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Insurance Leader Advocates Industry Responsibility

lewisr — Thu, 14 May 2009 01:19:57 +0000

Tom Wilson, the chief executive of Allstate Insurance, called for a federal insurance regulator to oversee the regulation of national insurance companies. In an opinion piece, in the New York Times, Wilson owns up to the part that insurance companies have played in the collapse of the financial markets, most prominently AIG.

Insurance companies are not regulated by the federal government, but rather by the states, and in Wilson’s opinion the states do not have the expertise, that a federal regulator would, in recognizing and dealing with possible future risks to the financial markets.

It is most probably reassuring to the American public to have the CEO of one of the county’s major insurance companies providing an insight into a problem that needs fixing, so as to prevent a repeat of mistakes that lead up to our current crisis.

The article was originally published in April and it created plenty of criticism, as one can read in this article in the Chicago Tribune.

Spitzer Says Watch AIG’s Bailouts Not Bonuses

JulesP — Tue, 31 Mar 2009 19:24:55 +0000

New York State’s ex-Governor Eliot Spitzer, who recently was given the nicknamed “Client Number Nine” by the media, spoke out last week on CNN’s Fareed Zakaria Global Public Square (GPS) show, regarding the AIG scandal. Before Spitzer became governor of the empire state and then ruined his career by getting caught in a sex scandal, he was the NY State Attorney General who went after AIG and their accounting methods and shady transactions. Spitzer told GPS that the insurer giant was at the center of the web of transactions that have forced the taxpayers to provide a massive bailout of the U.S. financial system.

AIG is now being kept afloat by U.S. taxpayers and according to Spitzer its woes stem from certain financial practices that he first investigated as the NY attorney general. AIG’s financial tentacles stretch to every investment bank and its collapse came largely from its various financial products such as credit default swaps which most all of went bad after the U.S. housing market went south after 2006. According to Spitzer, the real outrage is not the bonuses recently given to the top executives at AIG, but rather the dynamics between AIG and the financial institutions. Much of the 170 billion given to AIG by the taxpayers is now going to the financial institutions who were the buyers of AIG’s insurance policies which can best be explained as an insurance on mortgage backed bonds.

With the housing market tumbling and foreclosure rates spiking at an alarming rate, those bonds have diminished dramatically. That forced AIG to pay out money to the financial institutions. According to Spitzer, nearly 13 billion dollars alone went to the investment bank Goldman Sachs. Why weren’t any questions asked about this? Why do we need to pay 100 cents on the dollar on those transactions? What would have happened to the financial system had it not been paid? These are the questions that should be pursued.

When Spitzer was Attorney General his inquiries led to the resignation of AIG’s longtime chairman Maurice “Hank” Greenburg back in 2005.

AIG’s 6 Year History of Alleged Fraud

lewisr — Wed, 25 Mar 2009 01:44:14 +0000

Investigations by the New York Attorney General’s office, the Federal Bureau of Investigation, the Securities and Exchange Commission, and the British Serious Fraud Office has disclosed that AIG was guilty of much more serious actions, over the last six years, than the bonus disbursements, and involve several cases of alleged fraud.

To quote Peter Morici, a professor at the University of Maryland School of Business and the former chief economist at the US International Trade Commission, “Clearly this company has had endemic problems and it’d be best if we broke it up and sold it off so others can run its parts.”