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Joseph Cassano: the man with the trillion-dollar price on his head

From The Sunday Times, Times Online – a fascinating look into the world of AIG and Joseph Cassano. 

Joseph Cassano: the man with the trillion-dollar price on his head

By Tim Rayment

Excerpt: This is Joseph Cassano. He is the multimillionaire trader accused of bringing down the insurance giant AIG — and with it the world’s economy. So is he a criminal, an incompetent or a scapegoat?

They were frightened for a long time, then suddenly they were angry. For millions of Americans, anxiety about a jobless, debt-laden future turned to disbelief when it emerged that AIG, the company at the centre of the world’s financial crisis, was handing out £300m in bonuses. It was the superpower’s Sir Fred moment. Just as Britain reacted with fury to the disclosure that Sir Fred Goodwin’s pension pot had been doubled as his bank neared collapse, so the US was shocked. The death threats came soon after. “I want them dead!” said one of a stream of messages that caused AIG staff to travel in pairs, park in well-lit areas, and dial 911 if followed. “I want their spouses dead! I want their children dead! I want their children’s children dead! I want the earth upon which they have walked salted so nothing will ever grow again!”…

Can one man in London really be to blame for the collapse of capitalism?

Until now, the economic crisis has been seen as a giant intellectual error, and AIG’s multimillionaire employees in England were simply the people who made the biggest mistakes. The first to own up to misjudgment was Gordon Brown’s friend Alan Greenspan — once so revered in his role as America’s central banker that to be photographed with him was as flattering as being seen now with President Obama. “I have found a flaw,” said Greenspan, referring to his free-market philosophy, after the banks started falling over. “I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Others have repeated this innocent-sounding explanation for the wrecking of so many lives…

There is, however, an alternative reading. This says that the furore over bonuses is a convenient distraction from the real causes of the crisis, which go to the heart of how the world is run. There is dishonesty in this collapse, on a scale that is almost too vast to comprehend. There are conflicts of interest in American finance and politics that make our own, dear House of Lords look like beginners. There are frauds so large, and so long-standing, that it can be hard to see them for what they are. And all these things were allowed to thrive in an intellectual atmosphere that tolerated no dissent. This reading is optimistic for those who believe in free markets, even if it is pessimistic for the US. “Capitalism has not failed,” says Bernard-Henri Lévy, the French philo-sopher. “We have failed capitalism.” The thesis can be tested through Patient Zero.

The official version is that Joseph Cassano, who occupies the stucco-fronted house near Harrods, brought down a safe and stable company — and by extension, the world — with incompetent gambles. “You’ve got a company, AIG, which used to be just a regular old insurance company,” Obama explained during a recent TV appearance. “Then they decided — some smart person decided — let’s put a hedge fund on top of the insurance comp-any, and let’s sell these derivative products to banks all around the world.” Ben Bernanke, the chairman of the Federal Reserve, adds: “This was a hedge fund, basically, that was attached to a large and stable insurance company.”

Cassano, who ran AIG’s financial-products division in London, “almost single-handedly is responsible for bringing AIG down and by reference the economy of this country”, says Jackie Speier, a US representative. “They basically took people’s hard-earned money, gambled it and lost everything. And he must be held accountable for the dereliction of his duty, and for the havoc he’s wrought on America. I don’t think the American people will be content, nor will I, until we hear the click of the handcuffs on his wrists.”

This account is as satisfying as it is easy to understand…

But the official version overlooks many things, including episodes of fraud at AIG that go back at least 15 years. It fails to explain why Public Enemy No 1 was allowed to leave the company on generous terms, with a retainer of $1m a month and up to $34m (£23m) in bonuses. And it does nothing to tell us why other big companies, whose profits looked as smooth and certain as AIG’s in the good times, are also fighting for survival.

When Forbes published its first list of the world’s biggest companies in 2004, AIG ranked third, after Citigroup, the dying bank, and General Electric, the industrial giant now drowning in its own debt. If you can think of a risk to insure, AIG was there: the company even made plans to survive a nuclear holocaust. It was built into a behemoth by one of the 20th century’s corporate titans, Hank Greenberg. Less famous than the other insurance legend, Warren Buffett, Greenberg gave shareholders a return of 14% a year, and was equally loved. “I just think you are the most stupendous, unbelievable person in the entire industry, the entire world,” one investor told an annual meeting, without irony…

What does all this have to do with Joseph Cassano?…

Full article here.


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