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Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide

ISBN: 978-0-470-88980-0
349 pages
April 2011
Fatal Risk: A Cautionary Tale of AIG
Long-listed for the FT & Goldman Sachs Business Book of the Year Award 2011

The true story of how risk destroys, as told through the ongoing saga of AIG

From the collapse of Bear Stearns and Lehman Brothers, the subject of the financial crisis has been well covered. However, the story central to the crisis-that of AIG-has until now remained largely untold. Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide tells the inside story of what really went on inside AIG that caused it to choke on risk and nearly brining down the entire economic system. The book

  • Reveals inside information available nowhere else, including the personal notes and records of key players such as the former Chairman of AIG, Hank Greenberg
  • Takes readers behind the scenes at the U.S. Treasury and the Federal Reserve Bank of New York
  • Details how an understanding of risk built AIG, but a disdain for government regulators led to a run-in with New York State Attorney General Eliot Spitzer

Fatal Risk is the comprehensive and compelling true story of the company at the center of the financial storm and how it nearly caused the entire economic system to collapse.

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Cast of Characters.

Introduction.

Chapter 1 The (Noncorrelated) Dream Team.

Chapter 2 Who Dares, Wins.

Chapter 3 The Man with the Plan.

Chapter 4 Changes.

Chapter 5 The Dirt Below.

Chapter 6 War by Another Name.

Chapter 7 The Kids Are Alright.

Chapter 8 In the Shipping Business.

Chapter 9 The Preservation Instinct.

Chapter 10 The Down Staircase.

Chapter 11 Midnight in September.

Epilogue.

Notes.

Acknowledgments.

Index.

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Roddy Boyd is an investigative reporter who has been uncovering financial market shenanigans for more than a decade. Most recently at Fortune magazine, he also worked at the New York Post's business desk, the New York Sun and Institutional Investor News, and has written for Slate's "The Big Money." In addition to founding the financial investigative reporting website TheFinancialInvestigator.com, he has worked on both the buy- and sell-sides of Wall Street.
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Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide by Roddy Boyd has been longlisted for The FT & Goldman Sachs Business Book Of The Year Award 2011

Members of the seven strong judging panel will decide on a shortlist of up to six finalists in the middle of September.

‘If there is a theme that links most of the 14 titles on the longlist..it is their authors’ quest to work out how and why companies, governments and their leaders fail – and how not to go wrong in the future’

"A vivid portrait of the giant insurer at the center of the 2008 financial crisis."
(The Wall Street Journal)

"The best book of the crisis is Fatal Risk. This is a fabulous book - but it deals with complex subjects without shying away from their complexity and it assumes you have enough knowledge and intelligence to cope. . . This is the best book yet written about any specific episode of the crisis. Buy multiple copies. Give them to your friends. They will be grateful too."
(Bronte Capital)

"A sober work that appears to have been researched extremely thoroughly. . . more convincing on the mechanics of AIG's Suicide than it is on any of the deeper motivations."
(The Financial Times)

"Through superb reporting, Boyd has written one of the financial crisis genre's most important works."
(Bloomberg BusinessWeek)

"As Roddy Boyd demonstrates in his well-written study of AIG's fall, it was the very solidity of the company's credit rating that led it astray. Painstakingly built over the course of 40 years by an army veteran, Hank Greenberg, AIG was the ideal counterparty for Wall Street. . . For some, the demise of AIG was not the suicide described in the book's title, but an act of murder by Goldman. Mr Boyd argues that the investment bank was acting only as any prudent counterparty would. But the author's analysis is unlikely to dent the conviction of conspiracy theorists that AIG was rescued by Hank Paulson, the former Goldman chief executive turned treasury secretary, to prop up Goldman." (The Economist)

"Engaging and balanced account . . . Many books on the financial meltdown that began in 2007 treat AIG as a plot point in a wider drama. Yet valuable lessons can be gleaned from the narrower account that Boyd lays out here -- lessons about the responsibilities of leaders and regulators as well as the hazards of financial engineering. . . The story of AIG's demise has many moving pieces, large and small, which Boyd meshes into a smooth narrative. . . Boyd is good with dialogue and knows how to keep the story going. His reporting is thorough and fair, even when it comes to Timothy F. Geithner's risible assertions that it wasn't the Federal Reserve's job to pop bubbles."
(Bloomberg)

The best book on the financial crisis, and . . . favorite piece of non-fiction work since Michael Lewis' The Big Short. . . The reporting here is incredible."
(Distressed Debt Investing)

"A 10 best finance book.
Does the ongoing financial turmoil leave you scratching your head? Worry not, here's our pick of the finest - and most readable - books about Big Money..."
(The Independent)

'Fatal Risk is must reading for market insiders, investors, business leaders, and anyone who's wondered what really happened in 2008.’ (Hereisthecity.com, April 2011).

'researched extremely thoroughly’ (Financial Times, April 2011).

‘…a vivid portrait of the giant ­insurer at the center of the 2008 financial crisis.’ (Wall Street Journal Europe, April 2011).

‘A cautionary tale of corporate hubris.’ (Ethical Corporation Magazine, May 2011).

‘…Boyd is good with dialogue and knows how to keep the story going’.  (Bloomberg.com, June 2011).

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March 21, 2011
Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide

Many financial institutions failed when the financial crisis of 2008 hit, but perhaps none as spectacularly as insurance giant AIG.  In FATAL RISK: A Cautionary Tale of AIG’s Corporate Suicide (Wiley Hardcover; April 11, 2011; $27.95; 978-0-470-88980-0), investigative reporter Roddy Boyd writes a riveting inside account of how Maurice "Hank" Greenberg, the storied combat veteran and driven entrepreneur, took a motley collection of insurance companies and built them into the world's most innovative and daring financial conglomerate—only to see it all crash and burn.

Made rich and powerful through Greenberg's iron will and vision, AIG was unprepared for his dramatic ouster in 2005. As the company recovered from a bruising regulatory battle, its management did not understand what risks were being taken onto its once mighty balance sheet in the name of a quick buck. As the CDO and real estate markets imploded, AIG's role as the indispensable giant at the corner of Main Street and Wall Street nearly brought down the world financial system.

Fatal Risk reveals the following and more:

  • How AIG evolved away from the safe and reliable cash-flows of the insurance business into the more lucrative and riskier capital markets.
  • How the founding of AIG Financial Products, despite its collection of brilliant minds and mandate to invest and act independently of AIG, soon used its parent’s gilt-edged credit-rating to guarantee trades that no one else was willing to guarantee.
  • How the warning signs were visible as early as 1992: when you guarantee the credit-rating of a bond or derivative decades into the future, you had better be paid a lot of money for that risk or be right all the time.  AIG got this wrong on both accounts.
  • How brilliant and driven visionary CEO Hank Greenberg was run out of the company on a rail amidst concentric scandals that sapped his political capital.
  • How it felt on the inside when Attorney General Eliot Spitzer investigated AIG.
  • How AIGFP placed a gargantuan bet, probably the most lopsided and unhedged in the history of Wall Street, on the credit worthiness of subprime bonds.  Also, how an overlooked annex to a legal boilerplate for credit default swaps became AIG’s coffin.

Perhaps most controversially, Boyd argues that, contrary to conventional wisdom, Goldman Sachs, and the billions in collateral calls it made on AIG's Financial Products unit, was not the sole cause of the company's downfall. Drawing upon a host of sources—from Hank Greenberg to senior Goldman executives; current and former AIG leaders and board members; to legendary short-seller Jim Chanos and Federal Reserve officials—Boyd makes a compelling case that AIG's collapse was an inside job.

It took several generations of tireless work and measured risk-taking to build AIG into an AAA-rated juggernaut, but it took only a few years of profit and bonus chasing from a handful of previously unknown executives to bring the world's most important company to its knees.

A cautionary tale of corporate hubris and the enthralling story of how an insurance company became a central player in the global financial meltdown, FATAL RISK is must reading for market insiders, investors, business leaders, and anyone who's wondered what really happened in 2008.

About the Author

Roddy Boyd is an investigative reporter who has been uncovering financial market shenanigans for more than a decade. Most recently at Fortune magazine, he also worked at the New York Post’s business desk, the New York Sun and Institutional Investor News, and has written for Slate’s The Big Money.  In addition to founding the financial investigative reporting website TheFinancialInvestigator.com, he has worked on both the buy-and sell-sides of Wall Street.

 

Fatal Risk

By Roddy Boyd

Wiley/April, 2011

For more information about Wiley’s books, please visit our Press Room www.wiley.com/go/press

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$27.95; 978-0-470-88980-0; Hardcover

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