Spitzer's Epic AIG Battle

Spitzer v. AIG!  How would one even begin to tell the tale of history's ballsiest Attorney General attempting to take on what was then the most powerful corporation on earth? Here are some brief thoughts from Spitzer himself, which he shared in January, 2010 at The Commonwealth Club of San Francisco.  

"I have sort of a unique relationship with AIG…. I started off tilting at windmills when we brought our civil case alleging all sorts of accounting fraud at AIG. And it was met with hue and cry from the financial world: 'How can you say anything bad about AIG? It’s the best company in the world.'

"And I said, 'You have to understand, this is the center of the web.'  And I would go home at the end of the day and say to my wife, 'I feel like I’m stuck in this web and this giant black widow is about to kill me but I’m telling you there’s something wrong with this company.'" 

(Editor's Note: If that image isn't the cover of a Spitzer comic, I don't know what would be. It's half Spiderman, half Mel Brooks in "High Anxiety":)

"And AIG was the vortex, it really was. The reason I’ve called for the release of all the AIG emails is twofold, one I do believe if we follow those emails – and I said release them to the public, let everybody bring their investigative skills, thousands of journalists, lawyers, whomever, to parse them and find out what was going on, the reason we need to do that is because is was the center."

(Editor's Note: The vortex! Let's try that again. Here's Mel Brooks hovering over a spirally-looking thingamabob that possibly could be a vortex in the brilliant film, "High Anxiety":)

"The reason we CAN do it - this isn’t IBM which is really a private company - is we own AIG. We have made a $180 billion investment in AIG. As the shareholders, we can say, we want to know. So we are in a position to tell the three trustees appointed by the Treasury Department, to tell the Board of Directors, release the email, redact all the private stuff, take away all the legal privilege stuff, but let us understand the financial transactions between AIG and Goldman, AIG and all their counterparties. The counterparty payments at 100 cents on the dollar, this was the greatest scam in history, absolutely outrageous. It swamped in importance the bonus issue. The counterparty payment was fundamentally wrong. 

"And this is when I really, finally lost it with Geithner. We give all this money through AIG to the counterparties, and we take stock in the worthless shell, rather than even taking stock in the recipient of the money. This is Dealmaking 101. So I said, 'These guys don’t get it. This is something that we should really dig into, it’s beginning to happen a year later, but so be it.'"

Democrats and Progessives, Are You Tired of Getting Sand Kicked In Your Face?

You know how it is. You watch the President you campaigned for getting sand kicked in his face by the opposition. Over. And over. And over again. 

And you begin to think, this guy we elected actually LIKES getting beat up. You think, my God, we elected the first the masochist President. 

And then you think, I don't really need to do my run today, or my 50 girly push-ups. You think: there's a pint of Haagen-Daz in my freezer with my goddamn name on it. 

That's right. You've become demoralized by watching the monumental pussiness of your Democratic representatives. 

But it doesn't have to be this way. Remember that guy, whose name no one in the DNC is allowed to say anymore? The guy dealbreaker.com simply refers to as "N.H.F."?

The former New York State Attorney General, the guy with such big balls that he took on AIG CEO Hank Greenberg, and actually got him fired? The former New York State Attorney General who said epic things, like, "I'm a #$%^%$ STEAMROLLER!" when talking to the thugs who were taking your lunch money and tanking your economy? 

Whoo! Good times, those were! 

Yeah. You remember that guy. The abrasive guy who actually got things done. The guy so obsessed with justice that even Republican voters actually liked him and voted for him, too. The guy your auntie never liked because he was, well, so in your face. So unpleasantly... male. Well, guess what? That guy is still alive! Hank Greenberg and Roger Stone and Ken Langone didn't actually kill him. Like Bruce Wayne's Batman, he's just been hiding out in the CNN batcave. 

And then, because you are an actual adult past the age of 20, you think, "Y'know, a guy with big enough balls to take on Hank Greenberg? It was probably unrealistic that he was going to be able to keep it in his pants 24/7." And then, whether you are married or single, you think what every other longtime married woman would think: "At least he wasn't actually cheating on his wife - it was a contractual arrangement!" How obvious is that?

It's time, America. It's time to bring back Spitzer. We need a guy who can land a punch. 

Congratulations, Mr. Ferguson (and Spitzer)

Eliot Spitzer, featured prominently in the documentary "Inside Job", may feel vindicated that much more by the film's Oscar win last night.


Then again, no one watches the Oscars, anymore. But had they tuned in, they would have heard the only political statement of the night, delivered by Director Charles Ferguson:


“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong,” Mr. Ferguson said.


Additional congrats and thanks should go to Jeff Lurie, the owner of the Philadelphia Eagles, who bankrolled the film. 


"Inside Job" provides a strong overview of the financial crisis, but it does pull a few punches, partially because additional information about the TARP distribution was only made available this past December, long past the completion of the film.


That additional information was only made available through Bernie Sanders' amendment to the financial reform bill. It's been largely under-reported, but "Draft Spitzer" plans an upcoming post on the issue. 

Spitzer's Bipartisan Appeal

Judy and tb had posted comments in response to the Sanders post. I tried to address tb's understandable lack of faith in the U.S. electorate in the comment section, but I think the reply, amended slightly, warrants an actual post. Here goes:


If it's any comfort (and, one hopes, some inspiration), Spitzer was the only Democratic politician who consistently polled higher with men than with women, based largely on his tough, law-and-order position on white-collar-crime. That may indicate that Americans were never as hypocritical, prudish, or stupid as the corporate-controlled media would like them to be. The trick is circumventing the media's obsession with sex scandals to get the message out about the reforms Spitzer actually accomplished as New York State Attorney General. 

Spitzer's formidable accomplishments in that role may be an increasingly strong motivation for voters amid the ongoing corruption of the banking sector. Even motivation among Republicans. 

Ironically, Spitzer's work as Attorney General in New York makes an intriguing conservative argument for the efficacy of State governments over the ineptitude of the Federal Government. In the late-trading case against Canary Capital/Bank of America, Spitz accomplished in a matter of months what the Feds would take years to do - if they did it at all. Which, as we all know, they didn't. 

Full disclosure: I have quite a few conservative friends who genuinely respect and appreciate Spitzer's work as Attorney General. They're not about to support him for a presidential bid, but we all agree that he should at least have an essential role as the head of a new Pecora Investigation or as a candidate for U.S. Attorney General. 

There is common ground between ordinary people on both right and left when it comes to bank reform. I always suspected that, but I would never have known if I had not reached out to "the other side" and tried. 

The problem is, whenever we find "real" bipartisanship (e.g., bipartisanship that works for ordinary citizens, rather than the malefactor banks) we get shouted down. It has, sadly, given bipartisanship a bad name. I've occasionally taken a good deal of heat for continuing to seek said common ground, and the effort itself hasn't exactly been a picnic or necessarily successful (understatement of the year), but I'm still trying. 


Why? Because I think one way the malefactor banks have been able to exploit their advantage is the media's desire to split the electorate into "right" and "left" orthodoxies. But when it comes to Bank of America, Citigroup, Goldman Sachs, et alia, there have been many, many voices on both right and left who desire the exact same reforms. 

Bernie Sanders on Eliot Spitzer

"DraftSpitzer" attended Bernie Sanders' speech in San Francisco last night, and took the opportunity, post-speech, to buttonhole the 70-year-old Brooklyn-born Senator on the issue of Eliot Spitzer. This occurred while the jet-lagged, septuagenarian was trying to get through inscribing many boxes of books for his ravenous fan base. (The event was sold out, and Sanders had just delivered a rousing, populist speech.)

So, okay, maybe it wasn't the best time to ask about Eliot Spitzer, but DraftSpitzer figured this might be the only opportunity. Here's the breakdown:

DraftSpitzer: (interrupting actual book buyer, who wanted her book inscribed to Uncle Basil, or some such piffle) "Senator Sanders, do you think there's hope for a resurrection of Eliot Spitzer?"

Senator Bernie Sanders: (furrowing brow) "Spitzer? Well, he has a talk show on CNN."

DraftSpitzer: (panicky) "But... a talk show? That's not enough!"

Granted, it wasn't the wild endorsement one might hope for. Hadn't the Senator seen Alex Gibney's "Client 9: The Rise and Fall of Eliot Spitzer"?

To be fair, Senator Sanders had only flown in that afternoon, and by the time he finished speaking, it was after midnight Eastern time. Otherwise, I'm sure he would have sung the many praises of Eliot Spitzer. Because... who wouldn't?

Chalk it up to a Brooklyn-Bronx rivalry.

Spitzer on "Self-Regulation" and "Powerful Friends"

"So, what are the principles? Rule number one: Only government can ensure integrity in the marketplace. Now that seems like such an obvious statement, but nobody believed it three, four, five years ago. There was this canard, this oxymoron, called 'self-regulation.' We can all sit here and roll our eyes, but that was the governing ideology for a long time. And when I would go down to Washington and we’d bring out cases and I would say “Self-regulation doesn’t work,” people would say, 'Oh, come on, you’re just some left-over from the 1960’s....'

"This was a very difficult fight. And the story that brought it home to me was our case against investment bank Merrill Lynch. And it had to do with the tension that existed between underwriting IPO’s and secondary offerings on the one hand, and also having analysts simultaneously recommend those stocks to the investing public, which we thought was a conflict of interest. Jack Grubman, one of the analysts involved in all this, captured the moment in time when he said, 'What used to be viewed as a conflict of interest is now viewed as a synergy.'

"What happened in this case… we found the needles in the haystacks. And we were about to file the case. My first introduction to this type of litigation was when the lawyer from Merrill called me up and said, “Eliot, I’m warning you, we have powerful friends.” And I said, 'Well! That’s an interesting legal argument. They didn’t teach me that in law school.' (Laughs.) What am I supposed to say?

"Nonetheless, we filed the case, and the Merrill lawyers came in and said, 'Eliot, you’re absolutely right, but we’re not as bad as our competitors.' And that was their defense! 

"The point was this: when it came to a choice where they knew the behavior was problematic, sacrificing that integrity vs. market share, they sacrificed integrity. The reality was that the marketplace drove behavior down to a standard that was simply unacceptable, and the only entity that could come in and say 'Stop, that’s not acceptable,' was government."

Spitzer on Chinese versus U.S. Investment.

“Where is capital being invested and by whom? China is buying up the natural resources around the world, something we used to do, while we are paying for soldiers in Afghanistan…. We need a government at this moment that is nimble, quick, can respond, and make smart investment decisions. Unfortunately, this is the very moment when our government is failing us."

We didn't listen to Spitzer when he tried to warn us about AIG. And look what happened: the U.S. taxpayer ended up forking over $180 billion for the shell of a company, in what Spitzer rightly described as the scam of the century.


Maybe we should start listening to Spitzer. Now.

Spitzer on Alan Greenspan

"...Alan Greenspan's autobiography - I read it with shock, because I said, 'This guy was Chairman of the Fed - that's supposed to be a regulatory interventionist position - and this guy is singing the praises of Ayn Rand left, right and center.

"But that was the accepted dogma. It began with President Reagan, and it dominated the intellectual discourse of the country from that moment until a year ago. We’ve gone from Ayn Rand libertarianism to having Ken Feinberg appointed to set the salaries of senior execs at companies across the board.

"How did we span that spectrum so quickly? How do you go from one intellectual extreme to the other? And does that mean that there are no real intellectual moorings? And can we construct some meaningful set of principles that will permit us to understand what government should do and why? Because if we can’t do that, then we’ll be just coming up with ad hoc decisions without any coherent argument.”

Eliot Spitzer on the "White Collar-ization" of Organized Crime

Ever wonder what the Gambinos and Goldman Sachs have in common? 

In response to a question about "organized crime" last year at The Commonwealth Club in San Francisco, Former Attorney General Eliot Spitzer had this to say:

"We’ve gone through what I call the white collarization of organized crime. The smart organized crime figures realized the people who really make money are the folks who get together, create a monopoly, take over an industry, increase prices by 10 or 15 percent, and do very nicely.

"That beats by a long margin running a loan sharking operation on the street corner beating somebody over the head with a baseball bat, because when you hit somebody over the head with a baseball bat, the cop comes and arrests you. 

"When you create a monopoly, it looks like white collar crime, and they say, eh, we don’t fuss with that. 

"And so that’s what happened. In the case I prosecuted involving the Gambino family, trucking, and the garment district, they'd formed a clever cartel. And we prosecuted them under the New York State anti-trust law, which actually preceded the Sherman Act. That’s what we did. 

"So what we call traditional organized crime - the sort of organized crime you’d see in the Godfather movies - really went through that transformation. But let’s not kid ourselves. Organized crime is there, it moves in terms of ethnicity, it moves in terms of geography, it moves in terms of subject matter, it will always be there, but there really was what I call this white collar-ization."


Editor's note: I'd like to make very clear that Spitzer did not state in any way that Lloyd Blankfein was a member of any organized crime cartel. He simply pointed out that organized crime does not necessarily look like what we expect it to look like. And Spitzer had other, far more interesting things to say about Goldman Sachs that evening. Specifically he talked about his efforts to make all the emails between AIG and its counterparties (including Goldman Sachs) available to the public. But more on that in another post.

Why Spitzer?

The fact is that most of us ordinary folk just don't care about the hypocritical 80 grand he threw away on call girls, or even the black socks. We're too focused on clawing back the TRILLIONS the government blew on malefactor banks, which aren't loaning it back to small businesses. 
And if there's one man who could actually get it back, it's Spitzer.