Interconnectedness

MGIC, for instance, which Baldwin bought for $1.l7 billion, had $380 million in real estate and other assets which Baldwin sold to raise cash for the purchase.

  • But instead of selling only to outsiders, Baldwin has sold some of its assets, including stock of its own operating companies, to its own insurance companies.
  • ''Some of our best investments are subsidiaries that we own and manage,'' said James E. Schwab, the company's vice president and treasurer, defending the policy.
  • The problem is that when the assets are not stocks and bonds of publicly traded companies, there can be differences of opinion about how to value the assets.

1983 0123  - NYT - Baldwin United vs The Doubters - [link]

  • (p65) - Karl L. Rubinstein, (Special Deputy Insurance Commissioner, State of California): The Baldwin-United companies were hungry and the insurance companies were fat.
    • A series of transactions by which various of the Baldwin companies "sold" assets to the insurance companies occurred.
    • This included some mortgages and real estate, but it also included the almost $1 Billion in affiliated securities.
    • These included preferred shares in various Baldwin entities and other assets which quickly became non-performing (assuming, arguendo, they ever had the capacity to perform).
    • As a result, almost $1Billion in cash was taken out of the insurance companies and replaced with affiliated assets which turned out to be more or less worthless due to the financial collapse of the Baldwin empire for various reasons, not the least of which was the strain of attempting to repay the principle and interest on the MGIC loan.

1988 0914 and 0915 - GOV (House) - Insurance Company Failures - [PDF-4xxp-GooglePlay,

  • AIG
    • 2010 0526 - COP - Hearing - TARP and Other Government Assistance for AIG - [PDF-241p, -  Snippets
      • (p2) - Elizabeth Warren:  The company was a corporate Frankenstein, a conglomeration of banking and insurance and investment interests that defy regulatory oversight...
    • 2010 0127 - GOV (House) - The Federal Bailout AIG - [PDF-652p
      • (p140) - Blaine LUETKEMEYER (R-MO). Mr. Paulson, one of the things that we are looking into here with AIG, can you explain to me, AIG and their Financial Products, was that a subsidiary of AIG or was that part of their business model?
      • Mr. PAULSON. I believe it was part of the business model.
      • Mr. LUETKEMEYER. There wasn’t a separate entity that was separately capitalized?
      • Mr. PAULSON. It was clearly at the holding company and it was part of——
      • Mr. LUETKEMEYER. The thing that makes——
      • Mr. PAULSON. It wasn’t part of an insurance business model, but it was sure part of the company’s business strategy.
      • Mr. LUETKEMEYER. Because it makes a big difference. If it is not part of the insurance product company and it is a subsidiary that is separately capitalized, you can let that thing go down and it doesn’t impact the insurance part of it, which I believe it was. Is that not correct?
      • Mr. PAULSON. Well, I would say this to you. This company was so big and intertwined that it was—if there was any way that the people who were working on this could have found a way to just hive off and let one small part of the company go down—