As Robert O’Harrow and Brady Dennis reported in a three-part Washington Post investigative series on the rise and fall of AIG Financial Products called “The Beautiful Machine” (December 2008–January 2009), Greenberg told Matthews, “We are the tide now.”
It did not hurt Sosin’s cause that when asked about his views on trading strategy, he replied that he didn’t have one. Before they could get a frown off, he told the pair that he thought trading as a way to make money was dangerous and ultimately counterproductive and that he planned on making money from hedging out risk and capturing price and cost-of-funding inefficiencies. This actually understates Sosin’s antipathy to trading. Having sat on a Treasury-bond trading desk, he was appalled at how otherwise bright men wagered capital on bonds based on their guesses as to how the market reacted...
Frost told anyone who asked on the calls that dealers liked working with FP on asset-backed security (ABS) CDO swaps because they moved quickly, could handle volume, and knew the product. There were dozens of other marketers and dozens of other risks; no one dwelled too much on Frost, who was seen as an “old reliable” sort who wasn’t going to be involved in any violently complex structures. What no one was told about was the credit support annexes (CSAs). These were standard contracts attached to the swap agreements between AIGFP and the investment-bank trading desks that mandated the swap...
Note: $AIG in 2005...CEO Sullivan was clueless