Tip of the Iceberg
Friday, 01/8/2010 - 9:00 am by Eliot Spitzer, William Black, and Frank Partnoy | 13 CommentsIn a December New York Times op-ed, we called for the full public release of AIG email messages, internal accounting documents and financial models generated in the last decade. Today, a Bloomberg story revealed that under Timothy Geithner’s leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
The emails requested by Issa span five months beginning in November 2008. The Fed’s request to suppress this information would not have come to light without the release of these emails. If five months of emails reveal information key to our understanding of the aftermath of the crisis, imagine what 10 years of emails could contribute to our understanding of its causes. We believe the AIG emails and other internal company documents are the ‘black box’ of the financial crisis. If we understand the failure of AIG, we will more fully understand the crisis - what caused it and more importantly how to prevent it from happening again.
As such, today we are renewing our request for the full public disclosure of all AIG documents. We believe the government should put these documents on-line, thereby establishing an open-source investigation that would allow journalists and citizens the opportunity to piece together the story of what happened at AIG and in so doing more fully understand what happened in the broader financial collapse. AIG — and more specifically its credit-default swaps exposure — was an important contributing factor to the crash of the financial markets. What sets this company apart from others that played a role in the crisis is that we, the taxpayers, own it. As we noted in our original piece, US taxpayers bought 80% of AIG when they bailed the company out with $180 billion last year. As owners of the company, taxpayers are also owners of AIG. As owners of the company we can demand the release of these documents.
The taxpayer’s stake in AIG is held by the A.I.G. Credit Facility Trust, whose three trustees are Jill M. Considine, a former chairman of the Depository Trust Company and a former director of the Federal Reserve Bank of New York; Chester B. Feldberg, a former New York Fed official who was chairman of Barclays Americas from 2000 to 2008; and Douglas L. Foshee, chief executive of the El Paso Corporation and chairman of the Houston branch of the Federal Reserve Bank of Dallas. We call on these three officials (interestingly all former Fed officials) to immediately release the documents we request.
The value of these documents, if it were ever in doubt, was certainly proved by today’s revelations.
Release the emails.
Eliot Spitzer is the former governor of the state of New York. He blogs for Slate and contributes guest posts to New Deal 2.0.
Roosevelt Institute Braintruster William K. Black is an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist and was a senior financial regulator.
Frank Partnoy is the George E. Barrett Professor of Law and Finance and is the director of the Center on Corporate and Securities Law at the University of San Diego. He is one of the world’s leading experts on the complexities of modern finance and financial market regulation.
Hooray for Eliot Spitzer, William Black, and Frank Partnoy for their article on AIG emails owned by the taxpayers.
Posted by Jon Claerbout | January 7th, 2010 at 6:23 pm
I thought they were owned by UBS.
Posted by PlatoCan'tRepent | January 8th, 2010 at 7:40 am
Geithner evaded taxes…potentially mail fraud as well…
He’s treasury secretary.
Eliott Spitzer paid for sex (estimates are that about 80%+ of American men have done this at some point-it’s legal in some countries and at least one state). Spitzer had to resign as governor of NY. As far as we can tell Spitzer is a dedicated, intelligent public servant and family man.
Spitzer was the only politician with guts to investigate Wall Street.
Why were federal officials snooping in Spitzer’s bank account?
Who set up Spitzer?
Spitzer for President 2013.
Posted by wdm223 | January 8th, 2010 at 8:01 am
Spitzer not only paid for sex but had the girl cross state lines - THAT IS ILLEGAL and he should be in jail !!!! His Daddy got him out of jail time so don’t start promoting him for President, or any elected office.
Posted by Mookie | January 8th, 2010 at 9:14 am
“The emails today detail the efforts of the Fed to suppress the disclosure of payments made to banks such as Goldman, Sachs Group for reimbursement of their credit-default swap exposure.”
This statement is frankly untrue and another example of Mr. Spitzer’s habit of shading the truth. Or perhaps Mr. Spitzer didn’t read the emails or doesn’t understand how the Exchange Act works. The disclosed emails discuss the efforts of the Fed to remove details of the payments that they felt would be damaging to their ongoing attempt to unwind AIG’s derivative book. The disclosure of the payments was not suppressed - any person with access to EDGAR who read the December 24 Form 8-K and attachement knew precisely what payments AIG had made and for what purposes, the only detail not included was the name of the particular derivative counterparties.
The Exchange Act standard for what needs to be disclosed is whether the information is material, i.e., whether a reasonable shareholder would consider the information important in deciding how to vote or whether to purchase or sell securities. The standard is not whether the information would be useful in maligning entities that would give the maligners political or journalistic traction or whether the information will hurt the registrant’s ability to do business going forward. What was material to a reasonable investor was the payments themselves, not the identities of the payees. If SocGen or GS had novated their swaps to Joe’s Bait, Tackle & Securities and the payments went there instead, what difference would that make to AIG investors? None.
Posted by Jame Dexcente | January 8th, 2010 at 10:24 am
Sorry Mookie:
When I look at the endemic corruption of the Crony Capitalist system, the suffering of taxpayers without a voice and the pending insolvency of the US as a result of the looting….
In that context I see Spitzer to be as pure as driven snow and as the singular choice - a man with drive, experience, intelligence. By comparison to the entire political class, Spitzer has a virtually unblemished track record.
If you are looking for ideal moral purity you must wait ’til the next life.
In this life Spitzer is the answer.
Posted by wdm223 | January 8th, 2010 at 10:28 am
I can’t take Spitzer seriously. He should have the self-respect to resign from seeking the moral high ground on any matter. He should consider himself unworthy to handle issues of correctness or morality.
Spitzer, take a bow.
Posted by JR | January 8th, 2010 at 10:52 am
JR:
“Let he (or she) without sin cast the first stone”
I’m not talking about Spitzer for Pope or Rabbi…not even for a Chair in Moral Philosophy at Princeton.
Spitzer is the only politician that could take on and defeat the Crony Capitalist plunder.
You have no answer to that.
It is inevitable that Spitzer will come back in a very big way…it’s inevitable.
Posted by wdm223 | January 8th, 2010 at 11:03 am
What Spitzer, Black, and Partnoy are saying is exactly right: we live in a democracy, and are entitled to information. Somehow, elites have gotten the impression that they get to decide what the masses get to know. This culture is insidious, and I can’t help but think that Mr. Geithner set this tone when he was at the NY Fed.
The authors of this piece are sending a clarion call on behalf of the American public. We have to know what sent the economy over the cliff, and we have a right to get the full story of what happened at a company that we own.
Posted by Nellie | January 8th, 2010 at 12:51 pm
Nellie:
I’m with you.
The root cause of the GFC was the lack of knowledge as to where the risk (and losses) were located, and the result was a catastrophic seizure of the system.
Now we seem to be finding out that it was Geithner and Blankfein who were “hiding the ball” from the public and the markets.
Compounding this fraudulent failure to disclose material non-public information was that the fact that Goldman continued to trade and profit from that inside information.
Don’t forget that:
1. it was Goldman director Ed Liddy who was running AIG during this crucial period and the fact that
2. the Chairman of the NY Fed, former Goldman CEO Stephen Friedman, used the information ordered withheld by his President Geithner to making a killing in GS stock for his personal account.
Posted by wdm223 | January 8th, 2010 at 1:21 pm
I’m very glad that Eliot Spitzer had the chutzpah to get back quickly into the swim. We desperately need his skills and intelligence (and his chutzpah!) right now–I only wish he were in a major position in the Obama administration.
On the topic of his use of prostitution: I want there to be a serious movement to decriminalize and regulate prostitution, for public health reasons and for income tax reasons, if for no other. If his wife can forgive him, I sure can.
Posted by JWF | January 8th, 2010 at 1:48 pm
AIG is not the cause of collapse. They just are the oneness consolidation that finally fell. From a tipping point in overshoot in population with global resource depletion. The derivative debt market is up to 700 trillion dollars. How can you have a future when the resource is depleting?
The collpase is on, peak oil is here, wake up America and learn the designing of life called permaculture, and track the element s towards eco village. That is the only thing that can save you.
‘
Billions of people are about to die and know one even has a clue to the inevitable.
Posted by Ecosutra | January 8th, 2010 at 2:22 pm
There has been one person that the Wall Strreet crony capitalists are scared of—Spizter. The GS crowd put out the word to get him and the wiretaps, bank account sleuthings, sub rosa IRS investigations, covert homeland security operations turned up the fact that he paid for sex a few times.
In early 2008 Spitzer was hot on the trail of the complicated subprime CDO/CDS financial scam, and was in Washington testifying on that issue (2/18/08 House Fin Svcs Subctee) the day after the prostitute set him up, in fact.
So the “set-up Spitzer” scheme was successful in derailing his investigation, and gave GS the time to finish up their huge scam.
As far as I’m concerned, the fact that all the work put in to bring Spitzer down resulted in only digging up the fact he paid for sex tells me he’s clean!
Posted by wdm223 | January 8th, 2010 at 2:40 pm