The Back Story Of The CEO Meeting With Barack Obama

The Back Story Of The CEO Meeting With Barack Obama

I have so found someone after my own heart, and readers, you are going to love this writer, but we need to cover something else first.  Bambi and the Bankers.

On March 27th, a group of bank CEOs met with the usurper-in-charge at the White House and now the back story to that meeting is starting to leak out.  I was wondering what the newspapers were going to print about this meeting, knowing full well that we probably could not believe a word of it because at this point it is all smoke and mirrors with AIG as the front piece and funnel for American taxpayer dollars to every other bank, and the American aristocracy milling in the shadows.  Lovely touch; the comment about pitchforks – intended to get your blood racing and make you feel like Bambi is actually on the side of the American public.

From Politico:

Inside Obama’s Bank CEOs Meeting

The bankers struggled to make themselves clear to the president of the United States.

Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees – and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation, and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

“My administration,” the president added, “is the only thing between you and the pitchforks.”

The fresh details of the meeting – some never before revealed – come from an account provided to POLITICO by one of the participants. A second source inside the meeting confirmed the details, and two other sources familiar with the meeting offered additional information.

The accounts demonstrate that despite the public comments on both sides that the meeting was cordial, the tone in the room was in fact one of mutual wariness. The titans of finance – men used to being the most powerful man in almost any room – sized up a new president who made clear in ways big and small that he expected them to change their ways.

There were signs from the outset that this was a business event, not a social gathering. At each place around the table sat a single glass of water. No ice. For those who finished their glass, no refills were offered. There was no group photograph taken of the CEOs with the president, which typically happens at ceremonial White House gatherings, but not at serious strategy sessions.

“The only way they could have sent a more Spartan message is if they had served bread along with the water,” says a person who attended the meeting. “The signal from Obama’s body language and demeanor was, ‘I’m the president, and you’re not.’”

Just for your information, here are the names of the CEOs in the meeting.  Please note that the House of Morgan and the House of Mellon among others was in attendance.

Jamie Dimon, JP Morgan Chase
Ken Chenault, American Express
John Koskinen, Freddie Mac
Ronald Logue, State Street
Robert Kelly, BONY-Mellon
Rick Waddell, Northern Trust
James Rohr, PNC
Lloyd Blankfein, Goldman
John Mack, Morgan Stanley
Vikram Pandit, Citi
John Stumpf, Wells Fargo
Cam Fine, Independent Community Bankers
Edward Yingling, ABA
Richard Davis, US Bank
Ken Lewis, Bank of America

Now let’s get to what I really wanted to share.  A few weeks ago I had a choice to start digging on AIG or go find the “spider” (Pilgrim Society).  I am going to finish what I started with AIG, their board, their owners, yada, yada, yada…but wanted to introduce you to Justice Litle, Editorial Director, Taipan Publishing Group.

The AIG Connection – Far Worse Than You Think

The Real Story Behind AIG

Back in my student days, I had the privilege of living abroad in three countries. (I would say studying abroad, but there wasn’t a whole lot of studying taking place.)

For one of those semesters I was based in a little town called Olomouc, on the Morava River in the Czech Republic. This was in the mid-nineties, when Eastern Europe was still amazingly cheap. You could get a seven-course meal in Prague, complete with drinks and dessert, for under 10 dollars. The best beer in the world was less than 50 cents a pint. A number of Americans working for U.S. corporations in Prague were earning $30K a year in after-tax income, saving $20,000 of that, and using the other ten grand to live like kings.

One of the interesting things we quickly discovered about Olomouc – a fairly provincial town at the time, and a far cry from Prague – was the surprising number of bars, jewelry stores and restaurants. The locals had very little money for the most part. Besides students and backpackers, who was frequenting these places? The setup just didn’t make sense.

A local Czech we befriended quickly clued us in. These were real businesses – as we knew from firsthand acquaintance with the bars and restaurants, though not the jewelry stores – but the real “business” wasn’t taking place up front. It was happening in the back.

Most of the high-end joints in Olomouc were little more than mafia fronts.

The whole town had a very strong organized crime presence. (Again, this was well over a decade ago. I don’t know if it’s the same way now.) Once we knew what to look for, the clues were easy to spot. On the battered San-Francisco-style trams that ran down the cobblestone streets of Olomouc, for example, you would notice that all the locals wore basically the same clothing… drab, post-communist-era type stuff… and then you would spot the bald guy with the black gloves and full-length Armani trenchcoat, talking on his new-model cell phone.

Or if you watched the cars go by on the main thoroughfare, 19 out of 20 would be durable little Skodas – and then a shiny new Mercedes Benz would hulk along. That kind of thing.

So what does this have to do with our Wall Street detective story?

Well, as it turns out, the Washington guys seem to have taken a page from the Czech mafia guys. AIG has been made into a “false front,” like all those Olomouc joints – the real business of which is to hand out taxpayer dollars under the table.

Flashback, September 2008

The plot stretches back to that fateful weekend in September 2008 when Lehman Brothers collapsed. (I’ll never forget it – I was in Paris at the time, wondering what the hell just happened and how soon I could get home.)

Immediately after letting Lehman go bust, the Fed and Treasury realized the magnitude of their error and announced a massive bailout of AIG. The amount was crazy – if I recall correctly, something like $80 billion right off the bat. (That number has since grown much bigger.)

So here’s a picture of what AIG did with that money, and how they got into the “false front” business of spreading cash around to other players.

As soon as the bigwigs at AIG realized they were hosed, they called up the Treasury and the Fed (Hank Paulson at the time, and Ben Bernanke still) and probably said something like the following:

Listen, we’ve got payout exposure to credit default swaps and other exotic derivatives out the yin-yang here – hundreds of billions’ worth – and if you let AIG go the way of Lehman, it’s going to be full-on financial armageddon. You had better bail us out right now if you don’t want to see the global economy vaporized.

Of course, Paulson and Bernanke gave in, authorizing an insanely massive lump sum of funds to go to AIG.

So what do you think AIG did with the money? They gave it to the counterparties on the other side of their trades.

As soon as the government stepped in to bail out AIG lock, stock and barrel, the AIG execs stopped caring about profitability. The game of being a viable business was toast, and the taxpayer was on the hook for everything. So it looks like AIG’s traders were ordered to unwind many of their mind-bendingly complex deals at fire-sale prices that were massively favorable to the parties on the other side of the trades.

Highly Efficient

Now, if you’re a muckety-muck high up in the Treasury Department, think how efficient this setup is.

What you really want to do is write big fat taxpayer-funded checks for all your buddies. Billions for Goldman, billions for Morgan Stanley, heck, billions for those European guys who are always so nice when you hop across the pond… billions for everyone.

The trouble is, writing all those checks would be a public relations disaster. People would be furious. Congress would go crazy. More than likely they’d give you major grief and try to block your efforts, just like they did with the multiple tries it took to pass the original TARP plan.

So writing many checks is a political no-go… but what if you could just focus your bailout efforts on ONE player? What if you could shovel hundreds of billions into one overly complex black hole… and then let all that money trickle out to your friends via the back door?

AIG offered the perfect set-up for this.

  • As a huge global insurance firm, people intuitively accepted the notion that an AIG failure would be devastating to the financial world.
  • As a firm with notoriously complex and impossible-to-read accounting records, AIG also acted as the perfect sinkhole in terms of being able to plausibly pour hundreds of billions in.
  • As a scapegoat, AIG was almost perfect too. Instead of blaming all of Wall Street for this whole toxic mess, AIG allowed the powers that be to mop up all the public outrage and focus it on just one player.
  • Last but not least, the whole $165 million bonus flap was icing on the cake. Congress got so lathered up over the bonuses, they forgot to notice that AIG itself had become a massive “false front” conveniently used to funnel billions of dollars to every major counterparty on Wall Street that had connections to AIG. (And that counts as most all of them.)

Sleight of hand, folks, sleight of hand. Kind of beautiful in a sick way, no? They figured out how to concentrate all the outrage into one convenient spot, deflect it onto a trivial issue, and set up a powerful funnel that would let the real handouts (from AIG to various counterparties) go virtually undetected.

Bravo, sirs. Bravo.

Make sure to go over and read the whole post and check out the included links.  I definitely have a grin on my face.

Here is a little bit of information about AIG to get your started, and just pick one name and click on the relationships (i.e. Richard Holbrooke), and look at all the people and companies owned by the aristocracy in the background.

INSIDERS ON BOARD OF DIRECTORS AT American International Group, Inc. (AIG)

Name (Connections)Board RelationshipsTitleAge
Edward Liddy 202 RelationshipsChairman and Chief Executive Officer60
Edmund Tse 39 RelationshipsSenior Vice Chairman, Senior Vice Chairman of Life Insurance, Head of AIGs Worldwide Life Insurance Operations, Director, Chairman of American International Assurance Company Ltd and Chief Executive Officer of American International Assurance Company Ltd69
Paula Reynolds 95 RelationshipsVice Chairman and Chief Restructuring Officer51
Win Neuger CFA46 RelationshipsChairman of AIG Investments and Chief Executive of AIG Investments58
Louis Iglesias 16 RelationshipsChairman of AIG Risk Management Group and Chief Executive Officer of AIG Risk Management Group
Joseph Boren 16 RelationshipsChairman of AIG Environmental and Chief Executive Officer of AIG Environmental
Anastasia Kelly 76 RelationshipsVice Chairman of Human Resources, Vice Chairman of Corporate Communications & Corporate Affairs, Vice Chairman of Legal, Vice Chairman of Corporate Affairs, Executive Vice President, Senior Regulatory & Compliance Officer, General Counsel and Director58

Other Board Members on Board of Directors*

Name (Connections)Board RelationshipsPrimary CompanyAge
Morris Offit 65 RelationshipsAmerican International Group, Inc.71
George Miles Jr.167 RelationshipsEQT Corporation65
Michael Sutton 46 RelationshipsAllegheny Energy Inc.67
Richard Holbrooke 499 RelationshipsPerseus, L.L.C.
James Orr III62 RelationshipsGevity HR Inc.65
Martin Feldstein Ph.D.140 RelationshipsEli Lilly & Co.68
Virginia Rometty 16 RelationshipsInternational Business Machines Corp.50
Stephen Bollenbach 209 RelationshipsAlba Caracas65
Suzanne Johnson 227 RelationshipsGoldman, Sachs & Co.50
Dennis Dammerman 68 RelationshipsGEFS (Suisse) AG62
*Data is at least as current as the most recent Definitive Proxy.
And one more note, this particular chart was published about an hour before I went looking for it….timing and karma.

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