NOT THE SHARPEST KNIFE IN THE DRAWER: AIG Honcho Cassano Clueless About His Cluelessness
In his testimony about credit-default swaps before the Congressional Financial Crisis Inquiry Commission, Joseph Cassano, former CEO of AIG’s financial products division – “the epicentre of the earthquake at AIG,” as per The Economist’s succinct yet vivid description – divulged what he thought his former employer’s biggest mistake was. No, it wasn’t allowing banks to “use AIG as a dumping-ground for derivatives risks they didn’t want to hold,” so that when half a trillion dollars of mortgage-related securities AIG insured against default were downgraded to junk status, the federal government had to come to the rescue with a $180 billion bailout.
Crain’s New York reports that “[t]o hear it from [Mr.] Cassano … the bailed-out insurer made a big mistake by declining to keep him around after realizing what a mess he'd created”:
Mr. Cassano [said] AIG could have avoided a bailout had it retained him to bargain with banks who were demanding more cash as the mortgage market sank. …
“I would have negotiated a much better deal for the taxpayers than what the taxpayers got,” he said.
What's more, Mr. Cassano insisted that AIG's massive derivatives portfolio was sound, even though it led directly to the company's near collapse. … horrendously wrong, he said AIG suffered from a “liquidity issue” – a short-term cash squeeze – rather than a longer-lasting “credit issue.” …
Mr. Cassano added that that his interpretation of the events surrounding AIG “may differ from popular wisdom.”
It also differs from reality. Either Cassano is delusional, or he is the living embodiment of the Dunning-Kruger Effect.
Comments