And people thought Jerome Kerviel's blow up was spectacular. In an interesting piece out on abcnews, more light is being shed on AIG's small financial products London office which even AIG now acknowledges was ground zero for roughly $500 billion in losses, as well as the person who ran it, Joseph Cassano. Joe, who previously had made waves after the Washington Post first profiled him in October 2008, had "earned" $280 million during his tenure with AIG and who left the company with a $1 million a year consulting contract, and owns houses in London and Connecticut, was so confident in his huge risky bets that he is quoted as saying "It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions."It is a little easier to see a scenario where Cassano would end up losing $500 billion.Cassano's nearsighted actions have had staggering repercussions: everyone knows about the secret 21 page mutual assured destruction memo, the billions in cash downstreamed to AIG's counterparties, the systemic impact AIG's collapse has had on both the U.S. and global economy and all the other indirect consequences of the near $200 billion in taxpayer money that AIG's failure has so far cost.
It is somewhat surprising that while Barney Frank et al have been so focused on the executives of the major banks, Joe has been flying low under the public radar. After all, if allegations against Cassano prove true, his loss will have the tenfold impact of Madoff's ponzi scheme, however unlike with Bernie, who impacted a small group of people to a high degree, Cassano's $500 billion loss has to be shared equally amongst all taxpayers. And while hubris and reckless risk management are not criminal acts, incentives will always exist for traders to take on outsized risk unless there is some regulatory intervention, which really cuts to the heart of the whole problem. Sphere: Related Content
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14 comments:
not quite $500B yet. Closing on $100B.
"Honest" people such as Joe Cassano have done more damage and caused more losses than all the Bernie Madoff's of the world ....
Why isn't he a soon to be cellmate of Bernie's in prison ???
AIG was regulated ... by OTS (regulator of CountryWide, Indy Mac and Washington Mutual.) Heckva job, Brownie.
About time somebody publicized this crook's mugshot. It should be plastered everywhere. It's precisely these kind of people who infuriate me. He must be having a hearty laugh at our expense, the b*stard.
I want to punch this guy in the face. Twice. Three times. I want to take his lunch money. Every day. Like it was taken during his childhood. Every day.
Joey. Why don't you come on out and explain what you did.
one obvious question is whether people buying protection on supersenior tranches from AIG knew it was worthless from the beginning as they would have had to know that AIG had no ability to pay out.
this is suggested by the following blog: http://www.acredittrader.com/?p=65
what's this "secret 21 page mutual assured destruction memo" ? J
A lot of this happened on Hank's watch which begs the question: greed or ignorance?
Jonty: it's secret!
This guy used to live in my building.
I knew Joe Cassano years ago, we worked together at the same summer job for years, while in school. I know what he is capable of. When I heard he was working in Wall Street, I thought he will be a good mid level executive. Guess I misjudged him... Or maybe not. Meantime, when he hit it big, he stopped returning phone calls from his old friends.
Near-sighted? It's not near-sighted at all, for someone like Joe Cassano, gambling is part of the daily life and he knew perfectly well what the consequences will be if the gambling takes a turn for the worse.
He blatantly destroyed and robbed billions of dollar from our economy, and now he's run off to London? Fine with me if you like gambling, just not with people's money.
Seriously, visit this link to let Joe hear you: http://www.righteouschicken.com/calling.html?sindex=135
CORRECTION:
"....and who left the company with a $1 million a year consulting contract..."
Note that it should have read "$1 million a MONTH" (for nine months).
ATROCIOUS...
Regarding regulation, in 2002 Professor Robert Hare suggested that corporate executives who will be responsible for billions of dollars of others' money should be screened for psychopathy.
Had that advice been taken, the meltdown might have been averted.
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