Thank you for an objective, dispassionate article. It today's world, revisionist history is being produced after only six months! I agree with your conclusion that we should better understand, and manage, what got AIG into their mess in the first place. WRITE YOUR CONGRESSMAN!

Yes, the bailout of AIG was a conspiracy and a travesty, a financial crime of the higest magnitude.

But mostly it has been endlessly bailed out because, as the author notes, China has so much money invested in the company and thus to let it fail would have meant a HUGE blow to the Chinese economy - not just the American economy. Thus the U.S. government decided to placate our new Chinese economic overlords and bailout AIG.

Elliot Spitzer is just desperate to make everyone forget what a slimeball he really is. Enough with all of the armchair quarterbacks pretending to know "what the American people want." It's easy in the cheap seats. The American people made their choice loud and clear. Lead, follow or get the hell out of the way right now. There is just too much at stake. This is a very well-written article.

A fine start, but the gloss begins after the identification of the crux of the problem. This crux was pointed out in the statement, "The immediate problem was that AIG had loaned out much of the stock in its insurance companies portfolio to banks...,"

In real ilfe, if you "loan" something that belongs to someone else, or sell that something, you are guilty of conversion. Conversion, my attorney tells me, is a synonym for theft. Okay, if AIG loaned out stock, which belongs to others (shareholders) they are guilty of the same offense.

All this discussion about derivatives, is at its heart, a discussion about people borrowing other people's stock, "temporarily loaning" this stock to somebody else,
and when the stock's value changes, making a profit on the back of that change.

This is where we need laws to protect us. Shenanigans are part of the human psyche, and are going to occur anytime, and anywhere. The only hope we have, the only protections afforded are in the supreme law of the land. If we are truly a society ruled by law, rather than by a king or queen, then the Law that governs and protects, must be structured so that little kings and queens like AIG, Goldman Sachs, and by extension the Henry Paulsons of the world are not able to game us with their smoke and mirrors.

A Law that protects, that establishes a regulatory framework that provides protection would have also barred good old Bernie Madoff from his little version of borrowing what belonged to others (cash flow from the stock trades), and then making a profit from that cash flow.

Years ago, the Safeway corporation had a shipping warehouse in Richmond, California that burned. As a result of the smoke from the fire, there were numerous claims filed for damages. AIG was the insurance carrier for these general liablity claims. There were so many outraged citizens whose claims were ignored by AIG, that the San Francisco Chronicle did an in-depth investigation and published the results of an internal AIG document.

This document was from the head of the claims department of AIG, and stated something to the effect of, "It is AIG's position to not respond to any claimant, until five attempts were made by the claimant." This was not a directive to either settle or not settle a claim, but simply to stall the process. AIG would not even discuss the merits of the claim, until there were five documented attempts to even file the claim.

During the same era, when I was working as an insurance broker in San Francisco, I had placed worker's compensation coverage for a commercial client (business) with one of the AIG insurance companies. This was back during the heyday of Maurice Greenberg, who is being touted as some great corporate leader today.

But, on October 31, halloween, 1986 a worker at my client's business cut his finger while on the job, and had to go to the hospital for what amounted to $386.00 in stitches and antiseptics. On October 31, 1987, a full year later, my client called me to advise that not only had AIG not paid the $386.00, but that the poor employee was being hounded by a collection agency for this piddling bill that AIG should have paid an entire year before.

My point is that a corporate culture that thinks it can take in money, without having to pay its obligations is an outlaw in its very core. Little surprise, then to discover that AIG took additional liberties with other people's money and stock. And do not think it is okay for the company to "loan" its own stock to others on a temporary, or even permanent basis. They were loaning stock belonging to shareholders. Otherwise, they were loaning stock belonging to corporate officers, who should in no way benefit from a government bailout.

I don't know if this qualifies as a conspiracy, but it sure does smell like rotting fish.

"While no conspiracy theory is needed to explain why Bernanke, Geithner, and Paulson pushed the $85 billion panic button in mid-September, one may be necessary to unravel how a world-class insurance company turned into a near Death Star. Certainly, AIG needed enablers to so permeate the globalized financial system."

The conspiracy at work here is called monopoly capitalism. The conspirators are the government bureaucrats who allowed financial institutions whose primary product is debt to control the economy to the point where we are all held hostage. American government has had a clear responsibility since the Presidency of Teddy Roosevelt to guard against this type of exploitation. Republicans and Democrats are equally responsible for being bought off and enabling the current situation to occur.

zeitgeistmovie.org

if you want a whole slew of conspiracy theories that make a little more sense. the movie from 2007 is a lot better than the 2008 episode

Poor Spitzer. Imagine. He must have made some really bad enemies that his piddly little money transfers where tracked at all. That's what you get for pissing off Wall Street.

Those b@$t@rd$ -- in AIG, Goldman, Lehman , et al -- should end up with far worse ruined reputations. But they won't.

Why not let this bloated, rotting, enorged company go belly-up? I do not care about the rest of the world. That is what sucks in today's economy. We are always having to look after the rest of the world.
I absolutely believe that some kind of hush-hush conversations were going on between Bernanke, Paulson, Geithner (who is inept at best) and anyone else responsible for the bailout.
Why shouldn't we be able to read the exact transcripts from those fateful meetings? Mr.Epstein thinks we should be like children, who get a pat on the head and are told not to worry about anything. The adults at the Fed, the treasury, AIG, will take care of the problem.
I am so tired of the bullsh*t that the media continues to push concerning this problem. Actually you hardly hear it all anymore. The GM CEO has taken center stage, even though he has not done NEAR the damage AIG has wrought.
AIG, the treasury, the fed are all in this together.
And yeah, Eliot Spitzer slept with prostitutes. But he didn't bankrupt the enter world when he did it. Nor did he require billions of dollars to get out of his situation.
If he can find anything that proves the federal agencies and the private companies conspired to rob the American taxpayers, then by all means, I wish him Godspeed.

Having said that, I wonder when we as citizens will wake up and get tired of being f*cked in the ass by rich corporations and basically the wealthy citizens of this country.

Where is the revolution? There is strenght in numbers. Why are we so afraid?

I could also care less about the rest of the world.
All of our moral obligation, empire building and wars are what makes our country weak. But hey what can you do when the Fed sells out the treasury from underneath us. All the bs about free trade good, tariffs bad. Now we have to play by chinas rules because they own a trillion in our treasury. you dont have much leverage with tariffs and human rights when you owe a trillion.
And I could give a crap if spitzer f'd a hooker. So have most of the rest of us

Spitzer should be ashamed to show his face in public
let Alone come forward to speak out on corruption

He Broke laws that He put on the books
and Guilty as sin
walked away without Any legal repercussions

Eliot, maybe you have brain washed your wifey into forgiving and forgetting

as for the rest of us
please crawl back under your rock!!!!!!!!
corruption personified

Where is the revolution? There is strenght in numbers. Why are we so afraid?
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What? Whatching Glenn Beck much? What does that even mean? Do you want to storm the capitol? Should we put you in charge Texas Tiger? What's your plan for fixing this mess? You would have let AIG go under right? And - as for the the 30-40 facts mentioned above that it would have created an even further and deeper global crisis - f it right? Get EM!!!!! What is wrong with you people....As a broad generalization - Southerners are nuts.

The real conspiracy here is saying that "AIG is too big to fail"

What does that mean? Supposedly World financial markets will implode... Why? Oh well, that's too complex to explain.

I call bullshit. AIG isn't that complex. None of their transactions can possibly be so complex that they can't be explained. The truth is their transactions are riddled with fraud and no one who is "in the know" wants to say it. And the books are closed to everyone else (meaning a full scale investigation would be needed to uncover the skeletons).

AIG should fail with GM. Sink 'em, fire all of management, and rebuild.

Fire them all is correct but after that some of them need to spend some time in the gray bar hotel. It is not possible that the billions of dollars being handed on a silver platter to these Wall street crooks was not planned & not something that people shoud not be put into jail for.

It is absolutely true that AIG was too big to fail. The real conspiracy is how they had been permitted to pick their own regulator and write so many credit default swaps for customers who did not even hold the underlying assets. Are you allowed to take out a million dollar policy on your neighbor in whom you have no financial interest? And if you were allowed to, would the rest of the street be able also to take out million dollar policies on the same neighbor?

The push for deregulation - led by Phil Gramm, Alan Greenspan, Robert Rubin and Chris Cox - resulted in very few laws restraining the production and distribution of credit default swaps. As a result, they increased 100-fold in the last eight years.

That is one outrage. Another is the fact that AIG's counterparties should have performed their due diligence on the degree to which AIG was leveraging their capital. The investment banks involved in these transactions have dozens, if not hundreds, of individuals qualified to perform this analysis. To purchase such "insurance" without performing this due diligence flies in the face of fiduciary duty. As such, these CDS holders have no business being bailed out 100 cents on the dollar. I do not know what the ratio should be, but they should not be receiving full value from an investment that they should have known was very risky. Caveat emptor.

As to Hockeydog, you make a number of good points, but you do not understand securities lending. This is a perfectly legitimate activity that generates revenues for many pension funds as well as agent lenders and investment banks. When done properly, it is very low risk. Most securities lenders, however, invest their collateral in very safe Treasuries. AIG invested their collateral in Mortgage Backed Securities, trying to capture a few extra basis points of performance. So not only were they writing multiple policies against mortgage backed securities, they were also investing in it their collateral that would have to be returned to those who borrowed their securities. Over-exposure anyone?

"The question Spitzer does not ask, and which goes to the heart of the issue is: What would have happened if the Fed and Treasury had not acted decisively to bail out AIG after it informed them it was unable to meet its obligations?"

Yeah that is the heart of the matter, isn't it? What made it so imperative that we needed to engage in corporate welfare and increase government authority and power? Someone as educated as yourself surely took some basic economics courses right? The only true correct action to take was to let it fail despite the consequences because we live in a free market society.