Tag Archives: Commodities Classics

The AIG Trial – The 2008 Crash 6 Years Later

It’s been six years now since the bottom fell out of the stock market.

That was a tumultuous time, with the global financial system on the brink of total collapse.

And at the heart of the crisis was American International Group (AIG), the huge insurance company that had put itself on the line with credit default swaps on collateralized debt obligations (CDOs) to insure $441 billion worth of subprime mortgages. As the housing bubble began to deflate in 2007 and 2008, AIG had to pay out on more and more claims, until the big banks that had created the fraudulent CDOs backed with Liars’ Loans put themselves in jeopardy, ultimately pushing AIG into a massive liquidity crisis and virtual bankruptcy.

On September 16, 2008, with stock prices in a nosedive and the U.S. financial leadership in full panic mode, Ben Shalom Bernanke, at the head of the Federal Reserve Board, in collusion with U.S. Treasury Secretary Hank Paulson and New York Federal Reserve President Timothy Geithner, pushed through a high-interest federal loan to AIG of $86 billion and demanded the resignation of AIG CEO Robert B. Willumstad, who was replaced by Edward M. Liddy, a board member at Goldman Sachs.

More than five weeks before the collapse of AIG, on August 7, 2008, I had put the spotlight on AIG during an interview with Michael Yorba on his Commodities Classics TV show:


Although I called for “considerable downside” for AIG and the markets in general because of the then-imminent ingress of Pluto into Capricorn, and identified the September 23, 2008 Mercury/Mars conjunction at a Mercury station as a target zone for a trading bottom following a price decline by AIG and the insurance industry as a whole, I was definitely too conservative in my forecast at that time. Instead of finding a bottom at 17.25 as I thought possible, AIG dropped to below $5 a share – but it did find a trading bottom following the September 23 Mercury station.

The details about AIG are especially worth reviewing now, more than six years after that original interview, since AIG and all the big financial players from that time frame are the focus of a major trial set to begin in U.S. Federal Court of Claims on Monday, September 29, 2014. During the AIG trial, many new facts about the mechanics of the government bailout of AIG are likely to come to light. Former Federal Reserve Chairman Ben Shalom Bernanke is expected to testify, as well as former Treasury Secretary Henry Paulson, and Timothy Geithner (president of the New York Fed in 2008, and later Treasury Secretary).

Bernanke’s testimony in the AIG trial is certainly likely to attract lots of media attention. During a 2009 interview with 60 Minutes, he said that the AIG collapse made him so angry at the time that he “slammed down the phone more than a few times.”

During that interview, Bernanke said that “It’s absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy.”

In spite of Bernanke’s claims, however, the argument in the AIG trial is that the Federal Reserve and the U.S. Treasury used the ailing AIG “as a vehicle to covertly funnel billions of dollars” to Goldman Sachs and other financial institutions favored by the government in a nefarious backdoor deal.

The complaint in the case for the AIG trial notes that “This is the only time in history when the government has taken without just compensation and/or illegally exacted the assets and equity of a company and its shareholders in connection with a loan, let alone a fully-secured loan bearing an extortionate interest rate.”

I Talk Stock Market Trading on New Yorba TV Launch

Michael Yorba never stops trying.

For a number of years now he’s been a non-stop promoter of excellence and education for traders, and along the way he’s been a noteworthy pioneer in using the internet as a broadcast medium while he’s opened up new opportunities for improved stock market trading.

He put together the “Commodity Classics” online TV show as a live streaming video feed when a lot of the audience he was trying to reach just didn’t have access to enough bandwidth to make streaming video commonplace.

But Michael kept pushing the envelope, putting out show after show on a live video feed when a lot of other internet communicators were struggling to get pre-recorded video up on their web sites.

In more recent years, with his “Traders Network” program, Michael Yorba has perfected a talk-radio format for his internet broadcasting that consistently delivers high-quality content to listeners around the world. He’s attracted a big international audience.

Since his early days of television experimentation I’ve had the good fortune to be a guest on his shows on a number of occasions, and I’ve always been impressed with Michael’s skill as an interviewer– he has a great way of asking the kind of probing questions that help clarify complicated material and make important concepts clear on the air.

That’s why, when he called me last week to let me know that he was launching a new television show, I was eager to get involved.

His new program is still very much in the test-drive phase, and even though the video technology has vastly improved over the past few years there’s a lot to juggle in getting a live show up and running.

So it wasn’t too surprising that things were a little wild from the video technology end of things when I was a guest on the third episode of his brand-new show yesterday. There are plenty of bugs that still need to be worked out, and I obviously need to get a little more mastery of keeping multiple computer screens going, keeping my facts straight and remembering to look into the camera.

But for what it’s worth, here’s a recording of our shenanigans on the air yesterday. Take a look and share your comments– and remember, you’re getting to see history in the making!