Sept. 18, 2008 Elliot Spitzer Uncovered AIG Ponzi Scheme – Cooking The Books
Back during the election Senator John McCain’s solution to the AIG woes was to hire more lobbyists to study AIG collapse. He may have included his friend Phil Gramm who is well versed and tied to the Deutsche Bank which invested in the derivatives Ponzi scheme of AIG.
The Bush administration knew full well that the high risks of no financial regulations -and the Republicans were purposefully asleep at the wheel. Gramm was one of the engineers of the deregulation during the Bush administration and the one who helped the foreign Deutsche Bank recover their losses with US bailout money.
The culture of the high risk Wall Street Casino benefited many Republican CEO’s as the cause of economic ruin due to complex multi-tiered manipulations of accounting procedures unchecked by the Securities and Exchange Commission and the Department of Justice.
The downfall of AIG began years ago with very poor and deceitful accounting procedures creating a false impression of its earnings the giant has been falling for years. AIG has been facing investigations for years on overstating the values of their contracts which are called credit default swaps or credit derivatives in the new method of cheating the system.
Credit derivatives value comes from credit risk on an underlying bond, loan or other financial asset. The reference entity maybe a corporation, the credit risk is on an entity other that the parties to the transaction itself. Basically AIG was selling insurance policies on bad loans.
Over 400 billion dollars worth of derivative contracts were established under the direction of Maurice Greenberg who since 1968 was the Chief Executive Officer of AIG responsible for its operations. Maurice Greenberg replaced the former Chief Executive Officer – C.V. Starr who died in 1968 and Maurice has been at the helm steering this ship closer to all out thief and wrecking the company for decades.
When AIG was doing deals which comprised 40 percent of its net worth in derivatives, it was dangerously close to overload on net worth. Meaning, AIG was trading more paper than the company was actually worth.
Maurice ruled with an iron fist and even the board of directors must have approved this risky exposure to losses. Quite simply the derivatives’ values were overstated and AIG used improper accounting methods simply following Enron’s methods of “cooking the books”.
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