Economics
The Joe Cassano guide to escapology
Jul 1st 2010, 17:18 by A.P. | LONDON
IF ANYONE was going to get ripped apart in front of the Financial Crisis Inquiry Commission, it should have been Joe Cassano. He ran the unit that, as this week's paper puts it, was at the epicentre of the earthquake at AIG. Stories about his dictatorial management style have sullied his reputation. His outlandish pay (he raked in consultancy fees of $1m a month after being sacked by the insurer) make him an easy target. And he showed not an ounce of contrition. So why did he survive the hearing on June 30th with comparative ease?
First, he had very low expectations to surpass. Mr Cassano would have had to slam one of his inquisitors into the wall to live down to his image as the biggest villain of the crisis. By sounding helpful, even obsequious, he came across far better than expected. His only mistake was not to smile more: another veteran of congressional testimony reckons that manic grinning is the only way to avoid coming across as a criminal in press photos.
Second, he sat next to his ex-boss. If you've wrecked a company, it is useful to have the person who failed to control you alongside. Thanks to Tony Hayward's inept performance in front of Congress last month, it's even better if he has an English accent. Martin Sullivan, AIG's former chief executive, was on the same panel as Mr Cassano and helpfully admitted that it was only in 2007 that he became aware of the firm's toxic pile of credit-default swaps (CDSs). "That's stunning,"? responded Phil Angelides, the FCIC's chairman, in perhaps the most animated aside of the day.
Third, and much more importantly, there was the Goldman Sachs factor. Mr Cassano denied that there was a credit problem with the CDS contracts that AIG wrote. In his version of history, the problems at AIG stemmed from costly collateral calls by its counterparties, of which Goldman was the most aggressive. Goldman's defence, reiterated in another day of FCIC hearings on July 1st, were that its margin calls reflected market prices at the time. That argument is easily drowned out by the furore over AIG's eventual payouts to its counterparties, in which Goldman and others were made whole; and more generally by the toxicity of Goldman's image right now. Mr Cassano could not have chosen a better lightning rod to channel questioners' anger. When Mr Angelides went on television after the hearings on June 30th he made some half-hearted criticisms of Mr Cassano but seemed much more interested in Goldman. There are legitimate questions to be asked about the world's least-favourite bank, to be sure. But faced with the man behind perhaps the biggest failure of risk management in the crisis, it is perverse for the (sensible) risk-management practices of another bank to end up under the spotlight. Mr Cassano can count himself very lucky indeed.
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(Sarcastic mode: ON)
It was an "immaculate calamity".
The people to blame for the meltdown are the taxpayers, as they didn't pay enough in taxes to cover all of the great deals being done on Wall Street.
We need to find a way to punish the taxpayers for thier actions.
Let's raise the retirement age, lower payouts, and raise the Social Security tax.
That'll fix 'em!
(Sarcasm mode: OFF)
Regards
PS. we need to lower the corporate tax rate.
Act I: Squander billions of OPM while making hundreds of millions for yourself. Sounds like good gig. Act II: But...you're called to answer. Uh-oh...Oh, thank goodness, it's only verbally not financially. Wew! Act III: Now just look good on the tee-vee & blame the vampire squid for the temerity of believing that a contract is a contract. Act IV: Walk off into the sunset unblemished, unbowed, reputation intact, & stuffed to the gills w/ $. Epilogue: Tune into CNBC to hear about the awful treatment from those dumb, congressional populists.
2nd play: Run for Prime Minister--good TV presence, successful City financial career, plenty of campaign money, and impeccable spin master credentials.
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