In this week’s New York, I have a cover story that goes behind-the-scenes in the battle to control Wall Street comp. Nowhere is this conflict more vividly displayed than the current war between AIG and the Government. AIG’s CEO, the brash, outspoken Robert Benmosche, is fending off efforts by Kenneth R. Feinberg, the Pay Czar, who’s seeking to limit what AIG’s traders can make. The standoff came to a head on November 4, when Benmosche told AIG’s board of directors that he is going to quit. They convinced him to stay, but he’s set to give them his final answer at tomorrow’s board meeting.
From the piece:
After viewing the video, Feinberg left the room, and Benmosche turned to face his board members in private. Benmosche saw himself and his traders as being on the same side as the taxpayers—it infuriated him that Geithner and Congress seemed to see them as the enemy. With Feinberg gone, Benmosche let his anger loose. The pointed exchange he just watched only confirmed in his mind that Feinberg didn’t think he, or his executives, were worth much. He was going to quit. “I’m just about ready to hit the road,” Benmosche said. “Feinberg stabbed me in the back.”
“It wasn’t a moment of anger,” an executive familiar with the exchange later recalled. “It was the last straw of things that were agonizing him.”
Read the full piece HERE
The financial crisis has dragged on for two years already, and no senior Wall Street executive has been brought to trial. On October 12, Ralph Cioffi and Matt Tannin, two former Bear Stearns hedge fund managers, will be the first finance guys to go before a jury. The spring 2007 collapse of Cioffi’s $1.6 billion hedge funds was the first tremor that signaled the financial system was coming apart.
In this week’s New York Magazine, I preview the trial. What I find interesting is that Cioffi’s trial has become a proxy for the legions of Wall Street bankers and traders who gambled recklessly with leverage and exotic financial instruments, only to see the whole system go up in smoke. Prosecutors have compiled a bunch of embarrassing emails from Cioffi and his partner, Matt Tannin, that suggest they knew the market was tanking even as they tried to line up new investors. Sure, it looks bad. But the heads-I-win-tails-you-lose culture was rampent late in the bubble. Goldman’s prop trading desk famously shorted sub-prime real-estate even as they sold mortgage-backed securities to their other clients. It’s all too easy to dispose of a few foot soldiers like Cioffi and Tannin while ignoring the perverse culture of reckless investing and greed that incentivized this kind of behavior in the first place. The question remains open as to why, even now, no senior executive, from Dick Fuld to Joe Cassano to John Thain, has been charged with any wrongdoing even though the bubble happened on their watch, and was largely a result of their profit-at-any-cost management style.
It’s been a lonely time for Cioffi since prosecutors paraded him in front of reporters last June. No one from Bear’s senior ranks–Jimmy Cayne, Warren Spector, Ace Greenberg–has called since his indictment. Alan Schwartz, Cayne’s successor, called once. Meanwhile, Cioffi has liquidated his luxurious lifestyle. In July, he sold his Southampton home for way less than the $11 million asking price. He’s quit his country club memberships. His Tenafly, NJ home is in contract. And he’s sold two of his three Ferarris, while awaiting a buyer for the third. Any takers?
Read the full piece HERE