The retail investors seem hot and bothered over AIG shares today. They’re up more than 33% just after noon. AIG has been on a tear since Aug. 5, when its shares jumped 63%. Volume surged by 1600%, to 134.9 million from the prior day’s 7.9 million. (No typo.) We still don’t know exactly what stoked flood of interest, although the conventional wisdom was that a short-squeeze and retail-led pile on ahead of AIG’s earnings got it going. Since AIG’s Aug. 4 closing low, the government-controlled insurer is up about 150% just before noon today.
There was a little news on the company that might explain some of the renewed attention to the shares. For instance, AIG named a couple executives for its U.S.-based life insurance and retirement services businesses. But that was part of an ongoing leadership reshuffle, and it hardly seems important enough to drive the shares up to where they are.
The only other thing we can find is a Bloomberg interview with AIG’s recently named CEO Robert Benmosche. The money quote: “We believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well.” Not exactly a hugely reassuring comment for shareholders.
Just one note of contrarian context on the AIG share surge. A 150% move in a couple weeks seems impressive. But don’t forget that the company’s stock underwent a 1-for-20 reverse split in early July. Applying that algebra to AIG’s shares at their recent peak in September 2008 would have made one share worth $455.20. From that perspective, AIG long-term stock chart is still decidedly ski jump-shaped, with shares having lost roughly 93% of their value.
Saturday, August 22, 2009
Thursday, August 13, 2009
Fearing the whole financial system could collapse, the government loaned A.I.G. $85 billion, which it used to pay off more than a dozen big banks that were on the other side of those derivatives trades.Jail for AIG executives would be better, and the govt taking over AIG's assets completely-- but, this is better than the status quo.
The banks may have needed the money, but they certainly didn’t deserve it. They knew or should have known the risks they were taking when they did business with the highflying A.I.G. But they were paid up anyway because it was believed that widespread failures would be costlier to the economy than the cost of the bailout.
Goldman Sachs got $12.9 billion. Deutsche Bank got $11.8 billion. Bank of America got $5.2 billion, Morgan Stanley $1.2 billion and JPMorgan Chase $400 million, and so on. Since then, the government’s commitment to A.I.G. has swelled to $173 billion.
Now, to try to repay some of the bailout money, A.I.G., which is nearly 80 percent owned by the government, is selling off some units and planning initial public offerings in others. And according to a recent analysis by The Wall Street Journal, several of the banks that were paid off in the first go-round, together with lawyers and accountants, could collect close to $1 billion in advisory and underwriting fees to move those efforts along. (snip)
It seems safe to say that a reasonable person would find that galling. When it comes to A.I.G., the big banks have clearly already got theirs. Now they get more? A.I.G. must be restructured for taxpayers to have a shot at recouping some of the bailout billions.
High Frequency Trading:
Scamming TARP and other outrageousness:
... large brokers and funds can buy and sell a stock for the same price and still make 0.5 cents. Do that a million times a day and the money adds up. Or maybe do it 8 billion times. It requires powerful computers, complicity of the exchanges (because the exchanges get paid a lot), and highly proximate computer connections. Literally, the need for speed is so important that to play this game you have to have your servers physically at the exchange. Across the river in New Jersey is too slow. Forget Texas or California. This is a game played out in microseconds.More on Goldman-Sachs and HFT here.
Scamming TARP and other outrageousness:
“During the week of the AIG bailout alone, Mr. Paulson and [Goldman Sachs CEO Lloyd] Blankfein spoke two dozen times … far more frequently than Mr. Paulson did with other Wall Street executives,” the Times reports.
The revelation is sure to fuel further claims that the $700-billion Troubled Assets Relief Program, or TARP, passed by Congress last fall with the support of both major presidential candidates, Barack Obama and John McCain, was “gamed” by Paulson in order to help out his colleagues at Goldman — and preserve his own reputation, which he made as the bank’s CEO.
Paulson spoke with Goldman’s CEO in an official capacity a total of 26 times before the treasury secretary was granted an “ethics waiver” that allowed him to be in far closer contact with his former employer than would have otherwise been allowed, Reuters notes.
In the five days after Paulson received his “waiver,” on Sept. 16, 2008, he spoke with Goldman’s Blankfein another 24 times.
But Paulson may have done more than help his former employer get bailed out of bad debts — he may have helped orchestrate the demise of his former employer’s competitors.
“Indeed, Mr. Paulson helped decide the fates of a variety of financial companies, including two longtime Goldman rivals, Bear Stearns and Lehman Brothers, before his ethics waivers were granted,” the Times writes.
Sunday, August 9, 2009
The former top executive of embattled insurance giant AIG, Maurice “Hank” Greenberg, agreed to pay 15 million dollars to settle accounting fraud charges, US authorities said Thursday.
The Securities and Exchange Commission said Greenberg, chairman and chief executive at AIG before its spectacular meltdown, will pay disgorgement and penalties to settle a probe into “numerous improper accounting transactions that inflated AIG’s reported financial results between 2000 and 2005.”
The company’s former chief financial officer Howard Smith meanwhile will pay 1.5 million dollars to settle related charges, the SEC said in a statement.
The SEC said it filed the charges and settlement in US District Court for the Southern District of New York.
Greenberg, 84, had led the American International Group for four decades before he was ousted amid an accounting probe in March 2005, ahead of the near collapse of the insurance behemoth during a global financial crisis stemming from a US home mortgage meltdown.
It was taken over by the US government last year in a massive 170-billion-dollar bailout.
The SEC alleged that Greenberg and Smith were responsible for “material misstatements that enabled AIG to create the false impression that the company consistently met or exceeded key earnings and growth targets.”
The SEC had charged AIG in 2006 with securities fraud and improper accounting, and the company had settled the charges by paying disgorgement of 700 million dollars and a penalty of 100 million dollars, among other remedies.
“Without admitting or denying the SEC’s allegations,” Greenberg and Smith had consented to a judgment directing them to pay the penalties, the SEC said.