Joe Cassano, the real villain of the financial collapse?

[Kelly the Dog]

Really fascinating article in next month's Vanity Fair written by Michael Lewis about one guy who could have been personally responsible for the AIG collapse.

 

http://www.vanityfair.com/politics/feature...8?currentPage=1

[Magox]

Great Read!

 

Cassano may have been the main culprit for the AIG collapse, but if he wasn't there, then someone else would of most likely have made similar decisions that he had made. It is the culture of Wall Street, to make as much money as possible, and when people are making the sort of money that they are making, and you are constantly competing for profits and bonuses and etc. then it is natural to turn a blind eye to the risks, specially when that is the environment that you reside in. The ratings companies didn't help out either, all it did was reinforce their ignorance towards the risks at hand.

 

Btw, what a freakin Maniacal douchebag!!

[John Adams]

Great Read!

 

Cassano may have been the main culprit for the AIG collapse, but if he wasn't there, then someone else would of most likely have made similar decisions that he had made. It is the culture of Wall Street, to make as much money as possible, and when people are making the sort of money that they are making, and you are constantly competing for profits and bonuses and etc. then it is natural to turn a blind eye to the risks, specially when that is the environment that you reside in. The ratings companies didn't help out either, all it did was reinforce their ignorance towards the risks at hand.

 

Btw, what a freakin Maniacal douchebag!!

 

It's funny how similar what you wrote, and what Cassano did, is similar to what Lewis wrote about in Liar's Poker. The lesson there was similar. If some group within an investment house starts making money hand over fist, that group gets to run wild. Of course, that group always fails eventually, usually in a blaze of shame.

[TPS]

Great Read!

 

Cassano may have been the main culprit for the AIG collapse, but if he wasn't there, then someone else would of most likely have made similar decisions that he had made. It is the culture of Wall Street, to make as much money as possible, and when people are making the sort of money that they are making, and you are constantly competing for profits and bonuses and etc. then it is natural to turn a blind eye to the risks, specially when that is the environment that you reside in. The ratings companies didn't help out either, all it did was reinforce their ignorance towards the risks at hand.

 

Btw, what a freakin Maniacal douchebag!!

YOu are correct--if not Cassano, it would've been [place name here].

[Kelly the Dog]

YOu are correct--if not Cassano, it would've been [place name here].

 

I don't necessarily believe that's true. Not that there aren't other Cassano's around in the same business and other businesses, but if it wasn't Cassano there it could easily have been a guy much more like his predecessors that wouldn't at all have allowed this to happen, or wouldn't have been nearly as unwitting about it. To me, the article was saying that it just so happened that the worst kind of guy possible to be in this position at this one critical time was in that position. Not that anyone else would have done similar things.

[Magox]

I don't necessarily believe that's true. Not that there aren't other Cassano's around in the same business and other businesses, but if it wasn't Cassano there it could easily have been a guy much more like his predecessors that wouldn't at all have allowed this to happen, or wouldn't have been nearly as unwitting about it. To me, the article was saying that it just so happened that the worst kind of guy possible to be in this position at this one critical time was in that position. Not that anyone else would have done similar things.

So why did it happen at Citigroup, or BofA, or Bear Stearns, or Merril Lynch or.......

 

Trust me when I tell you this, it is the "culture" not the individual that is more to blame.

[Kelly the Dog]

So why did it happen at Citigroup, or BofA, or Bear Stearns, or Merril Lynch or.......

 

Trust me when I tell you this, it is the "culture" not the individual that is more to blame.

 

First of all, as a general rule, with few exceptions, I don't trust anything said directly after the two words "trust me", so I'm not going to trust you.

 

Secondly, we weren't really talking about the culture, we were talking about the fact that this one particular guy, was in this one essential position, at this one crucial time, at this one singular corporation, with one particular personality trait, which was diametrically opposed to his predecessor, and his lone decisions and business personality had an enormous impact on the world's financial situation.

 

You and TPS said if it wasnt him it would have been someone else doing it. I disagreed, and said that's not necessarily true, if most anyone else was in that one job at that one time in that one corporation it very likely would have been different, regardless of the culture or the fact there are indeed some other guys like Cassano.

[GG]

First of all, as a general rule, with few exceptions, I don't trust anything said directly after the two words "trust me", so I'm not going to trust you.

 

Secondly, we weren't really talking about the culture, we were talking about the fact that this one particular guy, was in this one essential position, at this one crucial time, at this one singular corporation, with one particular personality trait, which was diametrically opposed to his predecessor, and his lone decisions and business personality had an enormous impact on the world's financial situation.

 

You and TPS said if it wasnt him it would have been someone else doing it. I disagreed, and said that's not necessarily true, if most anyone else was in that one job at that one time in that one corporation it very likely would have been different, regardless of the culture or the fact there are indeed some other guys like Cassano.

 

A lot (99%?) of the story's sources came from AIG FP, so they have a self interest in pushing their side and put themselves in the epicenter. They are probably more right than that Polish programmer who takes "credit" for creating the financial collapse. The truth is that AIG FP played a central role, but they weren't the epicenter, because the CDS contract volume was huge and there's no way that AIG insured all of them, or even a majority.

 

Lewis does a good job of bringing the story to the surface, yet, it ignores the fact that a lot of other companies wrote protection or insured the subprime issues. He also glosses over the most important part - AIG got out of the game in 2005. The real bad stuff came in 2006 and beyond. The short sentence that "Citicorp decided to keep the stuff on its balance sheet" is a lot more damning than anything Cassano did. He recognized the risks earlier on, but made the fatal mistake in agreeing to post collateral if AIG were downgraded.

 

Little conversation is made of Imperial Spitzer's strongarming the board to fire Greenberg in 2005, which started the cascade. If Greenberg isn't let go, AIG doesn't get downgraded, he probably reigns in the risk sooner, and AIG doesn't have to post collateral as Bear & Lehman collapse.

[Magox]

First of all, as a general rule, with few exceptions, I don't trust anything said directly after the two words "trust me", so I'm not going to trust you.

 

Secondly, we weren't really talking about the culture, we were talking about the fact that this one particular guy, was in this one essential position, at this one crucial time, at this one singular corporation, with one particular personality trait, which was diametrically opposed to his predecessor, and his lone decisions and business personality had an enormous impact on the world's financial situation.

 

You and TPS said if it wasnt him it would have been someone else doing it. I disagreed, and said that's not necessarily true, if most anyone else was in that one job at that one time in that one corporation it very likely would have been different, regardless of the culture or the fact there are indeed some other guys like Cassano.

I don't give two sh*ts that you trust me or not, it is a phrase that is used to attempt to inspire confidence in what that person is trying to say. Without getting too much into detail, I've worked with a couple very large financial brokerages in my career, and I can tell you that this is the norm.

 

One of the big reasons why I quit working for these places was because of the greed factor. I was very good at what I did, I cared about my clients and I knew how to sell. Every day, the managers were always pushing for more, it didn't matter what the market was doing, it was always about buying more, with total disregard to timing and the client. If you didn't produce, it would cost you, either in stature, money or job advancements.

 

I am fortunate to have been able to do well for myself and my clients to have been able to open up my own brokerage. It is a small operation, but I have personal relationships with my clients that I enjoy and I believe that I am doing well for them, which makes me feel good about what it is that I am doing.

 

If Cassano wasn't there, most likely some other jack ass would have been in charge and would of also turned the blind eye to the risks they faced. If you don't believe that, well, I will just chalk it up to that you are either naive or ignorant to the matter, which doesn't make you stupid

[Kelly the Dog]

A lot (99%?) of the story's sources came from AIG FP, so they have a self interest in pushing their side and put themselves in the epicenter. They are probably more right than that Polish programmer who takes "credit" for creating the financial collapse. The truth is that AIG FP played a central role, but they weren't the epicenter, because the CDS contract volume was huge and there's no way that AIG insured all of them, or even a majority.

 

Lewis does a good job of bringing the story to the surface, yet, it ignores the fact that a lot of other companies wrote protection or insured the subprime issues. He also glosses over the most important part - AIG got out of the game in 2005. The real bad stuff came in 2006 and beyond. The short sentence that "Citicorp decided to keep the stuff on its balance sheet" is a lot more damning than anything Cassano did. He recognized the risks earlier on, but made the fatal mistake in agreeing to post collateral if AIG were downgraded.

 

Little conversation is made of Imperial Spitzer's strongarming the board to fire Greenberg in 2005, which started the cascade. If Greenberg isn't let go, AIG doesn't get downgraded, he probably reigns in the risk sooner, and AIG doesn't have to post collateral as Bear & Lehman collapse.

Thanks for the additional analysis.

 

I think there is a difference, however, in saying that this one guy is mostly responsible for the collapse -- versus -- this one company was the reason for the whole collapse, which I don't think Lewis was doing, nor was he minimizing the other things going around at the same time or later, which you seem to be implying.

 

As I understood it, he wasn't implying AIG FC was the only, central or even major problem, just that if this one thing that happened there with this guy at this time didn't happen, a great deal of the other problems like the ones you mentioned might not have been caught in the avalanche.

 

The Spitzer example is probably another of those same examples, but I know nothing of the intricacies of that issue and how diabolical or incompetent (or both) that Spitzer's decision was. But when I was reading the article and got to that point, I thought it was clear that if Greenburg wasn't replaced at that time this scenario wouldn't have played out as it did either.

[TPS]

A lot (99%?) of the story's sources came from AIG FP, so they have a self interest in pushing their side and put themselves in the epicenter. They are probably more right than that Polish programmer who takes "credit" for creating the financial collapse. The truth is that AIG FP played a central role, but they weren't the epicenter, because the CDS contract volume was huge and there's no way that AIG insured all of them, or even a majority.

 

Lewis does a good job of bringing the story to the surface, yet, it ignores the fact that a lot of other companies wrote protection or insured the subprime issues. He also glosses over the most important part - AIG got out of the game in 2005. The real bad stuff came in 2006 and beyond. The short sentence that "Citicorp decided to keep the stuff on its balance sheet" is a lot more damning than anything Cassano did. He recognized the risks earlier on, but made the fatal mistake in agreeing to post collateral if AIG were downgraded.

 

Little conversation is made of Imperial Spitzer's strongarming the board to fire Greenberg in 2005, which started the cascade. If Greenberg isn't let go, AIG doesn't get downgraded, he probably reigns in the risk sooner, and AIG doesn't have to post collateral as Bear & Lehman collapse.

The point made was that AIG helped start the game, and with all the money being made no one wanted it to end. So, when AIG "got out of the (subprime) game" (almost) everyone else was willing to fill the gap.

 

Your last point is conjecture, especially since AIG "got out of the game" the same year that Greenberg was forced out. IMHO, the crash would've happened, and AIG would've gone down, whether Greenberg was there or not.

[Magox]

The point made was that AIG helped start the game, and with all the money being made no one wanted it to end. So, when AIG "got out of the (subprime) game" (almost) everyone else was willing to fill the gap.

 

Your last point is conjecture. If AIG got out of the game the same year that Greenberg was forced out, how does he make a difference?

It's simple, he doesn't. This sort of risktaking behavior was going on back in the 80's and 90's at AIG and to quote the article :

 

In a financial system that was rapidly generating complicated risks, A.I.G. F.P. became a huge swallower of those risks. In the early days it must have seemed as if it was being paid to insure against events extremely unlikely to occur—how likely was it that all sorts of companies and banks all over the globe would go bust at the same time?

[GG]

The point made was that AIG helped start the game, and with all the money being made no one wanted it to end. So, when AIG "got out of the (subprime) game" (almost) everyone else was willing to fill the gap.

 

Your last point is conjecture, especially since AIG "got out of the game" the same year that Greenberg was forced out. IMHO, the crash would've happened, and AIG would've gone down, whether Greenberg was there or not.

 

To you & Kelly - they were there at the start of the game, but so were the monolines (MBIA, AMBAC, etc), as were the "FP" subsidiaries of the other insurers and investment banks. The reason that AIG stands out is that they got caught in the nature of the swaps contracts they wrote, which I was told was probably tax driven at the time of issue (no independent verification).

 

The conjecture of the direct line from Greenberg's forced exit is fairly sound - if Greenberg doesn't get pushed, AIG isn't downgraded to AA, Cassano doesn't need to modify contracts to provide collateral when things turn sour. If there are no collateral calls in 2008, AIG is still the world's largest insurance company in 2009.

[1billsfan]

Really fascinating article in next month's Vanity Fair written by Michael Lewis about one guy who could have been personally responsible for the AIG collapse.

 

http://www.vanityfair.com/politics/feature...8?currentPage=1

 

 

Wow, you really really really smart guys are just a tad bit behind the curve...

 

http://www.stadiumwall.com/index.php?showtopic=85328&hl=

 

 

[Kelly the Dog]

Wow, you really really really smart guys are just a tad bit behind the curve...

 

http://www.stadiumwall.com/index.php?showtopic=85328&hl=

 

 

Just a tad.