Vanity Fair, fresh off of smoking Sarah Palin, has a much more in-depth piece on Joseph Cassano, the man who led AIG’s financial products unit into the toilet.
Cassano, without using the mathematical models of his predecessor, became willing to take on ever more risk, and to apply corporate risk modeling to consumer financial risk, in a very small nutshell.
And AIG CEO Hank Greenberg and the board apparently either didn’t know, or didn’t want to know, what he was doing. Nor did Greenberg’s successor, as, ironically, AIG was downgraded from AAA to AA the day he retired, even while Cassano was adding more subprime loans to his credit default swap portfolio.
And, losing the AAA rating, per a Cassano agreement, required it to start posting collateral on these CDSs. And that’s when trouble really started.
It’s a complicated story, but well worth a read.
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