Because the Goldman excuse is getting old, Roddy Boyd aka the Financial Investigator is writing a book on why AIG really failed.What’s exciting is that there’s a new fall-guy singled out in this story: Win Neuger.
Neuger ran AIG’s Global Investment Corporation securities lending program.
Here’s one example of what he had his group do:
- Take a portfolio that had been throwing off about four basis points of profit since inception in the 1990s and in 2005 began imposing a 30-basis point profit target, taking on the risk of having to improve margins 7.5 times (aka a naked grab for yield)
Check out this chart of AIG’s securities lending portfolio evolution. It’s embarassing.
Neuger also, presumably, didn’t tell senior AIG management anything like, oh by the way, our securities lending program is now the largest proprietary securities lending portfolio on Wall Street. Only State Street is bigger, just FYI.
Not that it’s only his fault that senior management didn’t know – that was obviously one of their biggest problems, too.
From Financial Investigator:
Dozens of interviews with senior AIG corporate and financial officials testify to the fact that prior to the summer of 2008 few in the company’s upper ranks had an awareness of the program.
But what about Peter Adamczyk, a guy who worked under him, who, according to FI, loudly protested? Apparently he was under direct orders to just keep hunting yield.
We guess Neuger just didn’t believe it, or didn’t want to hear it.
(Sidebar: What a first name! “Win.”)