AIG says if the government won't let them screw over retirees, they won't play

[LiberalArkie]

By Joan McCarter

The latest massive offense the Obama administration has done to Wall Street is to come up with a rule telling financial services companies that their first duty is to their clients. That's such an offensive requirement, Republicans in Congress have even been trying to derail it. Because nothing should stand in the way of profits for Wall Street, including the nest eggs of senior citizens. To prove how awful the whole idea is, American International Group Inc. (AIG) decided they had to sell off, admitting that if they can't screw old people out of money, then why bother?

"It’s a business we are not the best owner of, particularly in the light of potential Department of Labor rules," [CEO Peter] Hancock said Tuesday in a conference call updating investors on AIG's strategy. "With the new DOL rules, that was a big factor in thinking whether this was better owned by somebody independent of us." […]
Hancock said the broker-dealer network earned about $40 million in 2014, yet consumed a "disproportionate amount" of AIG's compliance cost. The sale was part of a larger plan the insurer announced Tuesday to simplify operations and improve results, as the New York-based company faces pressure to break up from activist investor Carl Icahn.

What can you do with a measly $40 million that has to be earned honestly? What the new rule says is that instead of pushing their own retirement products, or those that they've been commissioned to sell, financial advisors have to consider what's best for the portfolio of their client. That's something that you would kind of take for granted that's already happening, if you didn't know better. Now you do know better.

A White House Council of Economic Advisers analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors—or about $17 billion per year in total. To demonstrate how small differences can add up: A 1 percentage point lower return could reduce your savings by more than a quarter over 35 years. In other words, instead of a $10,000 retirement investment growing to more than $38,000 over that period after adjusting for inflation, it would be just over $27,500.

Snip

http://www.dailykos.com/stories/2016/1/27/1475833/-AIG-says-if-the-government-won-t-let-them-screw-over-retirees-they-won-t-play

[Ghost Dog]

1. Break it up, identify the fraudsters & jail them

after relieving them of their ill-gotten gains + interest, legal costs & damages.

[Nye Bevan]

2. I don't think there are any allegations of lawbreaking here.

I think Hancock is just saying that AIG is not interested in being in that business given the new requirements. So there are no "ill-gotten gains", no criminal charges that people could be imprisoned for, and no mechanism for forcibly breaking up the company (but AIG seems to have decided to do that voluntarily).

[Ghost Dog]

3. There should be. "Mis-selling" is too lenient a concept

where clients are being deliberately lied to & exploited for corporate & personal gain.

[hobbit709]

4. Break out the tumbrel, dust off the blade.

[Octafish]

5. Tim Geithner made AIG whole, 100-cents on the dollar. Capisce?

Timothy Geithner and AIG-Gate

The World’s Greatest Insurance Heist

by ELLEN BROWN
FEBRUARY 08, 2010
CounterPunch

EXCERPT...

Geithner has been under the House microscope for the decision of the New York Fed, made while he headed it, to buy out about $30 billion in credit default swaps (over-the-counter derivative insurance contracts) that AIG sold on toxic debt securities. The chief recipients of this payout were Goldman Sachs, Merrill Lynch, Societe Generale and Deutsche Bank. Goldman got $13 billion, roughly equivalent to its bonus pool for the first 9 months of 2009. Critics are calling the New York Fed’s decision a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been put through bankruptcy proceedings in the ordinary way. In a Bloomberg article provocatively titled “Secret Banking Cabal Emerges from AIG Shadows,” David Reilly writes:

(T)he New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.

The beneficiaries of the New York Fed’s largesse got paid in full although they had agreed to take much less. In a November 2009 article titled “It’s Time to Fire Tim Geithner,” Dylan Ratigan wrote:

(L)ast November . . . New York Federal Reserve Governor Tim Geithner decided to deliver 100 cents on the dollar, in secret no less, to pay off the counter parties to the world’s largest (and still un-investigated) insurance fraud — AIG. This full payoff with taxpayer dollars was carried out by Geithner after AIG’s bank customers, such as Goldman Sachs, Deutsche Bank and Societe Generale, had already previously agreed to taking as little as 40 cents on the dollar. Even after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, he still had the audacity to claim the “sanctity of contracts” in the dealings with these companies like AIG.

Geithner testified that the Fed’s hands were tied and that the bank could not “selectively default on contractual obligations without courting collapse.” But if it was all on the up and up, why all the secrecy? The contention that the Fed had no choice is also belied by a recent holding in the Lehman Brothers bankruptcy, in which New York Bankruptcy Judge James Peck set aside the same type of investment contracts that Secretaries Paulson and Geithner repeatedly swore under oath had to be paid in full in the case of AIG. The judge declared that clauses in those contracts subordinating other claims to the holders’ claims were null and void in bankruptcy.
“And notice,” comments bank analyst Chris Whalen, “that the world has not ended when the holders of contracts are treated like everyone else.” He calls the AIG bailout “a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States.”

CONTINUED...

http://www.counterpunch.org/2010/02/08/the-world-s-greatest-insurance-heist/

The very model of the Corporation, AIG still does zip for humanity, other than use it.