selise's blog


NYT: A.I.G. Chief Liddy Owns Significant Stake in Goldman

April 17th, 2009 by selise

From the NYT: A.I.G. Chief Owns Significant Stake in Goldman

Edward M. Liddy, the dollar-a-year chief executive leading the American International Group since its bailout last fall, still owns a significant stake in Goldman Sachs, one of the insurer’s trading partners that was made whole by the government bailout of A.I.G.

Mr. Liddy earned most of his holdings in Goldman, worth more than $3 million total, as compensation for serving on the bank’s board and its audit committee until he stepped down in September to take the job at A.I.G. He moved to A.I.G. at the request of Henry M. Paulson Jr., then the Treasury secretary and a former Goldman director.

Details about his holdings were disclosed in Goldman’s proxy statement and confirmed by an A.I.G. spokeswoman, who said they constituted “a small percentage of his total net worth.” Mr. Liddy had already owned some stock in Goldman Sachs before joining its board in 2003.

Had A.I.G. simply declared bankruptcy, the financial institutions doing business with it would have ended up in court, as they did in the case of Lehman Brothers, fighting to get pennies on the dollar for their claims.

Instead, Goldman Sachs received $13 billion of the Federal Reserve’s rescue money to close out various contracts it had outstanding with A.I.G. It was one of the biggest beneficiaries of the government rescue.

Simon Johnson, ex-IMF economist, self-described centrist technocrat writes:

Have we completely lost of sense of what is and is not a conflict of interest? Have we really built a system in which greed fully overshadows responsibility? Is it not time for a complete rethink of what constitutes acceptable executive behavior?

Poor Simon probably didn’t hear about how our President in effect said that organized, bureaucratized torture, including all the things we read about yesterday, was just honorable people doing their jobs in good faith. "Acceptable behavior" is undergoing a redefinition. Kind of like "transparency" I guess.

Back to Simon Johnson because he’s got good ideas about what can be done:

One of our country’s leading corporate attorneys made a telling point to me on Wednesday night, “the only way to control executive behavior is to criminalize it,” i.e., civil penalties do not change behavior – the prospect of jail time has to be on the table. His broader point was that antitrust action can make a difference in today’s world, but only if this includes potential criminal charges.

Let me be very clear on my position vis-a-vis AIG-Goldman and the broader Washington-Wall Street Corridor. I’m not saying that anyone has broken any laws, but rather that laws need to be changed. I’m not even saying that there have been transgressions against the prevailing code of ethics for executives and politicians – although surely we agree that this code needs to be dragged, kicking and screaming, into the 21st century.

x-posted at oxdown

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