Even more oddly, the public explanation of A.I.G.’s failure focused on the credit-default swaps sold by traders at A.I.G. F.P., when A.I.G.’s problems were clearly broader. There was the mortgage-insurance unit in North Carolina, United Guaranty, that had taken on all sorts of silly risks in the past two years, lost several billion dollars, and replaced their C.E.O. There were the fund managers at A.I.G., the parent company, who had blown nearly $50 billion on trades in subprime mortgages—that is, they had lost more than A.I.G. F.P., whose losses stood around $45 billion. And there was a pattern: all of this stuff had happened since 2005, after an accounting scandal forced C.E.O. Maurice “Hank” Greenberg to resign. Greenberg, who had headed A.I.G. since 1968, was a bullying, omnipotent ruler—one of those bosses who did not so much build a company as tailor it to his character and render it incapable of being run by anyone else. After he was forced out, Greenberg said, “The new management wanted to prove that they could continue to grow without former management” and so turned a blind eye to all sorts of risks. So how come most of the senior management at A.I.G. was left in place by the U.S. Treasury after the bailout? Why were officials, both public and private, so intent on leading others to believe all the losses at A.I.G. had been caused by a few dozen traders in this fringe unit in London and Connecticut?
I had no idea, was busy doing other things, and had no special interest in Jake DeSantis’s predicament. I listened politely, made my excuses—and went back to whatever it was I’d been doing. But then, on March 19, the new C.E.O. of A.I.G., Edward Liddy, went to Washington to testify. The story broke—or, rather, rebroke, as it had been reported two weeks earlier, without stirring much notice—that A.I.G. F.P. had just shelled out $450 million in bonuses to the 400 employees of A.I.G. F.P., including to Jake DeSantis. It must have been an otherwise slow news day because all hell broke loose, in a way it hadn’t before and hasn’t since in this financial crisis. The perception was that the very same people who had made these insane, greed-driven decisions that might cost the U.S. taxpayer $182.5 billion were still paying themselves big bucks! An exchange between C.E.O. Liddy and Florida congressman Alan Grayson captured the spirit of that moment:
GRAYSON: Mr. Liddy, you said before that there’s 20 or 25 people who were involved in the credit default business. What are their names, please?
LIDDY: I don’t have their names at my disposal, sir. GRAYSON: Well, I’m sure you remember a few of the names. I mean, they did cause your company to crash.
LIDDY: You know, I’ve been at the company, as you know, for six months. I don’t know all the people that were in AIG F.P., and many of them are gone.
GRAYSON: Well, there or gone, it doesn’t really matter. I want to know who they are. Names, please.…
LIDDY: If it’s possible to provide you the names, we will. We will cooperate with you.
GRAYSON: That’s good, but I want to know the names that you know right now.
LIDDY: I don’t know them, sir.
GRAYSON: Not a single one. You’re talking about a group, a small group of people who caused your company to lose $100 billion, as you sit here today, you can’t give me one single name.
LIDDY: The single name I would give you is Joseph Cassano, who ran …
GRAYSON: That’s a good start. You already gave that name. Give me another name.
LIDDY: I just don’t know them. I do not know those names. I don’t have them all at my command.
GRAYSON: Well, how can you propose to solve the problems of the company that you’re now running if you don’t know the names of the people who caused that problem? … I would expect you’d at least know more than one name. How about two names? Give us one more name.
LIDDY: I’m just not going to do that, sir, because that will provide—that’ll be the—that could be a list of people that we could do—individuals who want to do damage to them could do that. It’s just not …
GRAYSON: Well, listen, these same people could now be working right now today at Citibank. Is it more important to protect them, the ones who caused the $100 billion loss, or protect us? Which is more important to you right now?