WASHINGTON — A former top executive of American International Group acknowledged Wednesday that his division more than quadrupled the amount of risky investments it insured in the three years leading up to the 2008 financial meltdown.
But Joseph Cassano, chief executive for AIG’s key Financial Products division, rebuffed accusations from a special panel investigating the crisis that he relaxed standards to issue more credit-default swaps.
AIG received a $182 billion taxpayer bailout — the biggest of the federal rescues — after it nearly collapsed and helped trigger the financial crisis.
“We never diluted our underwriting standards at any point in time,” Cassano told the Financial Crisis Inquiry Commission, a bipartisan panel created by Congress, in his first public comments since the crisis.
AIG’s Financial Products division sold billions of dollars of credit-default swaps, guarantees on mortgage securities that ended up forcing the company to pay out billions after the housing market went bust. That pushed AIG to the brink of failure in September 2008.
The inquiry panel’s chairman, Phil Angelides, questioned how the world’s largest insurer could raise the amount of swaps it issued, from $17 billion in 2005 to $78 billion in 2007, without compromising its standards.
Martin Sullivan, a former chief executive of the company, said he wasn’t told until several months afterward in 2007 that the amount had more than quadrupled.
AIG and Goldman Sachs executives appeared at the hearing focused on derivatives, the complex instruments at the heart of the meltdown. The panel is also examining the relationship between AIG and Goldman.
Cassano, who was forced to retire in March 2008, said the federal government paid too much to settle AIG’s debt. He said he could have negotiated better deals with the company’s Wall Street trading partners if he had stayed on with the company.
