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Joe Cassano: The Man Who Brought Down AIG?

Moments ago, members of the House oversight committee concluded their hammering of the two most recent AIG chief executives. Topic: Joe Cassano, the man who some credit with bringing down the insurance giant.

Cassano was president of AIG's financial products division, which trafficked in the credit-default swaps, or CDS, which we learned earlier proved so dangerous.

Rep. Bruce Braley (D-Iowa) angrily recited the tale of Cassano's tape: He earned $280 million in cash -- more than AIG chief executives -- and for every dollar his financial products unit made, 30 cents came back to Cassano and other top execs.

After the unit lost $11 billion, Cassano was fired Feb. 29 of this year, Braley pointed out, and got to keep $34 million in bonuses and was kept on as an AIG consultant at a salary of $1 million per month.

Braley asked the witnesses, former AIG chief executives Michael Sullivan and Robert

Willumstad
, if they had exercised their authority to fire Cassano from his consultant's role, given all the damage he had brought to AIG.

"No," both said.

Then oversight committee Chairman Henry Waxman (D-Calif.) really lit into them.

Asked why they didn't fire Cassano, Sullivan said they needed to "retain the 20-year knowledge of the transactions."

Waxman was impressed.

"When I retire I want to come work for you at $1 million a month," he said, The Post's Peter Whoriskey reports.

"What would he have had to have done for you to fire him?" Waxman asked rhetorically.

- Frank Ahrens

By Frank Ahrens  |  October 7, 2008; 2:53 PM ET
Categories:  The Ticker  
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Comments

It is really sad that these company executives get compensated for poor decision making, improper oversight, and greed. Regardless of public scruntiny, they will continue to live a much more lavish lifestyle then the taxpayers (paying for this) will ever live. Those that get the short end of the stick are again, the MIDDLE CLASS.

Posted by: Anonymous | October 7, 1908 3:22 PM | Report abuse

"What would he have had to have done for you to fire him?" Waxman asked rhetorically.

"Well he would have had to burn down the building or commit murder..." Claimed the previous CEO.

"Oh yeah, he actually did. He torched and killed off the business, but we got to keep our bonuses..." claimed the other previous CEO.

Very sad and disgusting really.

Posted by: NHEngineer | October 7, 1908 3:40 PM | Report abuse

Going up is more of a challenge. It looks like The Post numbers are going down, which is bad news. The good news is that the interested is going down. I guess things could get better from here, so please keep us Posted. If they get any worse, we're all headed for whole lot more trouble than we have. Like we need that. Good luck Post.

Posted by: Anonymous | October 7, 1908 3:49 PM | Report abuse

I meant interest, but you know what I meant.

Posted by: Anonymous | October 7, 1908 3:51 PM | Report abuse

And to top it all - this unit was based in London, most of its business was with Euro banks. Now American tax money will go to help bail out foreigners.

Posted by: Anonymous | October 7, 1908 4:20 PM | Report abuse

AIG is now owned by the US govt. Something can be done. Something must be done. If not then the US itself is responsible.

Posted by: Anonymous | October 7, 1908 4:23 PM | Report abuse

Someone should be incarcerated for fraud.It is not right that this much damage is done and no one is punished but us taxpayers.

Posted by: pheasantfriend | October 7, 1908 4:35 PM | Report abuse

Why wouldn't you want to be a Wall Street executive? You get a king's ransom for signing on, you get Fort Knox for keeping the company's doors open, and you get a golden parachute and a pirate's treasure chest even if you run the company into the ground.

How much valuable experience and insight do you need to get handsomely rewarded regardless of the company's performance during and after your presence? It would seem the proverbial dog catcher would do as well if given the opportunity.

Where do I sign up?

Posted by: Gary Goldberg | October 7, 1908 4:44 PM | Report abuse

After the unconsequential verbal thrashing that resembled nothing so much as a barroom brawl in a 1950s cowboy movie (fake punches and fake tables crashing on heads), the congresmen and the rich guys retired to the Capital Bar for a few friendly rounds on the taxpayers tab and played a game of liars poker. It was a draw.

Posted by: Phil | October 7, 1908 4:44 PM | Report abuse

'this unit was based in London, most of its business was with Euro banks. Now American tax money will go to help bail out foreigners'

Well the euros are putting up in excess of 500bilion of their own and the problem rests with American 'inovation' in financial products.

Posted by: Herbert | October 7, 1908 4:48 PM | Report abuse

One of the men who testified today gave back his golden parachute and the other one walked away with $15 million. What did it cost him? He got told "Shame on You" on national (C Span) television. He's not inclined to give any of it back.

Posted by: Gaias Child | October 7, 1908 4:52 PM | Report abuse

I don't have a problem with people making money, but I'm starting to think that much of this is at our expense.

I'm also thinking that someone should figure out a way to put this guy in jail, or at least make him give some of the money back.

Posted by: John B. | October 7, 1908 4:56 PM | Report abuse

Why isn't there any discussion of what happened, with Congress's help at Fannie and Freddie? Change the names of those involved and every comment being made about Wall Street/AIG, Lehman, etc executives can be made about Fannie and Freddie executives.

In terms of oversight - where are the comments about the UTTER FAILURE of Congress to display ANY oversight of those two GSE's. In fact, looking at the last 10 years, it appears that the exact opposite happened - Congress worked to PREVENT ANY OVERSIGHT of either GSE.

Posted by: JD | October 7, 1908 4:58 PM | Report abuse

If the RICO statute does not apply, it is imperative to bring legal action against these people and take all of their ill gotten gains. To not do so would only be additionally morally corrosive to our society.

Posted by: BJ | October 7, 1908 5:46 PM | Report abuse

Slime like the individuals involved in this disaster make me even more convinced that somehow, someway, CEOs and their fellow upper management must have their compensation drastically, and I mean ENORMOUSLY slashed.

Up until about 1980, the average CEO made 20-40 times the average employee. Now, it is over 400 times. The executives and their "compensation specialists" i.e. extorters, main arguments have been that these slime "add value". They started this line of b.s. ten years ago during the "Great Bubble", and it certainly has proved invalid. Today, like children, they cry that "everyone else is getting these goodies, so why can't I?".

Pompous Jack Welch declared in so many words a few years ago, that his ilk are "rare", "special talents". I would suggest rather, that executive compensation levels today are the result of a huge misleading, calculated con game; an ultimate Good 'Ole Boy's Club. James Webb is the only politician I've ever heard to clearly state this, and I sure wish others would follow, and moreover, do something severe about it.

Posted by: BJ | October 7, 1908 6:03 PM | Report abuse

A NEEDED FIX IN ALL BOARD ROOMS

Isn't it time the system went in for some much needed repair?

Due diligence and oversight long ago slid out the window. No one was watching.

Time to do something about it.

Here's a huge one they all missed.... The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of "disconnect" by most Americans.

"WE THE SHAREHOLDERS OF YOUR COMPANIES......

http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html

Posted by: Anonymous | October 7, 1908 7:26 PM | Report abuse

Anonymous, Excellent post!

I read it quickly, but the only thing I would add to that document, is that there should be some sort of moral/common sense limit on what those in these jobs make, on top of the sensible dictates in this fine piece.

Thanks for posting this!

Posted by: BJ | October 8, 1908 9:49 AM | Report abuse

"It Wasn't Me" AIG
(feat. Ricardo Ducent)
WilliamBanzai7

(Yo', man) Yo'
(Open up, man) What do you want, man?
(My shareholders just caught me) You let them catch you?
(I don't know how I let this happen) With who?
(The financial products unit, you know) Man
(I don't know what to do) Say it wasn't you
(Alright)

PW Coopers came in and caught us red-handed
Trying to hide our subprime surprises next door
Picture this, our books were butt naked, lying on the boardroom floor

How could I forget that AIG
Is a public company
All this time they were standing there
They never took their eyes off me

But now how you can grant the FEDs access to your boardroom
Examiners and witnesses while you cling to your pillow
You better watch your backs before they turn into CEO killers
Best for you and the situation not to call the bean counters
To be a true player you have to know how to play
If they say a night, convince them say a day
Never admit to a word when they say makes a claim
And you tell them in a babble, no way!

But they caught us running up the bonus tab (It wasn't me)
Saw us selling shifty CDS paper so we could collect fast fees (It wasn't me)
Caught us pretending everything was OK while we hid massive liabilities (It wasn't me)
Even caught us in the St Regis SPA (It wasn't me)

They saw the red marks in our CDO books (It wasn't me)
Heard the words that we told the analysts (It wasn't me)
Heard the screams get louder (It wasn't me)
Paulsen waited until it was almost over

Hank came in and caught us red-handed
Trying to push our subprime mess next door
Picture this, our books were butt naked, laying on the boardroom floor

We had tried to keep Congressman Waxman
From what he was about to see
Why should he believe me
When I told him it wasn't me

Posted by: williambanzai7 | October 8, 1908 3:17 PM | Report abuse

The Very People Responsible For Setting The Fire That Is Burning Our Economy To The Ground Are Going Free, Helped By Henry Waxman.

These people, Including Jamie Goerlick, Franklin Raines, Daniel Mudd and Jim Johnson are at the heart of the meltdown.

They Were Aided By Chris Dodd, Barney Frank, Chuck Schummer, Henry Waxman, Maxine Waters, Gregory Meeks, Artur Davis, Harry Reid, Lacy Clay, and Nancy Pelosi.

http://www.youtube.com/watch?v=_MGT_cSi7Rs

These people owe the American People an explanation, an apology, and perhaps some jail time.

Don't take your eye off of the ball. These are the people who lit the match.

And Jamie Goerlick is set to be our next attorney General.

We simply CAN'T let this happen or they will all go free.

http://www.wnd.com/index.php?pageId=67068

Make Certain Your Anger Is Directed At The Correct people. Don't Let Henry Waxman Build A Smoke Screen That Shields The Real Crooks From The Anger Of The American People.

Posted by: GeraldD | October 8, 1908 6:03 PM | Report abuse

Lets throw some blame at Hank Greenberg. Seems he does not even have the nerve to testify in person claiming he has "health related issues". Funny as he always has time to speak with Maria Bartiromo and those in the media who still think of him as a legend. It was under his stewardship that AIG began investing CDS. Who hired Joe Cassano? The only consolation that AIG shareholders have is that he also has lost billions. The reality was that Greenberg and his media cronies hid the truth about AIG being built on a foundation of lies. Funny how everyone seems to forget how Greenberg pressured NYSE specialits to "buy" AIG stock. Greenberg and Cassano belong in jail.

Posted by: Reality check | October 8, 1908 10:23 PM | Report abuse

Why aren't protesters positioned out side the Robber Barons homes demanding money be given back to the tax payers.

Posted by: Michael | October 8, 1908 10:48 PM | Report abuse

these people should serve life sentence in jail,they are not much better then oj simpson.

Posted by: marcello | October 8, 1908 11:50 PM | Report abuse

GeraldD,

I think the anger is more accurately directed at where much originated, with Alan Greenspan, and the idiot, Phil Gramm, recently, McPain's Economic "advisor"!

Treasury Secretaries Rubin and Summers, and Clinton, went along with the Republican Gramm/Greenspan's poorly thought out deregulation plans.

Posted by: Anonymous | October 9, 1908 2:11 PM | Report abuse

GeraldD,

I think the anger is more accurately directed at where much originated, with Alan Greenspan, and Phil Gramm, recently McPain's Economic "advisor"!

Treasury Secretaries Rubin and Summers, and Clinton, ultimately went along with Republicans Gramm's and Greenspan's poorly thought out deregulation.

Posted by: BJ | October 9, 1908 2:19 PM | Report abuse

Here is the link to an article detailing this and more, in today's NYT's.

http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?ref=business

Posted by: BJ | October 9, 1908 2:20 PM | Report abuse

Just for the record, the financial products division is NOT based in London.

Be sure you know your facts before you start throwing rants.

Posted by: Anonymous | October 9, 1908 10:08 PM | Report abuse

What party does Joe Cassano belong to?
Dem. or Rep.

Posted by: Herry T. | October 9, 1908 11:53 PM | Report abuse

It's obvious that there are many who are to blame for the financial catastrophe, and those who are responsible are the heads of the organizations, no matter who lower in rank contributed to the problem. AIG seems to be one of the worst offenders, so it figures that the CEO of AIG should be at the top of the list. The recent excesses of AIG following its bailout, and the following request for more money is one of the most disgusting and reprehensible actions ever perpetrated on the American people. The public won't rest until justice is served, and restitution is made. There should be a decision as to whether a criminal offense has been committed.

Posted by: Anonymous | October 10, 1908 2:01 AM | Report abuse

"It's obvious that there are many who are to blame for the financial catastrophe, and those who are responsible are the heads of the organizations, no matter who lower in rank contributed to the problem."

Yes, this is certainly true as there is a blindingly glaring lack of integrity in the top executives good 'ole boys club. However, Greenspan's foolish deregulation cheerleading (see link I previously posted), and Phil Gramm succeeding in getting the depression era regulations limiting financial institutions' abilities to highly leverage themselves, are key milestones in the dire situation that has resulted.

Maybe this article will help to clarify Phil Gramm's actions:
http://www.politico.com/news/stories/0308/9246.html

Posted by: BJ | October 10, 1908 7:10 AM | Report abuse

Herry T.,

I found a list on the web where he (along with many other AIG people), is said to have given money to a Dem. politician in CT. However many companies in the insurance industry are based in CT, so I doubt Party affiliation can be determined by this.

The way our money driven political system is, they tend to give to the politicians of whichever party (and often both) they think are in position to help them.

Posted by: BJ | October 10, 1908 7:20 AM | Report abuse

From the Politico article above:

"Gramm’s role in the swift and dramatic recent restructuring of the nation’s investment houses and practices didn’t stop there.

A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS’s new investment banking arm.

Later, he became a major player in its government affairs operation. According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006.

During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.

For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs. "

Posted by: BJ | October 10, 1908 7:23 AM | Report abuse

Thanks BJ. That was a great help.

Posted by: Harry T | October 10, 1908 4:46 PM | Report abuse

Americans. All 3 branches of government have betrayed us. It is time to dramatically shrink the size and scope of the federal government. Government should be about roads, fire departments, police. Let us stop all this social engineering. Let us stop funding everything from abortions to zoos. We can’t keep pumping all of our resources into the politicians that want to make slaves of everybody.

Posted by: Hadnuff | October 10, 1908 5:37 PM | Report abuse

Harry, You're very welcome.

Hadnuff, I'm not sure that simply less government is the answer. Ronald Reagan targeted government as the problem, promised less, and we ended up with more government spending than ever. It sounds good, because few like to pay taxes, but too often it seems, this argument is used as a political red herring.

Greenspan's Ayn Rand foolishness promulgating unregulated markets gained huge traction during the Reagan years, and look what resulted.. We need good regulation. History proves this, as do current events in the business world, such as the subject of this article.

Additionally, what would have happened in the aftermath of the Crash of '29 and the long years of The Great Depression had government not taken on the positive, widespread role that it did under FDR?

Sure, get rid of earmarks and pork, but don't cut the muscle. We've got an infrastructure that needs enormous investment in order for our country to remain competitive economically. And, I've listened to enough experts trying to come up with possible solutions to our health care crises, to think that the enormous scale of administration required, may well be best administered, by yes, our government. These huge administrative tasks could be much more efficiently carried out by one body, our Federal Government, than by literally thousands of private companies.

What we need is high quality government, then determine its ultimate size. And, we actually need more financial regulation, and many more investigators within the government, free from political pressure, in order to provide stringent oversight; of that I am sure.

Posted by: Anonymous | October 10, 1908 11:18 PM | Report abuse

You evil, evil, person! You take all that money for your self when their are families out here that can non not even pay their monthly bills?oYOU WILL HAVE ANWSER TO A HIGHER POWER!

Posted by: Anonymous | October 11, 1908 12:01 AM | Report abuse

"Asked why they didn't fire Cassano, Sullivan said they needed to "retain the 20-year knowledge of the transactions.""

Excuse me, but are you telling me that AIG does not keep records of their transactions? Does AIG really believe that Cassano did ALL of the transactions on his own and did not have help from his 300+ guys under him? This is a pure BS response. Personally, those execs are protecting him because they don't want him to spill the dirty on them!

--------

Posted by: Anonymous | October 12, 1908 1:31 AM | Report abuse

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