Ex-AIG Executive Defends Credit Default Swaps
MARY LOUISE KELLY, host:
One of the key figures in the financial debacle at AIG has been silent since the meltdown at the huge insurance firm. Yesterday, he was called before the Financial Crisis Inquiry Commission.
NPR's Tamara Keith reports.
TAMARA KEITH: Joseph Cassano hadn't spoken publicly in more than two years. He's the former chief of AIG's controversial financial products division. The division has taken much of the blame for bringing down the insurance giant by issuing billions of dollars in credit default swaps - essentially, insurance on bundles of mortgages.
At the hearing, Cassano said the swaps are doing much better now.
Mr. JOSEPH CASSANO (Former Chief of Financial Products Division, AIG): The underwriting standards and the credit risk within these transactions have, to date, been supported and still perform.
KEITH: The problem for AIG and taxpayers was the firms that took out these insurance policies, like Goldman Sachs, demanded payment when the value of their mortgage-backed securities plunged, and AIG didn't have the funds to handle it.
Commission Vice Chairman Bill Thomas asked Cassano this...
Mr. BILL THOMAS (Vice Chairman, Financial Crisis Inquiry Commission): How much money did you get from the federal government?
Mr. CASSANO: For the credit default portfolio? The federal government paid $40 billion.
KEITH: In total, AIG got more than $130 billion taxpayer dollars to help it stay afloat. But a lot of that money was funneled to counterparties, including Goldman Sachs. Cassano said the government could've negotiated a better deal. The commission is likely to dig further into that question today.
Tamara Keith, NPR News, Washington.
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