Tuesday, January 08, 2013
Sorry, Hank. You got screwed. But by Joe Cassano - NOT by the Government. At least not in the AIG bailout. In the case of you versus Elliot Spitzer, one might argue that you got a raw deal - but you must accept some culpability for that since you sorta kinda challenged The Spitz to a proverbial duel when you clearly were breaking the law which it must be said, wasn't a terribly clever thing to do (the duel thing) if you'd wanted to keep your seat at the table. After all, on your watch, AIG got caught manipulating earnings, changing the characterization of your earnings, helping others "manage" their earnings, participating in reinsurance bid-rigging. Ignorance is hard to argue given your legendary reputation for knowing everything about everything that went on at your company including anyone who sold a share of your stock. Yet, like WB, you might still have gotten off if you'd been polite, regretful, apologetic, donated some dough to the Spitzer's favourite charity, and gotten one of your faithful to do a Ron Ferguson* for you and take the bullet.
The world knows you're sore and bitter. And that's OK since, after all, who wouldn't be if they saw the value of assets they control (whether directly or even through an Irish Orphanage) dwindle from double digit billions to less-than-a-unit. Yet the argument you make that somehow the US Government egregiously misappropriated or stole AIG from the shareholders is simply balderdash, and a waste of civic time and money. AIG was toast. Not worthless (as it turns out), but in the absence of government support certainly insolvent since there was no way for you to meet your margin calls. You were Merriweathered*. And if you'd been forcibly dismembered (like LTCM) on your creditor's terms, rather than the government's, you and the other shareholders would have gotten ZERO NOTHING NADA NIL, irrespective of whether it caused a Herstatt-like financial circle-jerk meltdown. The ONLY equity value AIG had at that moment in time resulted from our massive and generous backstop and the outcome even then was not assured which is why so many other things WITHOUT GRAVE LIQUIDITY CONSTRAINTS traded at 10cents on the dollar, or indeed, worse. Equity on risky leveraged financials is always short the put - and you got exercised and it was your own fault. Indeed, if I were King at the time, I would have taken EVERYTHING from AIG shareholders on the one side for the extension of US Public liquidity to AIG for the sake of the system, and, on the other side demanded large haircuts from AIG counterparties on the other side of the mortgage CDSs, else the US Govt cuts AIG FP loose and they take their chances in bankruptcy court with everyone else. And if I were King, I wouldn't have done this to maximize return for the public, but rather to inflict punitive damages upon those who needed (and deserved) a spanking. This wouldn't have been perfect justice, but it would have effectively sent an unmistakable message where it needed to be sent. Then, as King and now-owner of AIG, I would have pursued criminal suits in an attempt to claw back the several-hundred-million Mr Cassano took down in bonus for wrongly-accounted-for up-front profit for deals that were effectively still open.
So it is with something other than amusement that I look upon your lawsuit, and your encouragement of AIG to join you in your Jonah-like case against the big white government whale. Disdain comes close to what I feel. Contempt perhaps comes closer. But neither fully describes the brass-balled chutzpah being displayed by your royal failure to accept culpability and pin the blame elsewhere. I only regret that those filing a lawsuit deemed to be without merit aren't - like in the UK - obliged to pay ALL the costs of the court and the defense.