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« Bailout Comedy Video: The Fly Presents Asshat Of The Month: Ken Lewis | Main | The Mother Of All Irony: Playboy Magazine Targets The Daily Bail. We Stand Accused Of Having Fake Boobs »
Monday
Mar022009

Bailout AIG Videos: Using 8-Year-Olds For A National Marketing Campaign Will Generally Come Back To Bite You In The Ass

I present these AIG commercials with some commentary.  They were annoying enough when AIG was still a viable insurance company, now that they've failed and are actually engaged in stealing from your kids, we need new words to describe the visceral loathing we feel.  Several more of these commercials are inside including a satirical copy.

It's so painful for taxpayers we can't even laugh properly.  The squalor is presented below in numbered format.

1) Any company whose national marketing was built around obsessive 8-year olds discussing anything, deserves prima facie ridicule for insulting our inteligence.

2) Now add that the company in question, AIG, is a financial company and that they used these fiscal whiz-kids specifically to scare adults into switching all their investment and retirement products to AIG.  Doubly Insulting.

3) Then the company in question goes bankrupt less than 2 years later from its own poor investments.  That's supposed to be the hilarious reward for those of us offended by these ads.  Possibly the greatest irony that coincidence could ever create, right.  Not so fast.  Read #4, #5 #6 and #7.

4) It is revealed that the company in question, AIG, fucked up so extra-ordinarily that taxpayers might have to lend them some cash while they sell some businesses.  But taxpayers are assured there will be no losses.  Less funny.

5) It is revealed that the company in question, AIG, needs the loan increased to $150 billion and the terms weakened because they can't really sell any of their golden assets.  The type of funny where you realize the joke is on you.

6) It is revealed that the company in question, AIG, lost $61 billion in 3 months and now they really need the loan terms modified plus $30 billion more of that borrowed money from your kids.  The type of funny where your colon makes the e. coli rumbling noise.

7) It is revealed that the company in question, AIG, was saved primarily to protect Goldman Sachs.  And that the former CEO of Goldman Sachs, Henry Paulson, is the one who made this decision while he was serving as Treasury Secretary of the United States.  The type of funny that sends people to withdraw cash, buy shotguns and ammo, stockpile food and bury gold in their backyards.

 

For a primer on AIG click here.  A dozen of the best background pieces all in one link.

 

 

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Reader Comments (23)

I hate you AIG! Die you thieves! You have stolen so much money from us. Enough is enough!
Mar 2, 2009 at 1:18 PM | Unregistered CommenterSanta Monica Monster
@santa monica

easy monster. enjoy the videos. they are hilarious and should help ease the pain.
Mar 2, 2009 at 2:26 PM | Registered CommenterDailyBail
@ DailyBail

These videos are very funny, but the crook company cause the entire financial markets to collapse again today. The DOW is sitting at 12 year low at 6,767. AIG is stealing money by the minute. This makes me so sick I want to throw up. So on behalf of all taxpayers: Screw you AIG! I hate you you thieves!
Mar 2, 2009 at 4:02 PM | Unregistered CommenterSanta Monica Monster
@Santa Monica Monster

"This makes me so sick I want to throw up."

You mean you haven't thrown up already. You must have some serious sea legs. I vomited when Senate passed the Emergency Economic Stabilization Act of 2008 on October 1, 2008. At that point, I knew it was inevitable the House would waffle and follow suit. Well done Bush/Obama/McCain! You have personally screwed Americans for generations to come. Congratulations are also in order for the GBP (Democrat/Republican-Grand Banking Party). Your retirements are secure and you can shed your "public servant" clothing and go back to being the morally bankrupt lobbyists the majority of you really are. Excuse me, the nausea has me on the verge of vomiting again.
Mar 2, 2009 at 4:38 PM | Unregistered Commenterspideydouble
First off: An apology to the Kid. Playboy has yanked its blog entry regarding your alleged connection to the Koch klan. Looks like Hugh's crew screwed up. I went with their piece. For that, and for what I wrote, I was incorrect. Hope you will accept the apology in kind. (Never liked writers who put their screw ups at the end of a piece. A writer makes the error. Admit it up top.)

Regarding AIG, in the Feb. 28 edition of the Times (not always the greatest rag), Joe Nocera did an excellent job of explaining the blatant stupidity that epitomized that company for the past decade. Pure greed, indifferent regulation since Clinton/Rubin and including Cheney/Pitt/Cox, and the irrational behavior of Greenspan and the rest of the Randian-Uncle Miltie blind followers. With a hat tip to Mr. Nocera, read it and understand what's going on at AIG (in which I have never invested), that it stinks, and that there's little we can do except bail them out unless, of course, we really want to see things get difficult:

"When you start asking around about how A.I.G. made money during the housing bubble, you hear the same two phrases again and again: 'regulatory arbitrage' and 'ratings arbitrage.' The word “arbitrage” usually means taking advantage of a price differential between two securities — a bond and stock of the same company, for instance — that are related in some way. When the word is used to describe A.I.G.’s actions, however, it means something entirely different. It means taking advantage of a loophole in the rules. A less polite but perhaps more accurate term would be 'scam'.

"As a huge multinational insurance company, with a storied history and a reputation for being extremely well run, A.I.G. had one of the most precious prizes in all of business: an AAA rating, held by no more than a dozen or so companies in the United States. That meant ratings agencies believed its chance of defaulting was just about zero. It also meant it could borrow more cheaply than other companies with lower ratings.... Unlike many of the Wall Street investment banks, A.I.G. didn’t specialize in pooling subprime mortgages into securities. Instead, it sold credit-default swaps.

"These exotic instruments acted as a form of insurance for the securities. In effect, A.I.G. was saying if, by some remote chance (ha!) those mortgage-backed securities suffered losses, the company would be on the hook for the losses. And because A.I.G. had that AAA rating, when it sprinkled its holy water over those mortgage-backed securities, suddenly they had AAA ratings too. That was the ratings arbitrage...

"Why would Wall Street and the banks go for this? Because it shifted the risk of default from themselves to A.I.G., and the AAA rating made the securities much easier to market. What was in it for A.I.G.? Lucrative fees, naturally. But it also saw the fees as risk-free money; surely it would never have to actually pay up. Like everyone else on Wall Street, A.I.G. operated on the belief that the underlying assets — housing — could only go up in price...

"That foolhardy belief, in turn, led A.I.G. to commit several other stupid mistakes. When a company insures against, say, floods or earthquakes, it has to put money in reserve in case a flood happens. That’s why, as a rule, insurance companies are usually overcapitalized, with low debt ratios. But because credit-default swaps were not regulated, and were not even categorized as a traditional insurance product, A.I.G. didn’t have to put anything aside for losses. And it didn’t. Its leverage was more akin to an investment bank than an insurance company. So when housing prices started falling, and losses started piling up, it had no way to pay them off. Not understanding the real risk, the company grievously mispriced it.

"Second, in many of its derivative contracts, A.I.G. included a provision that has since come back to haunt it. It agreed to something called 'collateral triggers,' meaning that if certain events took place, like a ratings downgrade for either A.I.G. or the securities it was insuring, it would have to put up collateral against those securities. Again, the reasons it agreed to the collateral triggers was pure greed: it could get higher fees by including them. And again, it assumed that the triggers would never actually kick in and the provisions were therefore meaningless. Those collateral triggers have since cost A.I.G. many, many billions of dollars. Or, rather, they’ve cost American taxpayers billions.

"The regulatory arbitrage was even seamier. A huge part of the company’s credit-default swap business was devised, quite simply, to allow banks to make their balance sheets look safer than they really were. Under a misguided set of international rules that took hold toward the end of the 1990s, banks were allowed use their own internal risk measurements to set their capital requirements. The less risky the assets, obviously, the lower the regulatory capital requirement.

"How did banks get their risk measures low? It certainly wasn’t by owning less risky assets. Instead, they simply bought A.I.G.’s credit-default swaps. The swaps meant that the risk of loss was transferred to A.I.G., and the collateral triggers made the bank portfolios look absolutely risk-free. Which meant minimal capital requirements, which the banks all wanted so they could increase their leverage and buy yet more “risk-free” assets...

"A.I.G. sold something called 2a-7 puts, which allowed money market funds to invest in risky bonds even though they are supposed to be holding only the safest commercial paper. How could they do this? A.I.G. agreed to buy back the bonds if they went bad. (Incredibly, the Securities and Exchange Commission went along with this.) A.I.G. had a securities lending program, in which it would lend securities to investors, like short-sellers, in return for cash collateral. What did it do with the money it received? Incredibly, it bought mortgage-backed securities. When the firms wanted their collateral back, it had sunk in value, thanks to A.I.G.’s foolish investment strategy. The practice has cost A.I.G. — oops, I mean American taxpayers — billions.

"Here’s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would 'blow up,' and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing. It would be funny if it weren’t so awful."
Mar 2, 2009 at 4:53 PM | Unregistered CommenterMark
@mark

You and I came to agreement yesterday before Playboy pulled their story. So we're good, but thanks for apologizing anyway. I can promise you it felt bizarre to be accused of being in a nefarious network with individuals and groups of which I had never heard.

As for the Playboy pull, I wish they would offer a public apology instead, for the remaining readers who think we might be associated.

Here's an AIG squirrel with about a dozen background pieces. It's a good resource. Nocera's peice is inside.

12 Outstanding AIG background articles from all over the web. All in 1 link:

http://sqworl.com/?i=6edd1b
Mar 2, 2009 at 5:19 PM | Unregistered CommenterDailyBail
Grand Mama always said the truth will be here when the world is on fire......You lit up their world and you're still standing. AIG stands on borrowed legs, as does most of the finance sector. Now get back to work! Uncle Sam needs a capital injection....
Mar 2, 2009 at 5:23 PM | Unregistered CommenterAin't Bullshittin'
@ Mark

So nice to see you frequenting the site and changing your tune regarding the Kid. The Kid seems to have a great handle on the current situation, and it's nice to see a little humor injected into the fleecing we are witnessing first hand. All of this information is pretty tough to stomach and the general public has no clue about the magnitude of this problem. The Kid's references to excrement of all types in relation to this disaster seem very appropriate!

I like your recommendation of Lowenstein's books, which do tell well of why we are in the current predicament. Not long now and we won't be able to pay the interest on our interest. Oh, joy. We've got a long tough road ahead and I'm afraid it ends with the US bankrupt.

@ DB

Keep up the great work! Lot's of interest from some pretty influential places so far. No publicity is bad publicity.
Mar 2, 2009 at 5:25 PM | Unregistered CommenterInWestor
Playboy has removed the story. They not only got it completely wrong about us but it seems they didn’t do their research about the Koch and FreedonWorks claims.

To all those who believed in me, thanks.

And to my critics who actually believed I was part of a nefarious network of right-wing astroturf sites, get your heads examined for tinfoil.

And special thanks to Barry Ritholz from The Big Picture for posting my response yesterday. It means a lot that you stood up for me.


The Daily Bail

Publisher and Writer
Mar 2, 2009 at 5:41 PM | Unregistered CommenterDailyBail
@DB

"The type of funny that sends people to withdraw cash, buy shotguns and ammo, stockpile food and bury gold in their backyards." Wow DB, that's the hyperbole I'd expect from our friend Bridge Loan to Nowhere. He'd suggest a Mossberg and I'm sure he's also willing to show you how to hotwire an Armalite.

Regrettably from inside the institutional buy-side I'm not presently able to provide any more optimistic guidance. Long-only investors still have nowhere to hide and I suspect that any medium-term rally in equities, IG corporates or commodities will prove to be a dead cat bounce; I fear that this will be a very long, very hard slog. My first-lien secured guys tell me that the CRE market is about to crack and the anecdotal evidence provides support for their thesis; the problems are with the same vintages and I don't need to tell you what that means for already battered pension funds and insurance companies.

Real money investors, for the most part, have relatively less exposure to Level III opacity, are largely marked to market and have been forced by regulators to make the necessary provisions however, in truth, there is material exposure to ABS of all types. Risk managers and treasurers are increasingly terrified of the NAIC and of the possibility of externally imposed ERISA remedies. Unfortunately the pain hasn't been limited to financials or structured product and with bid-ask spreads large enough to drive a truck through raising liquidity can compound the problem; the grassroots reality of the deflationary death spiral.

I think that you believe in the complete annihilation of all stakeholders but, as I’ve written in the past, senior, unsecured is one of the last ramparts between us and the caves. I understand the Darwinian flush argument but I’m concerned about the blowback if the banks, insurance companies, private equity firms, hedge funds and irresponsible mortgage borrowers all simultaneously face the financial firebombing of Dresden. Ironically in the pursuit of expediting Schumpeter's creative destruction it may be the obliteration of much of the existing financial architecture that bursts the most dangerous bubbles yet created; that of the USD and the UST. I’ll first need to do some ashtanga if I’m going to contemplate that seismic event.

Normally I buy fear and sell greed but there’s little visibility with respect to the salvageable tangible equity supposedly created in the last ten years. We may not yet have taken a large enough impairment and the Bernanke-Geithner piecemeal approach reminds me of the slow moving train-wreck in Argentina in the 90’s. Unfortunately our tickets have been punched, this ride has few intermediate stations at which to disembark and the door opens fleetingly. It doesn't pay to be a hero.

You were wise to internalize the pleasure of gathering the fresh eggs from the chicken coop, working the tractor and milking Bessie’s teats. Let’s continue to put our faith in curiosity, the free mind, the belief in good taste and the belief in the human race but, in the future, those skills may serve you well.
Mar 2, 2009 at 5:50 PM | Unregistered CommenterInside the Buy-side Bail
When it hit the fan, they were still running these commercials. I thought it would be funny if when the one kid says, "My parents are with AIG" the other kids just blessed themselves.....

And what about WAMU? Remember those commercials with the real bankers roped off in the basement?? Downright Prophetic.
Mar 2, 2009 at 6:38 PM | Unregistered Commentermark mchugh
@ Mark

i checked out your site. you are an excellent writer and thinker. post a link to your blog here on this comment section so readers can check you out.

just be aware that after you put up a URL a 2nd verification page comes up where you have to type in letters, etc. many people miss the 2nd page and the post gets lost.
Mar 2, 2009 at 8:10 PM | Unregistered CommenterDailyBail
@inside the buy-side bail

great comments. when i get a few minutes i will respond in kind. hilarious.

something about a firebomb in dresden excites me, dunno why.
Mar 2, 2009 at 8:13 PM | Unregistered CommenterDailyBail
"Can AIG do something about this traffic"

Why! Yes! Yes they can! They'll be no need for cars in the post industrial Armageddon.
Mar 2, 2009 at 8:38 PM | Unregistered CommenterJohn S
Tangible equity as defined in the near future may best be described as salt, propane, and ammo. Depression is not even becoming as a definition of this mess...that implies that you have memories of better days. Anyone working for the past 15 years has seen wages remain flat or decrease. The only folks who have good memories are prior RE agenst, Loan Officers, and bankers. The rest of us working stiffs remember them driving new cars and living in the now vacant McMansions. What we are coming into is akin to a rebirth. We will be reborn into a new economy that will mirror those seen in the dark ages or new frontier of the wild west. Laugh or sigh all you want....prepare or regret your lack there of down the road. Unless we all get government cheese....It's every man, woman, or child for themselves.
Mar 2, 2009 at 8:56 PM | Unregistered CommenterAin't Bullshittin'
@inside the buy side

one of the benefits of the insanity that comes from running this joint is that i get to make the decisions. so i hereby decide tonight that your career as a financial journalist needs to begin soon. as in now. so when you see your comment posts turned into main journal entries soon at least you will understand.

innocent bystanders please look out because 'mr. inside the buy-side' is here to stay. and his thoughts do not often take into account the possibility for collateral damage.

the truth can not and will not account for the reaction that inevitably follows.

how's that work for you, future thought leader.
Mar 3, 2009 at 12:59 AM | Unregistered CommenterDailyBail
@Inside the Buy-side Bail

"I think that you believe in the complete annihilation of all stakeholders but, as I’ve written in the past, senior, unsecured is one of the last ramparts between us and the caves. I understand the Darwinian flush argument but I’m concerned about the blowback if the banks, insurance companies, private equity firms, hedge funds and irresponsible mortgage borrowers all simultaneously face the financial firebombing of Dresden."

Two words. Bombs away.

If there is anything left, we can rebuild. Otherwise, well, we can start from scratch.
Mar 3, 2009 at 2:25 AM | Unregistered Commenterspideydouble
Ok... Bernanke in Capitol Hill right now and AIG is the main topic. They are griling B-52 for all the AIG aid and the screw up. What a disaster we have with this massive "never-ending black hole" as you call it Mr. Daily Bail.
Mar 3, 2009 at 10:48 AM | Unregistered CommenterSanta Monica Monster
Ok..Market update--As you know the whole AIG mess is not only sucking up all the taxpayers bailout money, but causing a major damage to the markets in general. The AIG thieves have cause the recent maket collapse and as you know a lot of us here are involved with the markets and want to talk financial here. Your posts (DAILY BAIL) have been awsome as far as exposing some of the companies like GE, Bank of America, ect.. that the research you have put out has helped us greatly in dealing with their stock in the markets. I have saved a lot of money by reading your post. For example I saw your alarming report on GE and I ran to my computer and sold ALL my GE stock around $15. Now the stock is trading at $7. Anyway, thank you for all your posts, but at the end of the day I want to make some money from this mess and your informative reports helps us just do that.
Thank you again Daily Bail!!
Mar 3, 2009 at 11:11 AM | Unregistered CommenterSanta Monica Monster
@monster

very kind words, thanks.

i want to know exactly where all this aig money is going.

i have suggested to henry and john at clusterstock that they file suit under the freedom of information act to find out EXACTLY to whom the cash is going.

as taxpayers we have the basic right to know where our children's money is going.

i believe a disproportionate amount is going to 85 broad street and Goldman Sachs.

i will be posting more on this later. but the figure I have been told by someone at goldman is $45 billion.
Mar 3, 2009 at 12:00 PM | Unregistered CommenterDailyBail
And what is so bothersome about Goldman getting all this cash is they hedged very late in the game with AIG.

They got spooked in mid 2007 and suddenly hedged a whole lot of their soon to be worthless assets with AIG.

My point is that Goldman likely knew at the time that AIG was already over-obligated and that AIG would not be able to make good on payments.

So, they gamed the system from the beginning. Their bet was made on the assumption taht they could get Paulson at the treasury to cover AIG's exposure when the time came.

And that's exactly what happened.

This issue needs more light.
Mar 3, 2009 at 12:05 PM | Unregistered CommenterDailyBail
Daily Bail...

Please do add more light..we need it. I'm sticking to this site like crazy glue. I know you are flooded with work, but please keep up your investigation work and keep us updated on your reports.
Mar 3, 2009 at 12:17 PM | Unregistered CommenterSanta Monica Monster
Alright, people are starting to get really upset at the massive loses over at AIG and where all the bailout money is going, but don't realize that other insurance companies are next to follow. You think AIG was the only insurance going under?

well, Genworth, Hartford, MetLife, Prudential Life, Lincoln Financial are all next. This is getting uglier, but we are just hiding the truth.
Mar 3, 2009 at 1:11 PM | Unregistered CommenterSanta Monica Monster

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