion that is requiring the additional loan.

The rest of the money has been for other liquidity needs amid an "unprecedented" freezing of credit markets, Chief Executive Edward Liddy said last week.

AIG said last week it would sell off a number of business units to pay off its massive government loan. The company didn't specifically disclose all the assets it would sell or the expected prices from the sales. However, AIG did say it plans to retain its U.S. property and casualty and foreign general insurance businesses, and plans to retain an ownership interest in its foreign life insurance operations.

"By them having greater liquidity needs, it would suggest that maybe they would have to cut deeper," Lane said. "But it's unclear because we don't have more details."...

The deal for the additional Fed loan comes as AIG has been castigated by lawmakers and the White House for spending hundreds of thousands of dollars on a posh California retreat just days after getting the $85 billion federal bailout.

Lawmakers investigating AIG's meltdown said they were enraged that executives of AIG's main U.S. life insurance subsidiary spent $440,000 on the retreat, complete with spa treatments, banquets and golf outings. White House press secretary Dana Perino on Wednesday called the event "despicable."

AIG issued a statement Wednesday saying that the "business event" was planned months before the Sept. 16 bailout and that it was held for top-producing independent life insurance agents, not AIG employees. Of the 100 attendees, only 10 worked for the AIG unit hosting the event, it said.

The insurer said Liddy sent a letter to Treasury Secretary Henry Paulson "clarifying the circumstances" of the event. In the letter, Liddy assured Paulson that AIG is "reevaluating the costs of all aspects of our operations in light of the new circumstances in which we are all operating."

On Thursday, the insurer said it canceled a future California retreat that was to be held later this month.

WASHINGTON (AP) -- Days after it got a federal bailout, American International Group Inc. spent $440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings, according to lawmakers investigating the company's meltdown.

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers still were enraged over thousands of dollars spent on outing for executives of AIG's main U.S. life insurance subsidiary.

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," the committee's chairman, Rep. Henry Waxman, D-Calif., scolded the company during a lengthy opening statement at a hearing Tuesday. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

Former AIG CEO Robert Willumstad, who lost his job a day after the Federal Reserve put up the $85 billion on Sept. 16, said he was not familiar with the conference and would not have gone along with it.

"It seems very inappropriate," Willumstad said in response to questioning from Rep. Elijah Cummings, D-Md.

"Those executives should be fired," Democratic presidential candidate Sen. Barack Obama said at a debate with Sen. John McCain on Tuesday, referring to the retreat participants. Obama also said AIG should give the Treasury $440,000 to cover the costs of the retreat.

But Eric Dinallo, superintendent of the New York State Insurance Department, said he could see the value of such a retreat under the circumstances.

"Having been at large global companies and knowing what condition AIG was in ... the absolute worst thing that could have happened" would have been for employees and underwriters in its life insurance subsidiary to flee the company.

"I do agree there is some profligate spending there, but the concept of bringing all the major employees together ... to ensure that the $85 billion could be as greatly as possible paid back would have been not a crazy corporate decision," Dinallo told the House committee.

The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released by the committee, which is examining the chain of events that forced the government to bail out the conglomerate.

The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.

"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."

AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.

Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.

For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, PricewaterhouseCoopers confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.

Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.

Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg -- who ran AIG for 38 years until 2005 -- canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Willumstad.

"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."

Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.

Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 -- even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.

The auditor, accused by Ohio of violating securities laws in its work with AIG, will pay one of the highest amounts ever for an accounting firm in a class action.

PricewaterhouseCoopers agreed to pay $97.5 million to the state of Ohio to settle a class-action lawsuit on behalf of investors in troubled insurer American International Group, which uses PwC as its independent auditor.

The "partial" settlement, on Friday, came after the Ohio Public Employees Retirement System, the State Teachers Retirement System, and the Ohio Police and Pension Fund filed a lawsuit seeking damages for investors who bought AIG securities from 1999 to 2005. In the complaint, PwC was accused of violating securities laws relating to a market division scheme allegedly involving AIG that was disclosed in 2004 and improper accounting for reinsurance and other transactions.

In May 2005, AIG's accounting problems led to a $3.9-billion restatement, and removal of former CEO Maurice Greenberg.

The settlement is among the 10 highest to be paid by an accounting firm to settle a securities fraud class action lawsuit, according to Nancy Rogers, Ohio's attorney general. The arrangement, however, still needs to be approved by the U.S. District Court for the Southern District of New York in Manhattan.

"This important settlement represents a tremendous result for investors," said Chris Geidner, principal assistant attorney general. "We are pleased with this milestone and will continue to vigorously pursue investors' claims against the remaining defendants in the case."

"We have decided to settle the case at this stage to avoid the enormous litigation costs that would be incurred if the case continued against the firm, while at the same time eliminating any potential exposure," said Steve Silber, a PwC spokesman told The Columbus Dispatch. "The settlement does not contain an admission of wrongdoing by the firm, and we continue to believe that our work was in accordance with professional standards."

AIG currently is facing another lawsuit filed in May by the Jacksonville Police and Fire Pension Fund. The Florida fund accused the insurer of manipulating the market by making false statements about its financial health before disclosing a first quarter loss of $7.8 billion. PwC is not implicated in that lawsuit and in February it gave a warning sign of AIG's problems when it found that there was a "material weakness in its internal control" relating to the accounting of its credit default swaps portfolio.

Last month the U.S. government agreed to an $85 billion bail out of AIG in exchange for warrants to purchase 80 percent of the company, which is selling off several units of its business to repay the loan.

We're not talking about the fictional James Bond Import/Export Ltd. here-components of AIG were/are black budget dedicated units. Lucy Komisar documented this in her November 17, 2004 Corp Watch AIG article below.

This thread is a bit of speculation about known black budget funded operations (individuals and networks), based on open source info, that quite likely were using the services of AIG--which was nationalized by the criminal Bush/Cheney administration.

I'll start with a few categories-add your own and expand this thread since WE ALL have such a STAKE in AIG today.

"Dubai Ports completes sale of controversial US operations" (archived TomInTib thread started March 17, 2007)

The Bush Family that is involved in so many "private" black budget entities from The Carlyle Group to Tenet Health to Riggs Bank to Lehman Brothers to Cerberus to God knows what else???

There is also the joint venture ZonaFinanciera with Citigroup which in 2001 acquired Banamex in Mexico and placed alledged drug money launderer and trafficker Roberto Hernandez on the boards of directors. It is unclear whether ZonaFinanciera is involved in narcotics, however the choice of directors is a bit strange.

Additional information is available from The War Conspiracy by Peter Dale Scott, however that book was published in 1992 so has rare. An excerpt:

"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 Dorfman

"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..."

For the China connection, you can look at AIG & U.S.-China Business Council or Maurice Greenberg & The Nixon Center. There are numerous sweetheart deals with CITIC, the former China International Trust and Investment Company who was recently (Sept 17) in talks to acquire Morgan Stanley.

There are also quite a number of interesting deals with the Indonesian Lippo Group. ( Washington Weekly, March 24, 1997 )

Finance executives and corporate risk managers shouldn't expect the wobbling insurance giant to lower its premiums or make its insurance easier to obtain, however.

AIG, which by September 30 had drawn down $61 billion of the $85 billion credit facility provided by the U.S. Federal Reserve two weeks earlier, is seeking to strengthen itself by selling off some of its subsidiaries. The company intends to make itself look good enough to avoid a flight by corporate insurance buyers from its core U.S. property-casualty insurance businesses, which it plans to retain, Ed Liddy, its new chief executive officer and chairman, told analysts in a conference call Friday.

Although the insurance giant's policyholder retention rate for directors' and officers' liability coverage has "slipped six or seven points from what it used to be," it is holding on to buyers of other lines of insurance, he said in response to an analyst's question.

But because of the current uncertainty about the company's financial fortunes, it's important for the company to trim down "to show we are the AIG of old," he said, acknowledging that the company wouldn't really like the AIG of old once it has completed the divestitures it hopes to make.

Finance executives and corporate risk managers shouldn't expect AIG to lower its premiums or make its insurance easier to obtain, however. "We will maintain our underwriting and pricing discipline," said Liddy. "We are really good at that in our [property-casualty insurance] operation.... If you do that well, you'll be around for another day."

The company plans to retain its U.S. commercial property and casualty and foreign general insurance businesses and to continue to hold a stake in its foreign life insurance operations, according to an AIG press release issued Friday. Our insurance businesses — our regulated entities — are strong and well-capitalized," the new CEO contended. "Our policyholders are secure."

Otherwise, the company is looking to divest all or parts of its other salable businesses. Liddy, for instance, said he hopes to sell off AIG's U.S. life insurance, annuity, and pension businesses to a single buyer, while divesting part of its non-U.S. life insurance operations.

Further, AIG wants to "monetize" the assets of its financial-products and securities-lending divisions, according to Liddy. Plummeting values of the financial-products division's credit-default-swaps business led to the collapse of the company. "The financial-products operation has caused us a great amount of pain," he said, correcting an analyst who had characterized it as a "fair amount of pain." The subsidiary is "not entering into any new activity," he added.

In line with trying to squeeze some revenue out of those ailing businesses, Liddy is likely to be paying special attention to the vote on the bailout bill in the U.S. House of Representatives. That bill provides the Securities and Exchange Commission with the power to suspend mark-to-market accounting "for any issuer," and the insurance chief executive thinks such a suspension "could help us." Top executives of insurers and banks contend that fair-value accounting tends to unnecessarily lower the value of currently distressed assets that may be worth more than market values suggest.

Still, he added, "I don't hold out hope that we're going to have a wholesale abandonment of fair-value accounting."

They said the probe of the four high-profile companies at the center of the current financial crisis that has triggered the Bush administration's proposed $700 billion bailout was in the preliminary stage and no criminal charges were imminent.

While declining to confirm that the four companies were under investigation, FBI spokesman Richard Kolko said the FBI now is probing 26 cases of potential corporate fraud related to the collapse of the U.S. mortgage lending industry.

Just last week, FBI Director Robert Mueller told the U.S. Congress that 24 cases of potential corporate fraud were under investigation.

The FBI has been under increasing pressure from lawmakers to investigate fraud related to the mortgage crisis, which has expanded to a broader credit crunch. The financial-market turmoil has prompted the Bush administration to seek a $700 billion rescue package.

A spokesman for AIG said, "We don't have details about the FBI investigation. Of course we will cooperate with the FBI." A spokeswoman for Lehman Brothers declined comment. Officials at Fannie Mae and Freddie Mac were not immediately available.

In testimony before the House of Representatives Judiciary Committee, the FBI chief vowed to pursue corporate executives if necessary in mortgage fraud cases.

Mueller said the FBI was looking at all levels of the mortgage systems. With respect to the corporate probes, which could result in federal charges, the allegations would deal with misstatements of assets, he said.

The officials refused to discuss details of the investigation, and said the matter was sensitive and could affect the stock market and any bailout.

"It's not helpful to anyone to name specific corporations under investigation," one official said.

Justice Department spokesman Brian Roehrkasse said, "As part of our investigative responsibility, the FBI conducts corporate fraud investigations. The number of cases fluctuates over time, however we do not discuss which companies may or may not be the subject of an investigation."

That's just in their own stock value, not counting
the worthless paper they sold

AIG was started by Cornelius Vander Starr in 1919, and in 1962, Greenberg was named by AIG's founder, as the head of AIG's failing North American holdings. In 1968, Starr picked Greenberg as his successor. Greenberg held the position until 2005, when he stepped down and was replaced by Martin J. Sullivan.

Greenberg was both a social friend and client of Henry Kissinger, utilizing his consultancy, Kissinger Associates, for advice and operations in a number of countries, particularly in Asia. In 1987 he appointed Kissinger as chairman of AIG's International Advisory Board.

He is married and has four children. He is the father of Jeffrey W. Greenberg, former chairman and CEO of Marsh & McLennan Companies (MMC) before he was ousted, and of Evan G. Greenberg, president and CEO of ACE Limited. Together, he and his sons controlled a major portion of the insurance industry.

They charged you $1,200 a year for your house insurance, and placed the proceeds into various investments. The company held a lot of sub-prime mortgages.

Greenberg took over the company, and an accountant with a magic pen, showed enormous profits. Next Greenberg took the company public, using the Zionist's piggy bank (stock market) and sold his shares which were estimated at $20 to $40 billion. The next step is to ask where the corporate profits were invested.

It is a safe bet that a massive amount of real estate was inflated, AIG bought the mortgages, and some lucky Zionists are sitting with countless retiree's funds in offshore banks.

Whether it's the $20 billion New York doctors bilk Medicare, of these stock frauds it just pennies. The real collapse will be the Medicare and Social Security as Baby Boomers try to collect. Now, add in the 150 million immigrants since the Zionists passed the 1965 Hart Cellar immigration act.

After the Jewish orchestrated American Civil War, 300,000 Zionists took control of America in the late 1800s and have directed all legislation for their own purposes. The Federal Reserve gave them control of the economy, and they determined who wins the elections. By controlling the tax laws they directed the investment of average American's funds.

In Addition To The Stock Loss - And The Fact AIG Is Bankrupt...
These People Won't Get Paid

(Because Greenberg wanted revenge, he arranged with Henry Paulson
Rupert Murdoch and others to frame Eliot Spitzer)

WASHINGTON: Three former executives at Berkshire Hathaway's General Re insurance unit and a former American International Group executive were indicted by a U.S. grand jury on charges of fraud and conspiracy, the Justice Department announced Thursday.

The indictment was returned Wednesday by a grand jury in Alexandria, Virginia, charging the former executives with conspiring to make AIG's finances appear better than they were.

The defendants put together a sham reinsurance transaction that allowed AIG to fraudulently report about $500 million in loss reserves "to mislead AIG's shareholders, stock market analysts and the investing public," the indictment said. The conspiracy was designed to make it appear that AIG's loss reserves were growing in order to pump up the price of AIG stock, according to the indictment.

Those charged are Ronald Ferguson, who was General Re's chief executive; Elizabeth Monrad, the former chief financial officer; Robert Graham, the company's former assistant general counsel; and Christian Milton, who ran AIG's reinsurance division.

Since early last year, federal prosecutors have been investigating General Re and AIG for financial improprieties relating to the five-year-old deal between the two companies, major players in the reinsurance industry, which provides insurance to insurers....

U.S. government prosecutors in New York City are also investigating whether Greenberg tried to manipulate AIG's share price shortly before he stepped down from the company's helm. Greenberg has denied any wrongdoing.

Prosecutors have said that AIG had been concerned about Wall Street analysts' suggestions that there were insufficient reserves to cover potential losses and approached General Re to facilitate a deal that would increase its loss reserves on paper.

But the deal had no substantive value and was designed to cosmetically alter AIG's books, according to court documents. General Re received a $5.2 million fee to arrange the sham transactions.

AIG forced Greenberg to retire last March because of improprieties associated with the transactions. He has said that transactions during his watch were proper and correctly accounted for.

AIG in March 2005 acknowledged that the transactions were improper. In May, while restating earnings for five years, AIG said that it was correcting its account of the transactions, saying that "there was insufficient risk transfer to qualify for insurance accounting."

The complaints raise questions about the potential impact on Warren Buffett, the billionaire investor who controls Berkshire Hathaway, as well as on Greenberg. Buffett has not been charged with any wrongdoing and prosecutors have described him as nothing more than a cooperating witness. He could not be reached for comment.

In September, the U.S. Securities and Exchange Commission notified Joseph Brandon, General Re's current chief executive, that it planned to file a civil fraud complaint against him in connection with its wide-ranging investigation of insurance industry abuses. To date, the SEC has not announced any charges against Brandon.

Brandon briefed Buffett a few years ago on elements of the AIG transactions, according to people involved in the investigation. People with direct knowledge of the inquiry have said that no evidence has emerged indicating that Buffett knew about the structuring of questionable transactions before they occurred.

Greenberg and Ferguson started the transactions under investigation on Oct. 31, 2000. Ferguson first mentioned the possibility of an AIG transaction to Buffett during a telephone call a few days after that date, according to two people briefed about the call, who insisted on anonymity because they were involved in the investigation. Ferguson called Buffett that November to discuss General Re's third-quarter earnings, these people said, and the AIG deal, which was under consideration but not completed, was discussed in passing.

WASHINGTON (AP) — The Federal Reserve's bailout of insurance giant American International Group reminded some of the most powerful members of Congress how little power they sometimes have. The lawmakers didn't like the decision being sprung on them with no notice, but they're also happy not having the responsibility for it.

"Republicans in the Congress feel like we could have had and should have had more information sooner," Rep. Roy Blunt of Missouri, the party's second in command in the House, said Wednesday.

Many lawmakers, especially Democrats, weren't happy about the Fed's $85 billion loan to AIG in exchange for 80 percent of the insurer's stock, but they saw no alternative given the specter of a financial meltdown.

"They had very little choice," said Senate Budget Committee Chairman Kent Conrad, D-N.D. "The consequences of a failure to act could have been extraordinarily serious."

Democrats were content to let the Bush administration and the Fed take responsibility for the call.

"This is their problem. This is their solution," said House Speaker Nancy Pelosi, D-Calif.

Tuesday night's behind-closed-door briefing by Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson just before the Fed's announcement was on such short notice that Pelosi and Blunt missed it. It's not as though their input would have made a difference.

"They were not there asking us to do anything," said Senate Majority Leader Harry Reid, D-Nev. "They were there telling us what they were going to do."

Reid was irked that lawmakers hadn't been given more of a heads-up about the takeover of AIG. He reminded Bernanke and Paulson that his attendance at the meeting didn't imply his approval.

At the same time, the episode forced GOP presidential nominee John McCain, R-Ariz., into pirouettes.

"I do not believe that the American taxpayer should be on the hook for AIG," McCain said Tuesday morning on NBC's "Today" show. "We cannot have the taxpayers bail out AIG or anybody else."

"On the bailout itself, I didn't want to do that," he said on ABC's "Good Morning America." "But there were literally millions of people whose retirement, whose investments, whose insurance were at risk here, and they were going to have their lives destroyed."

Lawmakers felt taken by surprise because Paulson on Monday had reiterated that further bailouts weren't on the horizon in the wake of the government's refusal to intervene to save Lehman Brothers Holdings Inc.

"I'm not happy about this," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman. "I don't think they had much of a choice, but they need to explain that and answer questions."

Sen. Richard Shelby, R-Ala., said before the meeting that he was not satisfied with Paulson's answers at an earlier briefing about the decision making into whether the government comes to the rescue of a financial company. "I said, 'Mr. Secretary ... you're picking and choosing. You have to have a set policy.'"

Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman said he was shocked to learn that Bernanke has the power to lend up to $800 billion. In the aftermath of the AIG takeover, Frank said Congress would consider setting terms for future government interventions.

"It has to be done, I think, in a reasonable way in a democracy, with some criteria," Frank said. "It shouldn't be one man with $800 billion."

Pressed by lawmakers to justify the extraordinary step, Bernanke took pains Tuesday to explain what made the insurance giant AIG more deserving of government help than the investment banks Lehman Brothers and Merrill Lynch. He made the case, Dodd said, that an AIG failure could affect not just many layers of the U.S. economy, but underpinnings of foreign economies as well.

Lawmakers at the meeting generally came away assured that the decision was warranted — even if it sent mixed signals about whether the government was in the bailout business. They were sobered by what they heard from Paulson and Bernanke.

"They got in there and found out that the company didn't know what it was talking about over the weekend," said Sen. Judd Gregg, R-N.H. "Not only did they not have a couple of months of liquidity, which is what the company said over the weekend, but they didn't even have a couple of hours."

NEW YORK/PHILADELPHIA, Sept 17 (Reuters) - Blackstone Group LP said on Wednesday it won the role of adviser on the emergency $85 billion rescue of insurance company American International Group Inc, a marquee assignment as the private equity firm works to expand its U.S. advisory team.

Blackstone had worked with AIG through the weekend to explore options and stave off bankruptcy. The efforts resulted in the emergency rescue by U.S. authorities who wanted to prevent the giant insurer from collapsing and deepening the global financial crisis.

The deal came just a week after Blackstone said the limit on bank financing for leveraged buyouts was about $5 billion.

Much has changed over the past week in the financial markets -- with the bankruptcy filing by U.S. investment bank Lehman Brothers Holding Inc the agreement by Bank of America Corp to buy Merrill Lynch & Co Inc and a reported deal for Britain's Lloyds TSB to take over rival HBOS Plc

Blackstone's team on AIG included John Studzinski, Martin Alderson Smith, Larry Nath, Tom Stoddard, and Art Newman.

The private equity company has been working to expand its U.S. advisory business, and earlier this month said it would open an office in technology-concentrated area of Menlo Park, California.

Blackstone, which went public last year just before the credit crisis, has won several high-profile and diverse advisory assignments -- Kraft's sale of Post cereals, the merger of Suez and Gaz de France, and Microsoft Corp's unsolicited offer for Yahoo Inc .

Shares of Blackstone closed down 9.5 percent to $15 Wednesday on the New York Stock Exchange. The 52-week high is $29.75, set on October 2007....

To: "David Farmer" <farmerd001@hawaii.rr.com>, "Steven Guttman" <sguttman@kdubm.com>, "Carol K. Muranaka" <ustp.region15@usdoj.gov>

Cc: "Michael Mukasey <AskDOJ@usdoj.gov> ACLU Hawaii" <office@acluhawaii.org>, "All Representatives" <reps@Capitol.hawaii.gov>, "All Senators" <sens@Capitol.hawaii.gov>, "Andrew Walden" <hfpeditor@email.com>, "Andrew Winer" <winer@pacificlaw.com>, "Aon Insurance Managers" <mike_coulter@agl.aon.com>, "Arnold T. Phillips" <arnold.t.phillips@verizon.com>, "Arthur Rath" <imua@spamarrest.com>, "Barry M. Kurren" <richlyn_young@hid.uscourts.gov>, "Benjamin Kudo" <bkudo@imanakakudo.com>, "Blossom Tong" <blossom.d.tong@marsh.com>, "Bradley Tamm" <btamm@hawaii.rr.com>, "Brian E. Schatz" <teamschatz@gmail.com>, "Carl Morton" <ethics@hawaiiethics.org>, "Charles Goodwin" <HONOLULU@FBI.GOV>, "Charles Hurd" <mcp@mediatehawaii.org>, "Colbert Matsumoto" <service@islandinsurance.com>, "Craig Watanabe" <captiveins@dcca.hawaii.gov>, "Curtis B. Ching" <Curtis.B.Ching@usdoj.gov>, "Dane Field" <danefl@gucl.com>, "Dave Shapiro" <volcanicash@gmail.com>, "David A. Ezra" <theresa_lam@hid.uscourts.gov>, "Dee Jay Mailer" <ksinfo@ksbe.edu>, "Dorothy Sellers" <hawaiiag@hawaii.gov>, "Excecutive Office for U.S. Trustees" <ustrustee.program@usdoj.gov>, "Hugh Jones" <hugh.r.jones@hawaii.gov>, "Insurance Division Fraud Branch" <insfraud@dcca.hawaii.gov>, "J C Shannon" <Hapa1234@aol.com>, "James B Nicholson" <jamesbnicholson@aol.com>, "James B. Farris" <Farrisj@adr.org>, "James Cribley" <jcribley@caselombardi.com>, "James Duca" <jduca@kdubm.com>, "James Paul" <jpaul@pjpn.com>, "James Wriston" <jwriston@awlaw.com>, "Jeffrey Sia" <Jeff.Sia@excite.com>, "Jeffrey Watanabe" <jwatanabe@wik.com>, "Jim Dooley" <jdooley@honoluluadvertiser.com>, "Jo Ann Uchida" <rico@dcca.hawaii.gov>, "Joe Moore" <news@khon2.com>, "John D. Finnegan" <info@chubb.com>, "John Goemans" <wip@kamuela.com>, "Judge Lloyd King" <hib@hib.uscourts.gov>, "Judith Neustadter" <Judy@tiki.net>, "Judson Witham" <jurisnot@yahoo.com>, "Ken Conklin" <ken_conklin@yahoo.com>, "Kenneth Hipp" <khipp@marrhipp.com>, "Kevin S.C. Chang" <shari_afuso@hid.uscourts.gov>, "Lawrence Reifurth" <dcca@dcca.hawaii.gov>, "Linda Lingle" <governor.lingle@hawaii.gov>, "Louise Ing" <ling@hsba.org>, "Lyn Flanigan Anzai" <lflanigan@hsba.org>, "Margery Bronster" <info@bchlaw.net>, "Marsh Affinity Group" <prosecure@marshpm.com>, "Matt Tsukazaki" <mat@torkildson.com>, "Michael N. Tanoue" <mtanoue@paclawgroup.com>, "Michelle Tucker" <michelle@sterlingandtucker.com>, "Na Kumu Book Project" <nakumu@ksbe.edu>, "Nathan Aipa" <nathan@pitluck.com>, "Office of Inspector General Civil Rights Complaints" <inspector.general@usdoj.gov>, "Office of the U.S. Trustee District of Hawaii" <ustp.region15@usdoj.goV>, "Paul Alston" <palston@ahfi.com>, "Peter Carlisle" <emeguro@co.honolulu.hi.us>, "Randall Roth" <rroth@hawaii.edu>, "Rick Daysog" <rdaysog@honoluluadvertiser.com>, "Robert Bruce Graham" <bgraham@awlaw.com>, "Robert F. Miller" <info@robertfmiller.com>, "Robin Campaniano" <aigh001@aighawaii.com>, "Roy F. Hughes" <hthughes@hawaii.rr.com>, "Samuel P. King" <leslie_sai@hid.uscourts.gov>, "Susan Tius" <STius@rmhawaii.com>, "V K Durham" <vkdtdht@pionet.net>, "Valerie U. Katz" <clmrpt@islandinsurance.com>, "William K Slate" <Websitemail@adr.org>, "Jim Terrack" <tnthawaii@aol.com>, "Don Michak" <dmichak@journalinquirer.com>, "Rocco Sansone" <rocco.c.sansone@marsh.com>, "Ted Pettit" <tpettit@caselombardi.com>, "Mark Burch" <burch@hawaii.edu>, "Laura Thielen" <dlnr@hawaii.gov>, "Michael Moore" <MMFlint@aol.com>, "John D Zalewski" <jzalewski@caselombardi.com>, "Robert M. Kohn" <rkohn@polhawaii.com>, "Haunani Apoliona" <info@oha.org>, "Malia Zimmerman" <Malia@hawaiireporter.com>, "DC Bureau Office of Hawaiian Affairs" <mathar@oha.org>, "CPCU Society Hawaii Chapter" <kkanehiro@gmail.com>, "Hawaii Independent Insurance Agents Assoc." <hiia@hawaii.rr.com>, "Hawaii Insurance Bureau Inc" <dpeters@hibinc.com>, "Hawaii Insurers Council" <apowershawaii@yahoo.com>, "Manuel Valenzuela" <manuel@valenzuelas.net>... more

Due to the discovery of NEW FACTS, I am adding the subject Exhibit which you will find on-line at:

As Judge David Ezra's Order constitutes a PRIOR RESTRAINT of freedom of speech, I regret that I must continue to submit each of these new and updated exhibits and witness descriptions for your review and approval in the event they may contain any prohibited "Protected Subject Matter". If you would like to avoid this approval process, then I would again suggest that we attempt a good-faith settlement of this case through confidential negotiation or mediation.

NEW YORK - Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government’s bailout of insurer American International Group Inc. and left investors with little confidence in many banking stocks. The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.

As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.

The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults.

Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy. However, the ramifications of the world’s largest insurer going under likely would have far surpassed the demise of Lehman.

“People are scared to death,” said Bill Stone, chief investment strategist for PNC Wealth Management. “Who would have imagined that AIG would have gotten into this position?”

He said the anxiety gripping the markets reflects investors’ concerns that AIG wasn’t able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren’t in trouble, but as market conditions have worsened the market appears distrustful of any assurances.

“No one’s going to be believing anybody now because AIG said they were OK along with everybody else,” Stone said.

The two independent Wall Street investment banks left standing — Goldman Sachs Group Inc. and Morgan Stanley — remain under scrutiny, as does Washington Mutual Inc., the country’s largest thrift bank. Morgan Stanley revealed better-than-expected quarterly results late Tuesday and insisted that it is surviving the credit crisis that has ravaged many of its peers.

Lehman filed for bankruptcy protection on Monday, and by late Tuesday had sold its North American investment banking and trading operations to Barclays, Britain’s third-largest bank, for the bargain price of $250 million. Over the weekend, Merrill Lynch & Co., the world’s largest brokerage, sold itself to Bank of America Corp. in a quickly arranged plan to sidestep further slides in its stock....

The Dow fell 449.36, or 4.06 percent, to 10,609.66, finishing not far off its lows of the session. On Monday, the Dow lost 504 points, the largest tumble since its drop following the September 2001 terror attacks. On Tuesday, it rose 141 points, after the Fed decided to leave interest rates unchanged.

The index is down more than 7 percent on the week, its worst showing since July 2002. The blue chips have fallen more than 25 percent since reaching a record close of 14,164.53 on Oct. 9 last year.

Kroll always had AIG as shareholder and is currently part of Marsh.

Alan is nicknamed Ace but Ace is owned by Evan. During Enron the gentleman did some revolving chairs as well. As mentioned above: They are partners in fraud with the Bush family.

Jeffrey W. Greenberg is the former chairman and CEO of Marsh & McLennan Companies. His father is Maurice Greenberg, former chairman and CEO of AIG, and Director Emeritus and Honorary Vice Chairman of the Council on Foreign Relations (CFR). His brother is Evan Greenberg, president and CEO of ACE Limited. Jeffrey Greenberg is also a member of the CFR and serves as a trustee of the Brookings Institution.

Maurice R. "Hank" Greenberg, "ranked 132 in the world and 59th in the US with assets of $3.1 billion," was forced out as Chairman of top insurance company American International Group (AIG) after the company "admitted to $1.7 billion in improper accounting." In Spring 2005, "two of Greenberg's sons, both executives in the insurance business, have also been tarnished by scandal." (1)

He is also a member on the Council on Foreign Relations. His son Evan Greenberg is the CEO of ACE. His son Jeffrey Greenberg is CEO of Marsh and Alan Greenberg is CEO of Bear Stearns. A family that preys together, stays together.

Greenberg is well-known in Washington where he known for raising large amounts of money. Greenberg was one of the President George W. Bush's 'Rangers' which means he personally raked in more than $200,000 for the reelection campaign. At the same time, he is also known for his access to members of the cabinet and Congress. This access has paid-off as the administration has often supported Greenberg on a number of issues ranging from access to China to terrorism insurance (1)

"Greenberg and AIG have further expanded their reach through the use of the $5 billion Starr Foundation, named after the founder of the company Cornelius Vander Starr. It supports influential groups such as the Council on Foreign Relations and the National Chamber Foundation, associated with the US Chamber of Commerce," (1)

Evan Greenberg is President and CEO of ACE Limited. He is the son of Maurice Greenberg.

2003: President and chief operating officer of ACE Limited; chairman of ACE Tempest Re.

Alan "Ace" Greenberg was the former CEO of Bear Stearns and still serving as chairman of the boards. He is the son of Maurice Greenberg of AIG.

Dubbed one of the shrewdest players on Wall Street, Alan Greenberg was born in Wichita, Kansas in 1927. Greenberg describes his family as close-knit. When Greenberg was 31, he was named a partner of Bear Stearns. In 1978, Greenberg was named chief executive officer of the firm. He continued to expand the business, finally taking it public in 1985. Greenberg was named chairman and CEO. Today, Greenberg retains the title of chairman of the board and chairman of the executive committee....

Economists say the Wall Street crisis will likely
damage Hawaii’s delicate economy

Calling it a once-in-a-lifetime financial crisis, local finance experts expect the national market meltdown to lead to a recession in Hawaii.

"It's hard to see what could be the worst financial crisis in at least the last 50 years and have it not precipitate into something like a recession," said Neil Rose, chief investment officer of Honolulu-based Cadinha & Co. "We don't see this as a quick bottom - it's going to take some time to figure out exactly who is tied to these financial institutions."

The state's lead tourism industry, already reeling from a sharp drop in visitors, is expected to spiral even further since it is tied to consumer spending and a healthy economy. Also of significant concern is the local housing market, which hinges on borrowing and financing for land development - a sector that is already struggling to make deals happen.

"We already predicted job losses for two years; that's a recession, and this can't do anything but make it worse," said Carl Bonham, an economist with the University of Hawaii Economic Research Organization. "It's bad, there's absolutely no doubt about that."

UHERO, which is set to release an updated economic forecast this week, predicted in June job losses of 0.2 percent for both 2008 and 2009.

While Hawaii has held up better than most areas on the mainland, the state is still extremely vulnerable to outside factors, evidenced by isle foreclosures, which jumped 132 percent year-over-year in August.

To some extent, Hawaii is already seeing the effects of a recession, including increased bankruptcies, the demise of longtime businesses and mass layoffs statewide, according to finance experts.

"I don't think we're going into a depression, but we'll probably have a recession; no doubt about that," said Richard Dole, chief executive of Honolulu-based Dole Capital LLC, a specialty private equity investment banking firm.

"It's really a crisis of confidence," he said. "If people don't have a lot of confidence on the mainland, they're certainly not coming here. Foreign markets are suffering, too."

Paul Brewbaker, Bank of Hawaii's chief economist, said isle consumers should not worry too much about the upheaval among some of Wall Street's largest players.

"The losses in this kind of financial market turbulence are not the kind of things that retail consumers are exposed to, unless they're shareholders," Brewbaker said. "The thing to remember is that the capital markets, as a whole, are secure, although a number of firms have experienced losses severe enough to put them out of business."

Some investors are concerned that AIG's problems could spill over to other companies that do business with the firm.

"The way we look at it is, as far as we know, the insurance side of our operation is fine," said Robin Campaniano, president and chief executive officer of AIG Hawaii, which wrote nearly $120 million in premiums for fiscal 2008. "The nature of our problems have less to do with the performance of our insurance portfolio than the credit and the real estate markets."

Disbelief and anxiety were written on the faces of staff at American International Group Inc as they grappled with the idea that their company, which was once the largest insurer in the world and one of the safest places to work, was struggling for its survival.

Workers at the company's lower Manhattan offices, one block from Wall Street, said there were more lunch deliveries than usual, as staff opted to stay inside rather than brave a phalanx of news reporters and cameras camped outside.

There was a bigger police presence than normal in the Wall Street area and security guards were double-checking ID's of everyone who came in or out of the AIG building.

Some workers at the 89-year-old institution were shocked that the company could find itself in a crisis like the ones at Lehman Brothers Holdings Inc, which just filed for bankruptcy protection after failing to find a rescuer, or Bear Stearns, acquired earlier this year in a "shotgun" merger.

"I came to this company because it was a big company, and big companies tend to stick around," said one male AIG employee who declined to give his name.

"There's a massive culture of uncertainty within the building," said a woman who has been in the insurance business for 20 years.

"I'll be the guy to turn out the lights and lock the door," joked a man who said he had a senior-level position at the company.

"I think the idea is to take a nap at my desk and be woken up when this is all over," another woman said.

One woman who went through the "Black Monday" stock market crash of October 19, 1987 played down the gravity of the current situation. "This is nothing compared to that," she said.

New York State officials said they had reached an agreement with AIG allowing the insurer access to $20 billion of its own capital. Under the plan, AIG will be able to shift the funds from its insurance subsidiaries to the parent company. That news helped lift employees' mood somewhat.

New York Insurance Superintendent Eric Dinallo is appealing to the federal government on AIG's behalf to provide additional access to capital, New York Gov. David Paterson said.

But Paterson stressed it was not a government bailout. "We will not expose the taxpayers of this state to any risk," he told reporters.

"Like all New Yorkers I am deeply concerned about the financial crisis that has engulfed the markets," Paterson said, noting that Wall Street brings in 20 percent of the state's revenue.

"Some companies have served as a bedrock of the system... and one of them is AIG," he said. The company employs 6,000 people in New York City and another 2,500 elsewhere in the state. AIG has 116,000 employees worldwide.

"AIG contributes to New York's position as a world financial leader," the governor added.

AIG's problems come after Lehman Bros filed for bankruptcy protection and Merrill Lynch & Co Inc agreed to sell itself to Bank of America Corp, months after Bear Stearns' near collapse and acquisition by JP Morgan Chase & Co with financial backstopping from the U.S. government.

AIG, an insurance and financial services company, is also known to millions as the shirt sponsor of current European and English champions Manchester United, one of the world's leading soccer clubs.

According to the 2008 Forbes Global 2000 list, AIG was the 18th-largest company in the world.

The company was founded by Cornelius Vander Starr, who traveled to Shanghai with just 300 yen in his pocket in 1919 after serving in World War One. AIG now has operations in approximately 130 countries and holds assets of over $1 trillion.

A stunning makeover of the Wall Street landscape sent stocks falling precipitously Monday, with the Dow Jones industrials losing 500 points in their worst slide since the September 2001 terrorist attacks. Investors recoiled after a shakeup of the financial industry that took out two storied names: Lehman Brothers Holdings Inc. and Merrill Lynch & Co.

The pullback, which erased about $700 billion in shareholder wealth, occurred across much of the globe as investors absorbed Lehman's bankruptcy filing and what was essentially a forced sale of Merrill Lynch to Bank of America for $50 billion in stock.

While those companies' situations had reached some resolution, the market remained anxious about American International Group Inc., which is seeking funding to shore up its balance sheet. A faltering of the world's largest insurance company likely would have implications far beyond that of Lehman, already the largest U.S. bankruptcy in terms of assets.

The swift developments that took place Sunday are the biggest yet in the 14-month-old credit crisis that stems from now toxic subprime mortgage debt....

Investors are worried that trouble at AIG and the bankruptcy filing by Lehman, felled by $60 billion in bad debt and a dearth of investor confidence, will touch off another series of troubles for banks and financial institutions that may be forced to further write down the value of their own debt assets. Wall Street had been hopeful six months ago that the collapse of Bear Stearns Cos. would mark the darkest day of the credit crisis.

AIG's troubles are worrisome for some investors because of the company's enormous balance sheet and the risks that its troubles could spill over to the companies with which it does business. AIG, one of the 30 stocks that make up the Dow industrials, fell $7.38, or 61 percent, to $4.76 as investors worried that it would be the subject of downgrades from credit ratings agencies....

The Dow fell 504.48, or 4.42 percent, to 10,917.51, moving below the 11,000 mark for the first time since mid-July. It was the worst point drop for the Dow since it lost 684.81 on Sept. 17, 2001, the first day of trading after the terror attacks....

Investors likely shrank from snapping up any bargains Monday after Treasury Secretary Henry Paulson said from the White House he "never once" considered using taxpayer money to help prop up Lehman. That punctured some hopes that the federal government might come to the rescue of AIG.

But AIG pared some of its losses after New York Gov David Paterson said the company will be allowed to access $20 billion of assets held by its subsidiaries to stay in business. Paterson asked the state's insurance regulators to in essence allow AIG to provide a bridge loan to itself. Investors are worried that the company could need up to $40 billion to aid its balance sheet....

CHARLOTTE, N.C. - The Wall Street Journal reported Sunday that American International Group Inc. plans to disclose a restructuring by early Monday that's likely to include the disposal of major assets including its aircraft-leasing business and other holdings.

AIG's chief executive, Robert Willumstad, who took the reins on the world's largest insurer in June, has indicated he was willing to shed some assets, saying about a month ago that a "less complex AIG would be a better competitor."

The need to restructure was likely exacerbated by a 45 percent drop in AIG's stock last week. The stock fell more than 30 percent on Friday alone, as Standard & Poor's warned that it could cut AIG's credit rating by one to three notches because of concerns that AIG will have difficulty accessing capital in the short term.

The Journal said on its Web site Sunday that AIG was talking to several private equity firms about getting more capital and was hoping to raise more than $10 billion.

The New York-based insurer has already raised $20 billion in fresh capital this year.

Like other insurers, AIG has been hit hard by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default. For the three quarters ended in June, AIG lost about $25 billion in the value of credit default swaps - or default protection for bondholders - and about $15 billion on other investments.

The insurer is considering selling or spinning off its profitable aircraft-leasing arm, International Lease Finance Corp., which posted record results in the second quarter. AIG was also considering selling other parts of its business, including assets related to property and casualty insurance, the Journal noted.

When Willumstad became chief executive of AIG in June, he said would conduct a review of the company over the next two to three months, saying "nothing is off the table, and there will be no sacred cows." Calls for a breakup of the company grew louder from Wall Street analysts after AIG posted a loss of about $5.4 billion for the second quarter. Following those results, Willumstad said his review could result in "significant changes," though he didn't provide details.

As recently as June, AIG considered shedding ILFC, a company founded in 1973 that has a fleet of more than 900 airplanes valued at more than $50 billion.

But newly appointed Willumstad said after reviewing ILFC's business, "ILFC should be a part of the AIG portfolio." ILFC primarily leases aircraft from Boeing and Airbus to major airlines and had net income of more than $200 million in the second quarter.

NEW YORK - Shares of American International Group Inc. lost more ground Tuesday, as an analyst forecast continuing problems at the world's largest insurer and Wall Street once again fled financial stocks on concerns over the health of the sector.

AIG shares shed 99 cents, or 4.1 percent, to $23.48 in midday trading. Shares are down nearly 60 percent for the year....

Like other insurers, AIG has been hit hard by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default....

Last week, AIG reported a worse-than-forecast $5.36 billion loss on more mortgage-related write downs.

It was the insurer's third consecutive multibillion-dollar quarterly loss, underscoring the continuing problems for the New York-based company and others that hold securities tied to the withering housing market....

American International Group confirmed analysts' worst forecasts, as it posted a net loss for the second quarter of 2008 of $5.36 billion or $2.06 per diluted share compared to net income of $4.28 billion or $1.64 per diluted share for the second quarter of 2007....

$4.019 billion in net realized capital losses were the main factor in producing the loss.

AIG said that "second quarter 2008 adjusted net loss," which excludes the subprime writedowns, "was $1.32 billion or $0.51 per diluted share, compared to adjusted net income of $4.63 billion or $1.77 per diluted share for the second quarter of 2007."...

AIG confirmed that the "continuation of the weak U.S. housing market and disruption in the credit markets, as well as global equity market volatility, had a substantial adverse effect on AIG's results in the second quarter."

Altogether AIG's net loss for the first six months of 2008 was $13.16 billion or $5.11 per diluted share, compared to net income of $8.41 billion or $3.21 per diluted share in the first six months of 2007...

Newly appointed Chairman and CEO Robert B. Willumstad reiterated that the "second quarter results were adversely affected by the severe conditions in the housing and credit markets and a very difficult investment environment."

He added that the losses do not, however, "reflect the earnings power and potential of AIG's businesses and it is clear that we have a lot of work to do to restore AIG's profitability to where it should be."...

"We are considering all options. Our goals are straightforward - to determine the optimal portfolio of businesses for AIG, sharpen our risk management and capital allocation processes, reduce expenses and continue to strengthen our accounting and reporting infrastructure....

NEW YORK (MarketWatch) -- Stocks finished sharply down on Monday as worries about the economy and the troubled financial system overtook any cheer over a rescue plan for mortgage giants Fannie Mae and Freddie Mac nearing enactment.

"I would refer to today as a death by a thousand cuts," said Peter Boockvar, equity strategist at Miller Tabak.

"It's not an event in particular but more of a reflection of concerns everywhere, especially in financials. It's all the concerns the market has had about the economy that is impacting stocks."

The Dow Jones Industrial Average declined 239.61 points, or 2.1%, to 11,131.08, with all but one of its 30 components trading lower.

Financial stocks were among the blue chips hit the hardest, with American International Group Inc. (AIG) down the most, off 12%....

NEW YORK - American International Group Inc., which has lost billions on bad bets on the mortgage market, on Sunday named former Citigroup Inc. executive Robert Willumstad to replace the insurer's besieged chief executive.

Willumstad, 62, will take over from Martin Sullivan, 53, effective immediately, the company said. Stephen Bollenbach, the former CEO of Hilton Hotels Corp., will be named AIG's lead director.

AIG named Willumstad chairman of the board in fall 2006, about a year after Willumstad left his post as president and chief operating officer at Citigroup. Citigroup had passed him over for the CEO job - which went instead to the now-dethroned Charles Prince.

Sullivan, a native of England who had worked with AIG for 37 years, now joins the long list of CEOs who have been pushed out since the credit crisis started slamming the financial services industry last year. That list includes Citigroup's Charles Prince, Merrill Lynch & Co.'s Stanley O'Neal and Wachovia Corp.'s Ken Thompson.

New York-based AIG - the world's biggest insurer with $1.05 trillion in assets - lost $7.8 billion during the first quarter of the year due to investments and contracts tied to bad loans. The insurer's first-quarter deficit was even more massive than its fourth-quarter loss of more than $5 billion. After its two straight quarterly losses, AIG revealed plans to raise $20 billion in fresh capital - but investors reacted skeptically, unsure that extra cash would solve the insurer's problems.

Shares of AIG have fallen by more than 50 percent over the past 12 months, closing at $34.18 on Friday.

"In the coming months, we will conduct a thorough strategic and operational review of AIG's businesses and their performance," Willumstad said in a statement Sunday. "The Board and I recognize that results over the past two quarters have been unacceptable, but we are confident in AIG's future."

George L. Miles, Jr., chairman of the AIG board's nominating and corporate governance committee, said Willumstad's "broad managerial and financial services experience makes him the right person to lead AIG through today's turbulent markets, drive further organizational change and rebuild shareholder value in the years ahead."...

Besides big losses, AIG is reportedly facing a regulatory probe. The Securities and Exchange Commission reportedly began looking into whether AIG had overstated the value of contracts called credit default swaps.

Credit default swaps, or CDS, are essentially insurance policies that investors buy to protect against loan defaults, including subprime mortgage defaults. A surprisingly large $9.1 billion loss in AIG's CDS portfolio dealt the insurer its most significant blow during the first quarter.

Sullivan - who received compensation last year of $13.9 million - replaced Maurice R. "Hank" Greenberg as chief executive in March 2005. Greenberg, forced out amid accusations from then-New York State Attorney General Eliot Spitzer of fraudulent accounting, still controls the largest block of stock in AIG.

Greenberg has been one of most outspoken of AIG's shareholders, many of whom have blamed poor management for AIG's financial troubles. In a May regulatory filing, Greenberg wrote: "AIG is in crisis."

Last August, shortly after mortgage-related losses began roiling the financial services industry, Sullivan told investors that AIG was "well-positioned, even in the event of further deterioration in this market." But by May, Sullivan acknowledged that "the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations."

News of Sullivan's dismissal arrives ahead of this week's quarterly results from three major investment banks: Lehman Brothers Holdings Inc., Goldman Sachs & Co. and Morgan Stanley. Wall Street expects the three reports to offer some insight into how the beleaguered financial sector is faring a year into the credit crisis - and whether additional management shake-ups may be in store....

WASHINGTON - Federal prosecutors have asked the Securities and Exchange Commission for material from its probe of whether American International Group Inc. overstated the value of mortgage-linked contracts, according to a newspaper report Friday.

The request to the SEC from prosecutors in the Justice Department and the U.S. Attorney's office in Brooklyn, N.Y., could lead to a criminal investigation of the matter, in addition to the SEC's civil inquiry into AIG. The development was reported in Friday's editions of The Wall Street Journal, which cited unnamed people familiar with the matter.

New York-based AIG, one of the world's largest insurance companies, paid a then-record $1.64 billion in February 2006 in a settlement with federal and New York state authorities over alleged deceptive accounting practices.

The current SEC investigation focuses on AIG's valuation of credit default swaps, which function as insurance policies against defaults, including those backed by subprime mortgages, The Journal reported.

The company in February told the SEC that its outside auditors had found significant weakness in how it reports the value of certain credit default swaps. AIG also said the auditors had concluded that the company "had a material weakness in its internal control over financial reporting and oversight" related to how it determines default probabilities and expected losses on the underlying securities.

Due largely to writedowns related to credit default swaps of more than $20 billion through March, the company posted the two biggest quarterly losses in its history: a $7.8 billion loss for the first quarter, following a loss of nearly $5.3 billion in the fourth quarter.

SEC spokesman John Nester in Washington and Bob Nardoza, spokesman for the U.S. Attorney's office in Brooklyn, on Friday both declined to confirm or deny investigations by the agencies.

AIG spokesman Chris Winans also would not confirm a federal probe. He said AIG has always cooperated with regulators and has "consistently and promptly" provided best estimates of its portfolio valuations and potential exposures of its financial products amid the recent uncertainty in the credit markets.

The finding of material weakness doesn't mean that the company has reported inaccurate financial results, Winans said. "We have clean audited financial statements with no qualifications from our auditors," he said.

The Bear Stearns Companies, Inc. is the parent company of Bear, Stearns & Co. Inc., one of the largest and best-known global investment banksand securities trading and brokerage firms in the world. The company was founded in 1923 and serves corporations, institutions, governments and individuals. The company's business includes corporate finance, mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services....

Bear Stearns was named one of the inside traders of 9/11. Their stocks were traded 60 times the usual amount as well.

Bear Stearns, of course, is where the Bush family, the Cheney family, George Schultz, James Baker, etc. all do business. It is the leading brokerage firm of the great and all powerful Bushonian Cabal.

The $7 million that Bush Jr. put into the deal came from the Harken Energy stock fraud. He and his father George Bush Sr. entered into a conspiracy with Bear Stearns and others to artificially manipulate the price of Harken Energy stock, wherein the Bush Family illicitly proceeded to trade their shares "against the box," through the Pilgrim Investment Trust, the Bush Family-controlled Panama-registered investment entity, wherein the price of Harken Energy stock was pumped up from 1-1/ 4 up to 7-3/8 and then dumped all the way back down again.

This whole round trip as it were was accomplished in only about 4 months time. By being long at the bottom through the Pilgrim Investment Trust with shares that they had borrowed from Bear Stearns -- by the way. They didn't even put up their own damn shares. It's one thing to commit a scam, but the Bushes added a new twist. They commit scams with Other People's Money. They take it one step further by using OPM to commit the scams. Thus they generate the money for nothing.

So then Bush Jr. takes the $7 million out of the Harken Energy Stock Swindle that he and his father orchestrated with their longtime ally Ace Greenberg, chairman of Bear Stearns. He then invests in a syndicate to buy the Texas Rangers sports franchise. Then Bush becomes part of the general management of the team and proceeds to run the team into the ground, financially speaking. Then he is allowed to sell his interest back to the syndicate, including his shares in Mays Hicks for 4 times what he paid for them. Despite the fact the franchise was worth only half of the purchase price since he had "managed" it . In order to bail the whole deal out, he as governor of Texas then authorizes the expenditure of $345 million of public monies in order to build the new stadium and surrounding complex for the Texas Rangers....

The syndicate was composed of the Hicks Muse crowd essentially. James Baker was an investor in it and so was Dick Cheney. Then how this ties in to Clear Channel Communications is that Hicks was the regent of the University of Texas, which is another whole scam. This is a scam within a scam. The regents of the University of Texas is an infamous scam....

Everybody promoted Clear Channel stock then, not only Bear Stearns, but Merrill Lynch and JP Morgan, and they ran it up. They got everybody to promote the stocks. so it got as wide as possible distribution. All these stocks were coming out of Clear Channel, and there was an enormous amount of money coming in with virtually no accountability as to how they have to spend that money. Then they can start paying 2 or 3 times what radio stations are worth just to own them. It was simply for the ownership of the market. It doesn't have anything to do with making any money. And yet the stock, which is now in the 40s, still trades in what is over a 35 P/E I think. It is still considered a high P/E stock....

I waited to post this story about AIG's reappointment of PricewaterhouseCoopers as their external auditor. I am incredulous. I was slightly apoplectic too, but then I calmed down.

After all, greater minds than mine, like the famous Arthur Levitt, have made sure that, "AIG's selection process was designed and executed with integrity, and the Audit Committee's evaluation of the proposals was both fair and impartial. AIG did an exceptional job."

It seems Levitt was hired by AIG in 2005 to spruce up their image in the wake of Elliot Spitzer's investigation of AIG. Mr. Levitt's tenure at that time was expected to be less than a year as a special consultant to the Board, but it has obviously taken longer than that to address AIG's governance problems and will continue to take longer to fix them completely, if that's possible. Mr. Spitzer was the former Attorney General for the State of New York and is now their Governor.

The audit committee of AIG's board of directors spent 12 months on the RFP process, which is part of the company's 2006 settlement with the New York Attorney General's Office, said AIG spokesman Chris Winans.

The agreement, Winans said, required AIG to take actions above and beyond the normal annual review of its relationship with the company's independent auditor. This RFP is something we did as part of the settlement agreement, he said. It requires us to do the RFP process for the 2008 fiscal year.

In 2006, AIG agreed to pay a total of $1.64 billion to settle litigation stemming from New York state and federal investigations of its accounting, financial reporting and insurance brokerage practices, and claims related to workers' compensation premium taxes.

Mr. Levitt, therefore, is not a court appointed monitor based on a settlement with the SEC, a la Mr. Breeden and KPMG, but a shill for AIG.

Interestingly enough Mr. Levitt has a long and contentious history with PwC. It all goes back to reforms he wanted to make to how the audit firms did and didn't do business and how PwC was the big stubborn holdout. This was in spite of the fact that they had been nabbed big time with serious independence violations and the SEC could have disqualified the audited financial statements of all of their clients (and caused them to have to resign from those clients) if they had not cooperated with the regulators at the time. For a history of this sword fight, go here.

I have seen some Google searches regarding this "RFP" process wherein other firms, in particular Deloitte, are searching for more details about why they weren't chosen. Let me give them all a clue... The fix was in.

I have requested via the Freedom of Information Act provisions for the State of New York Attorney Generals office, a copy of the RFP, the responses, the evaluation process and the grading of all proposal submissions. I have heard no response from them. Given that this was a public agency mandated process, I would assume that public disclosure would be mandated. Will make for interesting reading, if so. How can anyone for the Attorney General's Office be sure that it was a fair and competitive process if they also do not see and approve the process that AIG conducted?

As for Mr. Levitt, I am disappointed. I guess everyone has to make a buck. But I had hoped he would do it by being on the side of the investor and the other stakeholders of AIG, and not on the side of perpetuating the myth of a job well done by PwC as AIG's auditor.

Update: One of my favorite writers on these subjects reminded me:
"If you really want to have some fun with this, remember also that Levitt can't let go of his affiliations inside the Beltway -- now acting as co-chair of the so-called Paulson committee, along with Don Nicholaisen. Looking at the list of members, it's almost sure to be MOTS..."

Stocks were under the weather in New York on a rainy Friday morning, after a decent day Thursday.

Of course, things got markedly worse after the close, when American International Group reported disastrous first-quarter earnings, and they hardly improved Friday morning, with Citigroup expected to announce it will sell a significant portion of its assets, sparking fears that more losses are in store for the bank.

The Dow Jones industrial average fell 122 points, or 1.0%, to 12,744, while the Standard & Poor's 500 lost 12 points, or 0.9%, to 1,385, and the Nasdaq dropped 20 points, or 0.8%, to 2,431.

AIG swung to a $7.8 billion loss in the first quarter, far worse than expected, stoking fears that the credit crisis is still hammering Wall Street. The insurer also announced plans to raise $12.5 billion in fresh capital through sales of common stock and fixed-income securities. (See: "AIG's Hope Worth $12.5B")

Citigroup was the big story though, with its analyst day under way. The market has been waiting to hear more on the vision new Chief Executive Vikram Pandit has for the bank, and reports early Friday suggested those plans are significant indeed. (See: "What Would Dimon Do?") Pandit is expected to announce plans to sell businesses worth $400 billion, possibly including consumer finance divisions in the United States, Japan, Mexico and Germany.

The sheer size of the potential sale sparked fears the bank could be facing more heavy losses and emboldens cynics who have long-criticized the financial giant built by Sandy Weill as too large and unwieldy. Shares of Citigroup slipped at the open but righted themselves to gain 29 cents, or 1.2%, to $24.59....

The bull run in oil prices continued Friday morning, as crude was up $1.86, to $125.55 a barrel, after briefly crossing the $126 threshold.

The day was virtually devoid of economic news, but the U.S. Census Bureau reported the trade deficit narrowed to $58.2 billion in March, from a revised $61.7 billion in February, likely a result of U.S. consumers reining in spending.

HARTFORD, Conn. - The former chairman and CEO of the world's largest insurer initiated a deal that led to five ex-executives being charged with participating in a scheme to manipulate the company's financial statements, a federal prosecutor said Monday during opening arguments at their trial.

Four former executives of Berkshire Hathaway (nyse: BRKA - news - people )'s General Re Corp. and a former executive of American International Group Inc. (nyse: AIG - news - people ) are charged in the scheme involving AIG's financial statements.

Prosecutor Raymond Patricco said former AIG CEO Maurice "Hank" Greenberg, who has not been charged in the case, started the scheme in 2000, after AIG's stock price dropped 6 percent, representing a loss of $12 billion to shareholders. The price dropped because loss reserves had declined.

Attorneys for the defendants denied their clients did anything wrong Monday and said the case involved complex, subjective accounting. They attacked government witnesses - two senior Gen Re executives who pleaded guilty to conspiracy to falsify SEC filings - as out to save themselves.

"This is not Enron or WorldCom," said Anthony Pacheco, attorney for former General Re Senior Vice President Christopher P. Garand, referring to two of the biggest recent business scandals.

Greenberg, who headed New York-based AIG for nearly 40 years, has denied any wrongdoing. He was referred to as an unindicted coconspirator in an indictment.

Allegations of accounting irregularities, including the Gen Re transactions, led to his resignation in 2005.

At issue in the trial of the former executives are two reinsurance transactions between AIG and Stamford-based General Re. Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

Prosecutors said the transactions were initiated by an AIG senior executive to quell criticism by analysts of a reduction in AIG's loss reserves in the third quarter of 2000. The indictment alleges that the aim was to make it appear that AIG increased its loss reserves by about $500 million in 2000 and 2001, pacifying the analysts and investors and artificially boosting the company's stock price.

"But the evidence in this case will show that deal was nothing more than a sham transaction," Patricco said. "The defendants in this case knew what appeared in the contracts was a lie."

Prosecutors said Greenberg called his friend, former General Re CEO Ronald Ferguson, who is one of the defendants, and told him that AIG wanted to increase its loss reserves by $500 million, but did not want to bear the risk.

For a reinsurance transaction to be legitimate, there must be a transfer of risk, which was lacking in the deal in question, prosecutors said.

"The evidence in this case will show the defendants knew this would be a no-risk deal for AIG," Patricco said.

"Plain and simple, ladies and gentlemen, the statements about AIG's loss reserves were lies," Patricco said.

In opening arguments, Patricco never mentioned billionaire investor Warren Buffett, who could play a role in the trial. Some of the executives say they believed Buffett was involved and supported the deal that led to the charges. Buffett leads Berkshire Hathaway.

But prosecutors say they only named Buffett, who has not been charged with any wrongdoing, as a potential witness to rebut any suggestion by the defense that he was involved in or approved the deal.

Michael Horowitz, Ferguson's attorney, said Monday that his client told Buffett and others about the requested transaction.

The former General Re executives charged were Ferguson, chief executive officer from about 1987 through September 2001; Elizabeth Monrad, chief financial officer from June 2000 through July 2003; Robert Graham, a senior vice president and assistant general counsel from about 1986 through October 2005; and Garand, a senior vice president from 1994 until 2005.

Also charged was Christian Milton, AIG's vice president of reinsurance from about April 1982 until March 2005. Patricco said Monday that he lost $360,000 when the stock price dropped.

AIG filed a restatement in 2005 related to the transactions and agreed to pay a record $1.64 billion in a settlement with federal and New York authorities.

In 2005, two senior Gen Re executives, John Houldsworth and Richard Napier, pleaded guilty to conspiracy to falsify SEC filings in connection with the investigation and are awaiting sentencing.

If convicted of all the charges, Ferguson, Monrad, Milton and Graham each face up to 230 years in prison and a fine of up to $46 million. Garand faces up to 160 years in prison and a fine of up to $29.5 million.

NEW YORK - This year's credit crisis has cost American International Group Inc. roughly $3.75 billion so far this quarter, the insurer said in a filing with the Securities and Exchange Commission Friday.

AIG's book of credit-default swaps, which essentially provide insurance to lenders against borrowers defaulting, lost $1.05 billion to $1.15 billion so far in the fourth quarter. Even though AIG said it does not expect much of the insured debt to go into default, the market value of the contracts has slipped.

In a presentation to investors Wednesday, AIG said its nearly $97 billion portfolio of bonds backed by mortgage debt has lost $2.6 billion in value since the end of the third quarter.

Most investments linked to home loans have depreciated this year amid decaying credit quality and a drainage of demand for mortgage debt. About 10 percent of AIG's portfolio is invested in bonds backed by mortgages.

NEW YORK - Federal prosecutors intend to call billionaire investor Warren Buffett to testify against five former senior insurance executives charged with helping the American International Group to manipulate its financial statements through $500 million in phony transactions, according to court papers filed Monday.

The former executives - four from the General Reinsurance Corporation, a unit of Berkshire Hathaway (nyse: BRKA - news - people ), and one from AIG - were indicted by a federal grand jury in 2006 on charges of fraud, conspiracy and lying to the Securities and Exchange Commission in connection with what the government calls a scheme to inflate AIG's reserves, according to a report first published in the New York Times.

The defendants from Gen Re are Ronald E. Ferguson, the former chief executive; Elizabeth A. Monrad, the former chief financial officer; Robert D. Graham, the former assistant general counsel; and Christopher P. Garand, a senior vice president who was chief underwriter. The AIG defendant is Christopher M. Milton, who oversaw the company's reinsurance activities.

Opening arguments in the trial are scheduled to begin on Jan. 7 in a federal courtroom in Hartford, Conn.

American International Group Inc. is cashing in on Blackstone Group LP's initial public offering, according to a Goldman Sachs analyst.

The New York-based insurer invested $150 million in Blackstone Group in 1998, and Goldman analyst Thomas V. Cholnoky said in a note to clients that based on his calculations, that stake could be worth $1.9 billion to $2.1 billion.

Blackstone, a private equity firm, priced its IPO Thursday night at $31 per share, the high end of its underwriters' range. Blackstone's owners will receive almost $4 billion in cash plus stock in the new company.

Cholnoky estimates AIG will collect 10 percent to 12 percent of the cash and 48.8 million shares of a publicly traded Blackstone.

Cholnoky said its difficult to estimate the actual book value of the investment because of AIG's limited disclosure about it, but he noted that if the initial $150 million had increased threefold, it would add $1 billion to $1.1 billion to AIG's book value, after taxes. Book value, or the net value of a company's assets, is a common way for investors to determine what insurance companies are worth.

Cholnoky said his estimates are conservative, and AIG's take would increase if the shares do well in the open market.

Shares of AIG fell 41 cents to $71.64, and Blackstone shares rose 4.75, or 15.3 percent, to $35.75 in morning trading.

Three American International Group Inc. executives should be required to give testimony in the New York Attorney General's lawsuit against former chairman Maurice R. Greenberg, argued a brief filed Tuesday by Greenberg's attorneys.

AIG has sought to distance itself from Greenberg, who led the company for more than 30 years until his forced resignation in March 2005 at the urging of then-Attorney General Eliot Spitzer, who later brought civil charges against Greenberg relating to several AIG transactions.

In 2006, AIG paid $1.6 billion to settle a suit brought against it by New York and federal regulators. The suit against Greenberg remains, though it was narrowed down substantially in September, and alleges that as head of AIG he was involved in four sham transactions that misled investors.

Greenberg had previously requested depositions from the executives as part of his defense, and AIG had asked that the request be rejected, and that the three executives not be required to testify.

The executives are Anthony Valoroso, AIG's deputy comptroller, Jeffrey F. Johnson, senior vice president for toxic torts at AIG Technical Services Inc., and Perry Huntington, AIG's senior vice president for environmental, according to Greenberg's brief.

The brief rebuts the Attorney General's assertion that the transactions caused harm to the marketplace, in the form of lowered share prices. Instead, it argues that any harm that occurred was caused by AIG's restatement and other factors, rather than from the original accounting for the four transactions during Greenberg's tenure.

Greenberg's attorneys argue that input from the AIG employees is required to sort out how damaging any particular transactions or restatements might have been.

"Determining the extent, if any, to which the four transactions that form the basis of the amended complaint caused any 'harm to the marketplace' necessarily requires a full investigation of all the transactions identified in the corrective disclosures to the public," the brief said.

American International Group Inc. said Friday a program to help distressed borrowers keep their homes will cost the insurer $50 million more than it thought.

The New York-based financial services conglomerate said it agreed with regulators to implement a program to help clients who may otherwise lose their homes because of mortgage defaults.

Under the Office of Thrift Supervision program, certain borrowers can obtain a refund of some of the fees they paid when they took out mortgages. The program will be administered by three AIG subsidiaries - AIG Federal Savings Bank, American General Finance and Wilmington Finance - and be available to people who borrowed money from AIG Federal Savings Bank through Wilmington Finance between July 2003 and May 2006.

AIG will also donate $15 million over three years to nonprofit organizations that educate people about loans and credit.

At the end of the first quarter, AIG said it was discussing the struggling "subprime" mortgage market with the Office of Thrift Supervision. The insurer initially set aside $128 million to pay for the program. But Friday AIG said it needs to set aside an additional $50 million reserve to pay for the program and the $15 million donation. The reserve will be recorded as an accounting charge for the second quarter.

Remember all the political hullabaloo made over Dubai Ports World earlier this year? (See: " Dubai Divide.")

A chorus of politicians had pointed frantically to what they said was a threat to America’s security when the Arab shipping company looked set to pick up several major U.S. port operations via its $6.8 billion acquisition of P&O.

Somewhat alarmed at the protests, DP World offered last March to "transfer" P&O’s American interests to an American company -- and on Monday announced it had finally found a friend in AIG Global Investment Group.

News of the contract was applauded by investors, who sent shares in AIG up 0.9% or 65 cents to $71 in late afternoon Monday trading in New York.

The businesses, spanned six major seaports in New York/New Jersey, Philadelphia, Baltimore, Miami, Tampa and New Orleans, were reportedly worth around $700 million. But DP World said only that it had received a “fair” price, and added that it was “disappointed to be exiting the U.S. market.”

One person who won’t be disappointed is Democratic Senator Charles Schumer, one of the more vocal critics of the deal. Last February, he’d questioned if Dubai could be trusted to “operate our ports in this post 9/11 world."

The mollified politician now says the AIG contract is “an appropriate final chapter to the book on the Dubai Ports World deal.”

The deal should close in the next few months and AIG, a New York-based insurance company, says it will be "one of the industry leaders in setting standards for port security."

DP World is overseen by Sheikh Mohammed bin Rashid Al Maktoum, the Prime Minister of the United Arab Emirates and ruler of Dubai. While neither he nor DP World have had any apparent links to terrorism, critics of the deal had cited alleged financing by the UAE of the Sept. 11 terror attacks

Holder	Shares	Reported
STARR INTERNATIONAL CO INC	191,460,191	9-Mar-09
MAURICE R. & CORINNE P. GREENBERG JOINT TENANCY CO	25,269,689	29-Sep-08
C V STARR & CO INC	10,507,832	5-Dec-08
GREENBERG MAURICE R	12,889,788	30-Sep-08
C.V. STARR & CO., INC. TRUST	8,580,850	29-Sep-08

The Top Ten in Client Assets (in Billions)
1.	Merrill Lynch The current leader in the grab for client assets under management isn't resting on its laurels. It wants to hit the $2 trillion mark by 2002.	$1,352
2.	Travelers The Merger with Citicorp, expected in early October, will bump it to the top of this list--barely. The new firm, to be called Citigroup, will have $1.36 trillion in client assets.	1,140
3.	UBS Formed by the merger of Union Bank of Switzerland and Swiss Bank, this firm is on our list because its institutional business is managed by UBS Brinson in Chicago.	1,093
4.	Fidelity Investments The total here includes the $616 billion managed by Fidelity's horde of mutual funds. Most of the rest is housed at Fidelity's discount-brokerage operation.	941
5.	Barclays global investors This San Francisco firm, a unit of Barclays Bank, has only about 1,400 clients. But they are very large clients--institutions with an average of $400 million each.	564
6.	Mellon Bank This outfit's Dreyfus subsidiary accounts for $110 billion of its client assets under management. Mellon itself focuses on institutions and high-net- worth individuals.	460
7.	State Street The vast majority of its total comes from its 8,000 institutional accounts as opposed to its 16,000 retail customers, including the owners of its SSgA mutual funds.	459
8.	Charles Schwab This discount broker, based in San Francisco, makes the list on sheer volume, with 5.4 million customers. A full half of its stock trading now occurs on the Internet.	400
9.	Vanguard Group Index funds are at the fore of Vanguard's product offerings. So while it has lots of money in its coffers, the market itself dictates Vanguard's investments.	375
10.	Morgan Stanely Dean Witter Though last on this list, Morgan Stanley fairs better by other traditional measures of financial clout. For instance, it is third in total revenue and second in total assets.	374*
Data as of 6/ 30/98. Data as of 5/31/98. Sources: Company reports and Market Guide.*