Ding. Ding. Ding. Ding.

For anyone reading this thread who doesn’t yet know about a new Rolling Stone article just out by Matt Taibibi, it’s a very good explanation about the players, layers, machinations, and depravation:

http://www.rollingstone.com/po…..g_takeover

He makes a very, very good point: it’s not about money. It’s about power.
In Supercapitalism, IMVHO, Robert Reich makes the very same point. Other economists have tried to make this point since the mid-1970s, and anyone interested in the current meltdown would benefit from the Taibibi article.

No need to have a military revolution: just take over the financial sector, which controls the government, and then enslave via credit cards and threats to pension plans.

I hope Obama says, “Game On.”
We will see.

Geithner is either severely compromised, or playing a deeper game than any of us know.

It’s like a non-nuclear version of the Cold War’s MAD, mutual assured destruction. AIG may not know exactly what these employees have to say and vice versa. It knows they know a lot; it might fear harm from the disclosure. So there’s an element of “chicken” there, too.

AIG’s board and managers have a duty to protect AIG’s shareholders, now, ironically 80% of which are US taxpayers. More practically, they are protecting themselves with dwindling resources to do that.

Whether they have an obligation to disclose knowledge of a crime depends on the crime and the relevant law. But they needn’t testify against themselves. It’s horribly complicated and a big stakes play. Stay tuned for more from EW.

I think the Serious Crime Unit in UK has a lot of work on its hands.

But if they just walk out the door and go to a competitor and start spilling AIG “secrets” seems they’ve just put themselves at risk for criminal actions as well.

If they want to stay employed or get revenge, they might go to the counterparties and sell their stories. That information may reveal the existence of an event of default allowing them to make a claim.

Okay, you’re thinking along the same lines that I am, it appears.

Have really found your comments helpful — they always are, but this thread particularly.

Masaccio mentioned here or at Oxdown a month or more ago that he thought the first serious step was for the feds to declare all CDOs and CDS’s illegal. As I’ve tried to understand these better, I really see the significance of his point!

As near as I can tell, someone thinks they have us over a barrel until those damn things are declared illegal. And obviously Paulson would not have been able to get his head around that concept, since he made beaucoup $$$ by bringing derivatives into Goldman Sachs, thereby building up his powerbase inside GS and edging aside Corzine. (I get this from the “Other People’s Money“, which is the best history that I’ve read about it.)

These are insurance scams, and you had I have both had to hunt through code — I can’t quite fathom trying to ferret out all the derivative code, who it’s tied to, what triggers each contract, and what each contract triggers in turn, but it sounds like a complete nightmare to me.

That, in turn, is the **only** reason that I am even marginally willing to cut Geithner some patience — I think that probably Paulson set this whole TARP shitpile up at the core, because remember Paulson’s 3-page Ultimatum/Edict to Congress, about how **no one** could ever go investigate his actions?! It seemed weird to me at the time; now, all I can fathom is that he was using TARP for some kind of incredibly elaborate shell game, with Bernanke basically trying to kick his ass politely and rein him in at the same time. (They seem like a very unlikely duo; Paulson seems pure ego, and Bernanke seems a lot more geeky.)

The thing is, until Treasury, Paulson was a MasterOfTheUniverse on Wall Street, and it looks like he got that way overseeing derivatives. So not quite the guy to admit they’re corrupt piles of crap, methinks.

But Bernanke seems more button-down, academic; I could see him at Microsoft Research easily, but I can’t see Paulson anywhere near that place.

I don’t know about Geithner, and for the life of me I don’t fathom why he hasn’t recommended that Pres Obama get Congress to declare CDO’s and CDS’s null and void. Unless there are foreign policy implications, which there must be — both Blair and Clinton have mentioned their concerns about economic impacts.

But I can’t for the life of me see the VALUE in derivatives.
They’re a form of insurance, but given a completely unregulated environment, they appear to have become a favorite instrument of criminal interests. Then add on the layer of Swiss and offshore private/secret banking, and God only knows WTF is going on.

Josh Marshall just put up a good post, that really cuts to the heart of this mess: who runs the show? Derivative traders, or elected politicians.
I really think the rubber is hitting the road, and that’s the correct question to be asking.

Robert Reich’s “Supercapitalism” kind of poses the same question: who’s in charge? Has finance so completely captured government that it’s choked the life out of democracy and will only continue to exacerbate inequalities? It sure looks like it. But I can’t think of any situation where that kind of outcome is sustainable; a whale that eats up all the krill starves.

See also: “Midas”, the king who invented coinage, and then ’starved to death when everything he touched turned to gold’.

Paulson and his manic traders appear to have a ‘Midas touch’, but they’re starving us, instead of themselves.

Time to declare CDO’s illegal and unenforceable.

It would, however, put these employees on notice that AIG won’t be paying their “hush money”. If they want to stay employed or get revenge, they might go to the counterparties and sell their stories. That information may reveal the existence of an event of default allowing them to make a claim. Or, as I said earlier, it could give them information useful to sue AIG on various grounds. It might also reveal information the SEC, a UK or state or federal prosecutor might use to file criminal charges.

That’s why it’s brinksmanship; it’s a threat to AIG’s continued existence and possibly its top managers’ and board members’ personal assets. Criminal behavior sometimes voids certain insurance cover, meaning there would be less to pay claims from shareholders or other aggrieved parties. Spilling the beans could easily reach to the wider market for these questionable hedges, which AIG would want to avoid. As an aside, these employees would owe a “duty of loyalty” to AIG, but not to the extent of covering up criminal behavior or massive fraud, for example, if any exists.

Bob in HI

But would the revocation of retention contracts really be the first trigger?

good question

are the retention contracts Poland, or Czechoslovakia ???

probably not the analogy AIG wants us to use, but it fits