Joseph Cassano, a former AIG executive who played a big role in bringing the giant insurer to its knees, will face-off next week with a U.S. panel investigating the causes of the financial crisis.
Cassano will rub shoulders with a star cast, which includes Goldman Sachs Group Inc. President Gary Cohn and Chief Financial Officer David Viniar who will testify at hearings before the Financial Crisis Inquiry Commission next Wednesday and Thursday on the role of derivatives in the financial crisis.
Cassano, who ran AIG Financial Products, the division behind the insurer’s meltdown in September 2008, has evaded public appearances since leaving the insurer some two years ago.
The son of a Brooklyn policeman, Cassano has been the subject of criminal and civil investigations in the United States and abroad, but recently had the specter of prosecution lifted when the U.S. Department of Justice and Securities and Exchange Commission ended their investigations against him and other AIG executives.
Former AIG Chief Executive Martin Sullivan and AIG Chief Risk Officer Robert Lewis are also expected to headline the latest of the panel’s hearings.
The hearing comes as Congress prepares to hold final votes on financial reform legislation to address the financial crisis. The roles of Goldman and AIG in the crisis have been scrutinized since U.S. taxpayers committed hundreds of billions of dollars to bail out the banking industry.
Taxpayers pledged up to $182 billion to address problems at AIG’s financial products division.
AIG Financial Products wrote a form of insurance, known as credit-default swaps, on bonds created out of the home mortgage loan market during the U.S. housing boom.
When the loans began to sour and the bonds lost value, firms that had taken out the insurance demanded collateral from AIG, leading to the insurance industry’s equivalent of a run on a bank.
In 2007, Cassano boasted that the company did not expect to realize even $1 in losses on the portfolio. He left AIG in March 2008 under pressure over the company’s financial situation.
Goldman, which has been criticized for benefiting from the government’s bailout of AIG, will send four executives to Washington next week, including Cohn, who is second-in-command to Chief Executive Lloyd Blankfein. Blankfein testified before the commission in January.
Earlier this month the FCIC served Goldman with a subpoena, saying the firm had not been cooperative after it “dumped” 2.5 billion digitized documents on the committee in response to a request for information.
In April, the SEC charged Goldman with civil fraud stemming from its packaging and marketing of the Abacus collateralized debt obligation, an investment product linked to the performance of a group of mortgages.
The FCIC has been holding both public hearings and private meetings with financial industry players, including investor Warren Buffett, to piece together the causes and impact of the financial meltdown.
The congressionally appointed commission is supposed to issue a report by Dec. 15, detailing the crisis that peaked in late 2008 after the collapse of former investment banking giant Lehman Brothers.
The report will serve as a public record of the historic event and will not likely include thorough recommendations for reform.
The witness list for next week is posted at: http://www.fcic.gov/news/pdfs/2010-0625-Advisory.pdf.
(Additional reporting by Karey Wutkowski in Washington; editing by Carol Bishopric and Tim Dobbyn)