The New York Times ran an important op-ed from Eliot Spitzer, Frank Partnoy and William Black, calling on the Obama Administration to release the paper trail on the AIG deal:

A.I.G. was at the center of the web of bad business judgments, opaque financial derivatives, failed economics and questionable political relationships that set off the economic cataclysm of the past two years. When A.I.G.’s financial products division collapsed — ultimately requiring a federal bailout of $180 billion — those who had been prospering from A.I.G.’s schemes scurried for taxpayer cover. Yet, more than a year after the rescue began, crucial questions remain unanswered. Who knew what, and when? Who benefited, and by exactly how much? Would A.I.G.’s counterparties have failed without taxpayer support?

The three of us, as experienced investigators and prosecutors of financial fraud, cannot answer these questions now. But we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated by A.I.G. during the past decade. Before releasing its regulatory clutches, the government should insist that the company immediately make these materials public. By putting the evidence online, the government could establish a new form of “open source” investigation.

Once the documents are available for everyone to inspect, a thousand journalistic flowers can bloom, as reporters, victims and angry citizens have a chance to piece together the story. In past cases of financial fraud — from the complex swaps that Bankers Trust sold to Procter & Gamble in the early 1990s to the I.P.O. kickback schemes of the late 1990s to the fall of Enron — e-mail messages and internal documents became the central exhibits in our collective understanding of what happened, and why.

The authors want to see the communications between the AIG Financial Products division, the emails between AIG and their counter-parties at the financial firms, and more. As experienced hands at determining the timelines and circumstances of financial fraud, these three know exactly where to go to find out the truth – the email record. And as an 80% owner in AIG, the trustees of the taxpayers could make this a reality by demanding such disclosure from the board.

Yves Smith wants this opened up further, to take into account the communications of all major firms implicated in the financial crisis.

Why has there been NO serious investigation of ANY kind of the recipient of such extraordinary taxpayer largesse? Why has virtually NOTHING been demanded of them? Why the unseemly rush to let them off the hook and let them “pay back the TARP”? This is completely unwarranted in the case of AIG, which has had its deal with the government retraded in AIG’s favor a full four times. Why has AIG at every turn gotten a better and better deal, each time at the public’s expense, and is now allowed to lobby that it should be freed of its obligations? No private sector lender would allow a troubled borrower that could not meet its commitments to renegotiate and get IMPROVED terms. The inability to meet the terms of the original funding (one on terms private sector lenders were willing to consider, and that per Sorkin, AIG itself proposed) only strengthens the case to continue with the original plan, which is to break up AIG and sell the pieces for what they can fetch. This is the course that would yield the highest returns to the public, and that program will not produce a systemic event, which should be the ONLY offsetting consideration. There is no business rationale to have an agglomeration of diverse insurance businesses, particularly one that has been as badly managed as AIG (Sorkin’s account also reveals a shocking lack of financial and operational controls).

I don’t know if the op-ed could spark a fire, but it should.

David Dayen

David Dayen