American Conspiracies - Jesse Ventura [103]
Before he resigned, Greenberg had appointed a guy named Joseph Cassano to run AIG’s Financial Products Unit (FPU) and given him all the rein he wanted. Cassano had gotten his start at Drexel Burnham Lambert under “junk bond king” Michael Milliken, who ended up going to prison. A number of Drexel’s employees, Cassano included, just moved over to the FPU, where they started dealing in securities called “credit default swaps.” Same scam, same players, simply a different name for leveraging worthless paper to sell to clueless investors. These swaps, like collateralized-debt obligations or CDOs, are so complicated that even a lot of CEOs can’t make heads or tails of them. Cassano established dozens of companies, many offshore, to keep all the transactions off AIG’s books and out of sight of regulators here and at the “London casino.” Nobody inside the company apparently noticed things on the accounting books like “Lichtenstein Subsidiary Profit, $10 billion.”25 The government’s Office of Thrift Supervision was supposed to be keeping an eye on the FPU, but it thought the swaps were “fairly benign products”—because that’s what AIG told them. Meantime, the FPU was transforming these into the world’s biggest bet on the housing boom, and until the bottom fell out of the sub-prime mortgage scam, they made a ton of money doing it.26
Hank Paulson was still Goldman’s CEO in 2004, when he went to the SEC and petitioned to have lending restrictions relaxed for the five leading investment banks.27 Then Goldman went “berserk with lending lust. By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities—a third of which were subprime—much of it to institutional investors like pensions and insurance companies. And in those massive issues of real estate were vast swamps of crap.”28 Crap that permitted Goldman to pay each employee roughly $350,000 a year. Moving on to become treasury secretary, Paulson declared in 2007 that the American economy was the “strongest in decades.”29
When our gas prices spiked to $4-and-up a gallon in the summer of 2008, resulting in all the outcry about needing to drill for more oil offshore, the reality was that Goldman Sachs—the biggest trader in the energy derivatives market—had led the way by issuing high analyst predictions for the price of oil (a Goldman guy in 2008 talked up $200-a-barrel) and buying up oil futures. They could move the markets by stimulating other investors to jump in, and then selling oil back to them at the higher price. “By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.” Once again, a Depression-era law had been lifted (thanks to Goldman) that previously kept commodities markets in check. “Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent.”30 There was no oil shortage, except when it was convenient for Goldman and its cronies.
There was only one rub to it all: Early in 2008, Cassano got fired after the huge losses of his arm of AIG became known. Black September wasn’t far away. This crisis wasn’t about the little guy. It was a bailout of these financial giants unprecedented in our history, because they were “too big to fail.” “For the money spent on subsidizing the industry, the government could have bought out every single outstanding mortgage in the country. Plus, every student loan and everyone’s health insurance. And on top of that, still have trillions of dollars left over.”31 That’s what a former managing director at Goldman Sachs, Nomi Prins, is laying out in her muckraking book, titled It Takes a Pillage.
The behind-the-scenes story of the taxpayer-funded bailout is still emerging. I’d like to have been a fly on the wall when Hank Paulson called