AIG Scandal: America Wakes Up To Extent of Capitalist Thievery

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The news that AIG executives were to receive hundreds of millions of dollars in bonuses (maybe as high as $450 million!), even after a $170 billion dollar bailout, has fueled a populist revolt not seen since the initial shock of the economic crisis hit Americans last October. When Obama Treasury Secretary Timothy Geithner told American Insurance Group CEO, Edward M. Liddy, that government loans to AIG might be renegotiated as a result, Liddy responded with “grave concern” over the firm’s ability to retain “talented staff.”

Talented in rip-off, that is. But former New York governor and supposed scourge of Wall Street, Elliot Spitzer, is reporting over at Slate that the outrage in the media over the bonuses is a diversion. (H/T Inky99 at Daily Kos.) Not that they aren’t an outrage, the scandal misses the larger crime: the siphoning off of billions of taxpayer dollars to a handful of companies, who insured their highly risky investments with AIG. These companies have received hundreds of billions of dollars in bailout money. Now they are to receive 100% on the dollar reimbursement for their losses from AIG. Spitzer comments:

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?….

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.

No reason? No explanation? But there is always a reason. Always an explanation, though Spitzer may not want to go there.

Private ownership of the wealth and capital, freed of most regulatory restraints, is the distal cause, while the proprietors of this capital have gone on an orgy of thievery that may have never been seen in the history of civilization, outside of a world war.

Consider the new TALP plan (“Term Asset-Backed Securities Loan Facility”), which bobswern has dissected so well over at Daily Kos (bold in original).

1.)  $2 trillion in taxpayer funds with no salary restrictions to recipients….

2.) Shadow Bankers get almost all of their investment money for free, from you.
[Shadow bankers consist of “non-bank financial institutions that, like banks, borrow short, and in liquid forms, and lend or invest long in less liquid assets… via the use of credit derivative instruments which allow them to evade normal banking regulations,” e.g., hedge funds, investment banks, “structured investment vehicles,” etc.]

3.)  Shadow bankers will skim administrative fees off the top of $2 trillion, first.

4.)  Government has virtually no say in terms of regulating what these entities must do with the money once they give it to them.
[And on and on…]

Congress has responded to constituent anger, and hearings are being held even today (see liveblogging of those hearings by Emptywheel over at FDL). But while more details will leak out, it’s unlikely we will see much more than the spectacle of what Chris Floyd describes as “faux shock in the Beltway over Wall Street fat cats paying themselves big bonuses with the free money that Washington knowingly gave them.”

The following points will never be mentioned:

… the capitalist class is a definite concrete group composed of those who own and have a monopoly over the means of production (including loanable capital). The capitalist class is bound together by innumerable personal, familial and organizational filiations; the atomized non-capitalist entrepreneur –the central figure of bourgeois economic theory — is a fiction. The capacity to borrow is strictly limited by one’s ownership of the capital assets required for security against loans. In reality, credit under capitalism is always rationed, on the basis of specific monopoly complexes involving financial, industrial and commercial capitalists.

The ingrown nature of the capitalist class, who has united to unleash a frenzy of greed and stealing, is no better illustrated than by the biography of Obama’s Treasury Secretary Geithner. Born to a scion of the capitalist class — his father was a prominent leader of the Ford Foundation — Geithner’s early career (after attending the best Ivy League schools) was working for Kissinger and Associates in Washington, D.C. He began working for various divisions of the Treasury Department as early as 1988, when he was 27 years old. He was close to two former Treasury secretaries, Robert Rubin and Lawrence Summers. During the George W years he worked at the Council of Foreign Relations and the International Monetary Fund. In October 2003, he became president of the Federal Reserve Bank of New York, and a few years later joined the elite, Rockefeller Foundation organized “Group of Thirty.”

In March 2008, he arranged the rescue and sale of Bear Stearns… in the same year, he is believed to have played a pivotal role in both the decision to bail out AIG as well as the government decision not to save Lehman Brothers from bankruptcy.

Hmmm… the same guy who organized the AIG bailout, with its non-regulation of monies, including millions for “bonuses” to the same execs who helped manufacture the crisis… naw, that can’t be true, can it? (It is.)

Oh, and he “forgot” to pay $35,000 in self-employment taxes over several years.

AIG and the CIA

Another strange aspect of the AIG affair, and one with which to end this post, concerns AIG’s links to the CIA, another aspect of the entire scandal that seems to have escaped the mainstream press, if not the bulk of the blogosphere.

From CorpWatch:

Though it is an American company listed on the New York Stock Exchange, AIG makes extensive use of offshore jurisdictions such as Barbados, Bermuda and Luxembourg that are immune from U.S. regulatory and tax scrutiny. They help the company launder profits to evade U.S. taxes and hide insider connections in supposedly “arms-length” deals. This is especially important as the company has moved into financial services and asset management, handling the wealth of “high net-worth” clients — the mega-rich.

[Board Chairman Maurice] Greenberg has enviable political clout, never so much in evidence as when, with the help of Henry Kissinger — chair of AIG’s international advisory committee and a paid consultant via Kissinger Associates – AIG became in 1995, the first company licensed to sell insurance in China. AIG was the only foreign firm that owned 100 percent of its license there.

The American International Group at its origins was linked to the OSS (Office of Strategic Services) the forerunner of the CIA. It grew from the Asia Life/C. V. Starr companies founded by Cornelius Starr who started his insurance empire in Shanghai in 1919, the first westerner to market insurance in China.

Some of the links between AIG and the CIA can take us to some pretty heady conspiracy territory, as in this link from a Ron Paul website:

Since 1997, Frank G. Wisner, Jr., has been a board member of Kroll , and is currently Greenberg’s Deputy Chairman for External Affairs. Wisner’s father was a founder of the U.S. Central Intelligence Agency, who killed himself over the scandal from his being duped by British-Soviet masterspy Kim Philby. Frank Wisner, Jr., is a director of the George Bush-linked energy giant Enron (a client for whom AIG negotiated payments from Peru over nationalization of Enron operations).

Of course, nothing in this quote above is wrong, but whether these dots connect or not is another matter. Still, the connections between AIG and U.S. government operations is a shadowy land that is worth investigating. Wisner, by the way, stepped left AIG late last year.

Michael Ruppert made an impressive case regarding the intelligence connections of AIG in an article back in 2001. He quotes a September 22, 2000 L.A. Times article by Mark Fritz, the text of which is worth considering as the AIG scandal unfolds.

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

Though rarely numbering more than a half dozen agents, the unit gathered intelligence on the enemy’s insurance industry, Nazi insurance titans and suspected collaborators in the insurance business. But, more significantly, the unit mined standard insurance records for blueprints of bomb plants, timetables of tide changes and thousands of other details about targets, from a brewery in Bangkok to a candy company in Bergedorf.

“They used insurance information as a weapon of war,” said Greg Bradsher, a historian and National Archives expert on the declassified records….

The men behind the insurance unit were OSS head William “Wild Bill” Donovan and California-born insurance magnate Cornelius V. Starr.

Starr had started out selling insurance to Chinese in Shanghai in 1919 and, over the next 50 years, would build what is now American International Group, one of the biggest insurance companies in the world.

Ruppert, seven years prior to the current economic meltdown, highlighted the uses of reinsurance for national security purposes. From Fritz’s article (emphases added):

“Stiefel mapped the entire system,” said Naftali, a historian at the University of Virginia’s Miller Center of Public Affairs. “Each time I take a piece of your risk, you’ve got to give me information. I am not going to reinsure your company unless you give me all the documents. That’s great intelligence information”….

With the Axis defeat imminent, U.S. intelligence officials focused greater attention on ways the Nazis would try to use insurance to hide and launder their assets so they could be used to rebuild the war machine. It’s a task that continues today.

It’s no secret that the CIA needs to launder vast amounts of money to fund its secret wars around the world. That’s a good deal of what the Iran-Contra affair was about. Alfred McCoy also plumbed these depths in his classic work, The Politics of Heroin: CIA Complicity in the Global Drug Trade. According to the Wikipedia article on McCoy, in his work just cited:

He also uncovered money laundering activities by banks controlled by the CIA, first the Castle Bank which was then replaced by the Nugan Hand Bank, who had as legal council William Colby, retired head of the CIA [3]. He also alludes to the BCCI, which seems to have played the same role as the Nugan Hand Bank after its collapse in the early 1980s, claiming that “the boom in the Pakistan drug trade was financed by BCCI.”

There’s a lot that is horrifically dirty in the entrails of American capitalism. Why is this huge outflow of capital happening at this time? Where is money going, exactly? Why are the same people who engineered the bailout now in charge of policing it?

Standing outside the intricacies of this scandal, whatever they may be, as uncovered, stand two unassailable facts. One, this breakdown of the capitalist system is causing untold suffering for billions of people around the world. Two, the causes of the economic collapse are complex, and rooted first of all in the inadequacies of the capitalist system — a system that argues it needs an influx of public monies in the trillions of dollars every fifty to seventy years or so or it will implode. Great system!

But further questions remain: how was this collapse handled? Who benefited? What was the role of secretive government agencies that use sophisticated schemes of investment and money laundering in all this? I don’t trust the U.S. government to reveal this to us. The failure of public oversight and the need to preserve a crooked system at all costs led to the downfall of the Stalinist Soviet empire. It seems likely to do the same to the American empire as well, if not now, then someday soon.

Also posted at Invictus

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    • Valtin on March 18, 2009 at 11:56 pm
      Author

    AIG = All Intense Greed

  1. There is a pattern of criminality involving AIG, and many major Corporations, and determining all the details-following the money-should be a priority with our government, before giving more money to criminals.  Questions that need to be answered include:  Who committed crimes; When they committed crimes-in the past, and/or currently; the Full Extent of the crimes, within Corporations and between Corporations; and the extent of the involvement of International Organized Crime in the financial sector.

    Several reports I’ve come across recently seem to have a similar theme of fraud and corruption in major US Corporations, including AIG.  Josh Marshall at Talking Points Memo has been following the AIG story, and many of the links below are from TPM:

    Under (former head of AIG’s Financial Products Unit) Cassano, Troubled AIG Was Charged With Major Securities Violations:

    “…the Justice Department in 2004 criminally charged Cassano’s unit with helping another firm, PNC Financial Services, to conceal certain assets from its books…”

    Cassano Prevented AIG’s auditor from looking at the Financial Products Unit’s Books

    Investor Lawsuit:  Cassano Hid AIG Losses

     Last Fall, FBI and UK Serious Fraud Unit Launched Fraud Probe Into AIG:

    “…British authorities (who seem chattier than their US counterparts) said at the time that UK and US investigators were cooperating with each other.

    So that also means that, as of late February, when the UK investigation was announced, the FBI probe into AIG was still active, at least as far as the British understood…”

    The FBI is currently investigating 530 Corporate Fraud Cases

    “…38 of them involve some of the biggest names in corporate finance in cases directly related to the current economic crisis…”

    Last April, then AG Mukasey Warned:

    “…that organized criminal networks have penetrated portions of the international energy market…(and) similar efforts have targeted the international financial system by injecting billions of illicit funds to try to corrupt financial service providers…”

    These criminals have, among other things engaged in:

    “…The exploitation of the U.S. and international financial system to move illegal profits and funds, including sending billions in illicit funds through the U.S. financial system each year…The manipulation of securities exchanges and engaging in sophisticated fraud schemes that rob U.S. investors, consumers and government agencies of billions of dollars…

    IMHO, this pervasive and unchecked criminal corruption is the big picture that the Media, the Congress, and the Administration are either just missing, or are deliberately avoiding considering as the basic underlying reason for the financial meltdown.   Unless they clean out the rot in the system, all the money they throw at the problem will just be more money sucked into a corporate/criminal black hole.  

  2. Mammoth corporations, such as AIG, can easily form “secret alliances.”  There are always a hundred and one ways that they can find the means of camouflaging their activities.  And, of course, these same mammoth corporations are tied up with the government in a multitude of ways, as lobbyists, shareholders, such as Pelosi, Kerry and some 50 other members of Congress.  

    . . . . The following federal officials must all recuse themselves from participation in any Wall Street bailout proceedings because they have all engaged in illegal conflict of interest conduct over the past eight years for which criminal charges may be brought;

    a. NANCY PELOSI, Speaker of House: Pelosi’s last financial disclosure statements reveals Pelosi owns $100,000.00

    stock in American International Group (AIG) beneficiary of an August 2008 federal taxpayer bailout. Pelosi must face criminal charges for securities fraud and insider trading under SEC Rule 10(b)(5);

    b. SEN. JOHN KERRY: Sen John Kerry and 50 other members of Congress own between $250,000.00 -$500,000.00 of AIG stock and should all be prosecuted for insider trading, securities fraud in violation of SEC Rule 10(b)(5), inter alia; . . . .

    The above quoted material is just a glimpse, and there is much other interesting information therein,  of a long article entitled “CORRUPT WALL STREET BANDITS FEAST ON U.S. DOLLARS AT BUSH BAILOUT BANQUET CATERED BY PRIVATE FED RESERVE BD, BILDERBERGS, CFR,” posted October 3, 2008, by Dr. Ulysses S. Crocket, J.D.,’71 Boalt Hall School Of Law U.C. Berkeley; ’73 LL.M. Columbia University Law school; 1985 Visiting Scholar Taxation Yale Law school; 1986 visiting Tax Legislation Scholar Hoover Institute Stanford university; 1986-present Dean Of Instruction Carlton R. Inniss Oakland Alameda Community Law school, Inc. Uysses Crockett lives in Emeryville, CA home of Steve Jobs Pixar Animation Film Studios. see, Ulysses S. Crockett, Jr., ‘Federal Taxation Of Interest On Indebtedness In Corporate Acquisitions: A Congressional Response In Merger Tax Reform’, 10 Indiana Law Review 419 (1976)

    As to AIG plus the CIA, it strikes me that some of the places that AIG has been and is operating might not have been possible without the “assistance” of the CIA.  

    Eliot Spitzer was a forerunner in tracing the “roots” of the evils, so to speak — this article did him in:  “Predatory Lenders’ Partner in Crime

    How the Bush Administration Stopped the States From Stepping In to Help Consumers”


    By Eliot Spitzer

    Thursday, February 14, 2008

    Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

    Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

    In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

    But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. . . .

    Not to be overlooked is a lawsuit Spitzer filed against AIG, in June, of 2005:

    “The irony of this case is that AIG was a well-run and profitable company that didn’t need to cheat,” Spitzer said. “And yet, the former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company’s financial results.” . . . .

    And, it’s plenty well known that with AIG’s offshore business sites in Barbados, Bermuda and Luxembourg, they have found many a way to evade taxes.  So, now, get this:  “In Twist, AIG Sues Its Benefactor Over Taxes” a Wall Street Journal article, of March 2, 2009:

    By JESSE DRUCKER and LIAM PLEVEN

    In the midst of its negotiation with the federal government over revised terms of its bailout, American International Group Inc. sued the U.S. on Friday over a disputed $306 million in taxes, interest and penalties.

    The suit steps up a battle with the Internal Revenue Service largely over AIG’s use of a controversial type of “tax arbitrage” transaction that authorities are challenging across the world.

    With the company essentially suing its owner, the suit highlights the awkwardness of national control of AIG, which the government rescued from potential bankruptcy in September. If through litigation “you’re moving money from one pocket to another, why should we be paying lawyers to do that?” says David Weisbach, a tax law professor at the University of Chicago. . . .

    And, just guess who gets to pay the attorneys!

    Kinda’ reminds me of the story, back a number of years, where a New Yorker threw himself on railroad tracks, but lived, and then turned around and sued the railroad.  (Well, as close to my recollection as I can recall! )

    All of it is one huge spider web! To find one’s way through this maze would be an awesome task for anyone!

    The number one problem has to do with the anti-trust laws and the complete lack of enforcement of them, or the prevention of large corporations becoming larger still, over and over.  The larger they become, the worse they become.

    On top of it, whether it’s Wall Street, the banks, monster corporations, etc., there are insufficient regulations and certainly, for whatever regulations there may be, there is little or no enforcement of them.  There is no “policing” of their activities, so to say!  All of these huge entities will do whatever they wish and can, so long as there is nothing to stop them from doing it. Therefore, behaving in a morally and principled way under their own auspices is not anything to be trusted period.  And the government turns its head the other way! Greed has no conscience!

     

  3. back into the picture full swing!  

    This, just yesterday:

    Was Eliot Spitzer Taken Out Because He Was Going to Bust AIG?

    Posted by Melina Ripcoco,

    Brilliant at Breakfast

    at 3:39 PM on March 19, 2009.

    America is known for its great second acts, and we may be witnessing the curtain rising on Spitzer’s.

    Eliot Spitzer is back and he’s talking. The thought of this, no doubt, brings a small shiver to the boardrooms of some of the perps walking around trying to figure out how to hide the money this week. Today Edward Liddy testified that there have been death threats made to or about executives who received bonuses, so no names will be put on the record, but these anonymous players must know that the jig is up in the land of easy-money. Isn’t what to do a no-brainer for these great Americans?

    Spitzer may be as “disgraced” as any anonymous sex loving Republican loser, but America is known for its great second acts, and we may be witnessing the curtain rising on Spitzer’s. . . . .

    The relationship between AIG and Goldman goes back long enough that one would think that Goldman would know, having bought so much of this “insurance” or whatever it was, whether the “products” were …er…real or feasible at all. Indeed, Goldman and AIG almost merged a few years ago, but Spitzer notes that the unknown black hole of AIG’s business practices were probably what prevented it. Still, that didn’t stop the incestuous dealings; it almost makes one think that this whole thing was a setup. . . . .

    Little by little, things are starting to unravel.  

    The worst is that hard-working Americans have been at the mercy of these greedy, depraved parasites!

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