Nick Baumann

Nick Baumann

Senior Editor

Nick is based in our DC bureau, where he covers national politics and civil liberties issues. Nick has also written for The Economist, The Atlantic, the Washington Monthly, and Commonweal. Email tips and insights to nbaumann [at] motherjones [dot] com. You can also follow him on Facebook.

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Why AIG Went Down

| Tue Oct. 7, 2008 7:14 PM EDT

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Documents released today by a congressional committee investigating the collapse of insurance giant American International Group (AIG) paint a picture of a company that sought to conceal the scope of its risky investments, despite warnings from regulators, auditors, and even its own employees that its financial disclosures were insufficient.

According to a letter (PDF) released Tuesday by the House Committee on Oversight and Government Reform, which held a hearing on the firm's downfall, federal regulators warned AIG executives of a "material weakness" in the company's books five months before the insurance giant had to be rescued by an $85 billion government bailout. The federal Office of Thrift Supervision (OTS) wrote AIG on March 10, 2008 that its asset valuations "lacked the accuracy and granularity necessary to understand the impact… on AIG's accounting and financial reporting."

AIG's auditor, Pricewaterhouse Cooper (PWC), also warned the insurance giant about its books. Oversight committee chairman Henry Waxman (D-Calif.) pointed to minutes (PDF) from an AIG audit committee meeting in March indicating the board was told that the "root cause" of AIG's problems was internal auditors' lack of "appropriate access" to the Financial Products division—the very division whose massive losses eventually necessitated the $85 billion government bailout.

And even AIG's own employees warned the company that it had no way of knowing how much risk it was exposed to. In a letter (PDF) to the committee, Joseph St. Denis, the firm's former vice president for accounting policy in AIG's Financial Products division, accused AIG executives of stymieing his attempts to make sure the company was properly reporting the liabilities stemming from its involvement in risky financial products, including the $62 billion credit derivative swap (CDS) market. St. Denis, who worked as a Securities and Exchange Commission (SEC) enforcement official before joining AIG, said Joseph Cassano, the head of the division, "took actions that I believed were intended to prevent me from performing the job duties for which I was hired."

Lynn Turner, a former chief accountant for the SEC who testified at the hearing, said he didn't see how AIG's financial disclosures could possibly be consistent with its exposure. "When you've got that sort of exposure, you owe it to me as an investor [to disclose it]. That's the disclosure I cannot find in these filings…. There's a question there as to why we didn't get that."

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Bailout Bill Passes; Leading Dem Skeptic Issues Statement

| Fri Oct. 3, 2008 4:08 PM EDT

Republicans got most of the attention (or blame) for stopping the bailout bill when it was first brought up in the House on Monday. But many Democrats, including members of a bipartisan group that called itself the "skeptics caucus," also voted no. Unfortunately for the skeptics, the bill just passed, 263-171. Over 170 Democrats and 90 Republicans voted for the bill, with 108 Republicans and just 63 Democrats voting no (down from 95 on Monday). Rep. Brad Sherman (D-Calif.), a no vote who led the skeptics caucus, has issued a statement:

Five Alternative Bailout Plans

| Fri Sep. 26, 2008 6:42 PM EDT

The Bush administration is pushing its bailout plan by claiming the only way to save the economy is by having the federal government buy $700 billion worth of bad paper from big financial firms that screwed up. Conservatives should hate this because it is a massive federal intervention in the market. Liberals should hate this because it's a handout to the richest people and companies in America. But the Bush administration and Wall Street are insisting it's the end of the world and this is the only choice. Well, is it this or nothing? Many on Capitol Hill—especially Democrats—are buying the general premise of the White House plan but insisting on lipstick-on-a-pig modifications involving CEO compensation, taxpayer protection, and oversight and transparency. But are there other approaches to the problem besides putting the Treasury in charge of a $700 billion fire sale? Yup. Here's a quick roundup.

Bringing New Meaning to The Phrase "Golden Parachute"

| Fri Sep. 26, 2008 1:31 PM EDT

From the New York Times article on the largest bank collapse in American history:

But the seizure and the deal with JPMorgan came as a shock to Washington Mutual's board, which was kept completely in the dark: the company's new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.

That's right. The chief executive of WaMu is getting $19.1 million for three weeks of work. Natch. And these are the people taxpayers are supposed to be bailing out?

Yes, Joe Biden's Helicopter Really Was "Forced Down" in Afghanistan

| Tue Sep. 23, 2008 5:31 PM EDT

One of the narratives the blogs are talking about this week is that Joe Biden is—gasp!—"gaffe-prone." Nevermind the fact that this has been the story about Biden for 30 years: now journalists are even finding gaffes where none exist. In a post on The Stump exploring Biden's unfortunate attack on his own campaign's ad, Michael Crowley claims that this Joe Biden anecdote is a "gaffe":

"If you want to know where Al Qaeda lives, you want to know where Bin Laden is, come back to Afghanistan with me. Come back to the area where my helicopter was forced down, with a three-star general and three senators at 10,500 feet in the middle of those mountains. I can tell you where they are.

In an unsigned follow-up post on The Plank (accompanied by an awful Slate-style "gaffe meter"), someone claims that this quote "could teeter into Hillary-in-Bosnia territory." But what exactly is wrong or misleading or inaccurate about Biden's story? The Jake Tapper post Crowley links to is an admirably straightforward fact-check of the story—it turns out Biden's helicopter was forced down by a snowstorm. But did Biden say the helicopter was "forced down under fire" or even "shot at"? No. And Tapper points out that Biden went on, saying this:

[John McCain] says he'll follow [Al Qaeda] to the gates of hell. You don't have to go to hell. Just go to Pakistan. Just go to that area. That superhighway of terror that exists between Afghanistan and Pakistan.

Biden's right on in the rest of the quote, too: As far as we know Al Qaeda and bin Laden are in what Biden calls, "That superhighway of terror that exists between Afghanistan and Pakistan."

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