The Federal Reserve Bank of New York this week sold $1.3 billion worth of mortgage-backed securities from the Maiden Lane II portfolio it acquired from American International Group in 2008. The once toxic portfolio of AIG assets now has a market value of $15.9 billion. In fact, AIG offered to buy the whole thing back from the New York Fed last week for $15.7 billion but the offer was rejected.
Strong demand for Maiden Lane II assets is good news for the taxpayer. It also has led some to say the panic of 2008 was simply the result of poorly designed mark-to-market accounting rules.
Roddy Boyd, author of the new book Fatal Risk: a Cautionary Tale of AIG's Corporate Suicide says that assessment is flat out wrong. "AIG was about 6 hours from going into eternity," he tells Aaron and Dan in this segment. "AIG was dying and the only reason that there was reflation or increase in demand is that the Fed stepped in, Treasury stepped in aggressively, took over Freddie and Fannie," which has propped up the mortgage-backed securities market.
"An epic, colossal failure of risk management," was the main culprit for AIG's collapse, Boyd argues.. "This was an inside job, they came in early and stayed late to get this done," he says with a sarcastic tone.
<b>Stupidity or Criminal?</b>
In the end, investigators for the SEC and DOJ closed the case without pressing any charges for what happened at AIG. "They just threw up there hands in the end and said a) too complex, b) we can't prove any malice of forethought," Boyd concludes, citing a year of research into regulators' reviews of AIG documents.
Whether or not they're right is still debatable: "What went on in the securities lending portfolio was bumping hard against full disclosure rules," Boyd says.
What is clear to Boyd is AIG executives are guilty of a "heaping helping of stupidity. Levels of stupidity that escape easy metaphor."
<b>Best Thing That Ever Happened</b>
What's even more irritating, some executives directly responsible for bringing AIG to its knees are living happily ever after. "This was the best thing that ever happened to them," as Boyd describes it.
Instead of being ruined, many are still left with the millions they made during the good times, and some are potentially making more money than ever. Win Neuger, who ran AIG's Global Investment Corporation securities lending program and one of those most responsible for AIG's poor risk management, continues to run AIG's asset management arm PineBridge Investments, now owned by Asia-based Pacific Century Group.
- mortgage-backed securities
- The Federal Reserve Bank of New York
- American International Group
- securities lending