
The ‘Greatest Corporate Failure in American History’ - walterbell
http://www.vice.com/read/hanks-for-the-memories-0000513-v21n12
======
BookmarkSaver
In a typical murder trial, one of the classic, basic requirements for
prosecution is to determine motive. This article flat out admits that they
have no idea what the motive is. Apparently this strange manipulation was not
significantly more profitable than not performing it.

I have no illusions about the morality of the players involved in the
financial crisis. But this article is trash. Presumably by publishing a piece
in a popular news site, the author is at least claiming to have done some
researched and gained at least some understanding of the topic beyond what a
typical layman might achieve. If that is the case (and I seriously doubt it
is) then the only rational conclusion that I can form from this article is
that they might not have been engaging in illegal activities purely for
profit. People aiming to earn billion dollar payouts and playing with the
volatile fire that is public opinion don't engage in needless games and risks
"just to fuck with us".

Again, I don't doubt at all that something seriously wrong was happening, but
this article should never have made it past an editor.

~~~
makerman1982
Isn't the motive clear form the article? The Fed and US adept of Treasury were
completely controlled by ex Goldman execs -- the motive was to find a
scapegoat to stick the debt with, while Goldman got off getting paid 100cents
on the dollar. Goldman equity was less than what they would have lost on AIG
CDS so AIG bankruptcy meant instant Goldman bankruptcy.

~~~
yummyfajitas
Why does an ex-Goldman exec have any motive to help Goldman? Do people
generally feel the desire to improperly help their former employers?

~~~
blfr
Why do people develop loyalty toward the groups they join? Evolution?
Reciprocity? Indoctrination?

Either way, not unusual. Happens all the time in the military ("no such thing
as an ex-marine"), around football clubs ("once a red, always a red")...
pretty much everywhere there are humans, especially men in high-pressure
environments.

------
walterbell
From a 2010 Bloomberg article on hearings about AIG,
[http://www.bloomberg.com/news/articles/2010-01-28/secret-
ban...](http://www.bloomberg.com/news/articles/2010-01-28/secret-banking-
cabal-emerges-from-aig-shadows-david-reilly), _" When unelected and
unaccountable agencies pick banking winners while trying to end-run Congress,
even as taxpayers are forced to lend, spend and guarantee about $8 trillion to
prop up the financial system, our collective blood should boil."_

------
thejaredhooper
> Reading news coverage of all this five and a half years later is kind of
> like reading old infatuation-era emails with a much older ex-boyfriend you
> never think about—but who in hindsight was kind of a pedophile.

Well that's one way to remind me that this is a VICE article.

------
absherwin
This completely ignores the perspective of those who bailed-out AIG. Whether
their ultimate assessment of the ramifications of AIG's bankruptcy was correct
(Which is important to understand for future crises) they feared the collapse
of the financial system.

Bair's question: "Were the others really in danger of failing?" seemed
obviously true to everyone involved in the crisis at the time. When AIG
failed, Lehman had just declared bankruptcy and overnight lending rates
between banks had sky-rocketed. Washington Mutual and Wachovia were on the
brink of failure. Goldman and Morgan were both sufficiently dependent on the
short-term funding markets that they could have been rendered illiquid next.

Looking in from the outside, it's easy to see this as insanity. All they
needed to do was trust each other and most of the institutions would have been
fine. But they lacked sufficient transparency to know which wouldn't be. While
we can all imagine better solutions, making those things happen takes time.
Put yourself in Bernanke's, Geithner's and Paulson's shoes. You can do
something that will lead to be pilloried in the press or risk watching a
repeat of the great depression with some probability you can't estimate.

~~~
astazangasta
The other perspective (mine) is that everyone of these 'institutions' should
have failed. These were poisonous organizations, criminal parasites. We would
all be better off had we simply allowed them to burn to death in the fire of
their own making. Then we rebuild our financial system in a way that makes
sense, devoid of the influence of the criminals who caused all the trouble.

~~~
occamrazor
There are two problems with this course of action:

1\. Companies depend completely on an efficient credit infrastructure. They
buy on credit even more than consumers. Shutting off the financial system,
even for a short time, effectively means shutting off production.

2\. To rebuild the financial system one needs domain expertise. The people
with the expertise are those who work in financial institutions. Purging the
elites has never worked (E.g. Mao and the Cultural Revolution, the US in Iraq,
Mugabe, ...)

~~~
api
#2 is a very important principle that spreads across all kinds of areas and
domains. The top of the pyramid almost by definition tends to monopolize
domain-specific talent, therefore the only revolutions that ever work are
those that _convince the elite_ rather than those that purge them.

Luckily elites are just human beings, not shape-shifting reptiles from space,
and can be convinced with rational arguments and/or human empathy in the same
way and to the same extent anyone else can.

------
ck2
Pretty sure in American history there are corporations that have knowingly,
literally killed people because they knew the side-effects of their products,
if not immediately, over time.

Tobacco industry comes to mind and lying to congress scott-free. There is also
the dumping of toxic chemicals into water sources and rivers, etc. which
happens to this day.

So while it was the biggest financial and government oversight failure,
credit-default swaps unlikely literally, directly killed people.

What's worse is that little to nothing has changed and it could all happen
again given enough time.

~~~
dsr_
Chiquita Banana, which changed its name from United Fruit, had the CIA train
troops to overthrow a democratically elected government. Literally killed
people? Yes.

~~~
xacaxulu
Was that the same operation that used a battalion of US Marines? Might have
been Dole, but I think Smedley Butler was the Officer in Charge.

See the
[https://en.wikipedia.org/wiki/Banana_Wars](https://en.wikipedia.org/wiki/Banana_Wars)
Banana Wars

------
Shivetya
When the government gets involved just expect the law to be ignored. We saw
this with the auto manufacturer bailouts as well. Those in power make their
decision and then find means to execute it and redirect the ire. Washington is
all about power and manipulation of the public's outrage.

------
6stringmerc
For a minute before I clicked the link I wondered if this was about Enron. I
mean, there are a few 'greatest' failures. Pretty good write-up though with
its particular perspective.

~~~
finance-geek
See top-10 bankrupcies:
[http://content.time.com/time/specials/packages/article/0,288...](http://content.time.com/time/specials/packages/article/0,28804,1841334_1841431,00.html)

Enron's bankruptcy was "only" 67billion. The largest bankruptcy to date has
been Lehman's, which was shy of 700billion.

AIG's bankruptcy would be over a trillion PLUS would lead to a domino of
derivatives-driven bankruptcies across counterparties including Goldman Sachs
and Deutsche Bank.

------
banku_brougham
Terrible reporting. Caroms from one innuendo to another, very stingy with
verifiable facts. The goal of the author seems to be rage, not sharing
information.

