Joseph J. "Joe" Cassano (born 12 March 1955) is an American

insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...

executive who was an officer at

AIG Financial Products AIG Financial Products Corporation (AIGFP) is a subsidiary of the American International Group, headquartered in New York, New York, with major operations in London. The collapse of AIG Financial Products, headquartered in Wilton, Connecticut, is co ...

from the division's founding in 1987 until his resignation in February 2008.Morgenson, Gretchen (September 27, 2008
Behind Insurer’s Crisis, Blind Eye to a Web of Risk.
''

New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

'' Cassano is considered a key figure in the

financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...

.Lewis, Michael (August 2009
The Man Who Crashed the World
'' Vanity Fair'' His employees characterized him as a "bully", and said that the culture of fear helped to create the downfall of AIG, as Cassano would often yell at employees who tried to warn him about the dangers of subprime bonds. AIG later suffered a $99 billion loss and got bailed out by the U.S. government. Political writer

Matt Taibbi Matthew Colin Taibbi (; born March 2, 1970) is an American author, journalist, and podcaster. He has reported on finance, media, politics, and sports. A former contributing editor for ''Rolling Stone'', he is an author of several books, co-host o ...

nicknamed him " Patient Zero of the global economic meltdown."

Work at AIG

In 1987, AIG hired Cassano as one of the first ten people in the Financial Products unit, as Chief Financial Officer.Voreacos, David and Elliot Blair Smith (November 26, 2008)
Statements on AIG Probed by Prosecutors, People Say.
Bloomberg In 1994, Thomas R. Savage appointed Cassano as head of the Transaction Development Group. Cassano accepted the 1998 proposal by J.P. Morgan to package

credit default swap A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against som ...

s (CDS) on Broad Index Secured Trust Offering (nicknamed Bistros). Cassano considered these

collateralized debt obligation A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS).Le ...

s a key event: "It was a watershed event in 1998 when J.P. Morgan came to us, who were somebody we worked with a great deal, and asked us to participate."Dennis, Brady and Robert O’Harrow Jr. (January 5, 2009). 1998–2005: AIG & the anatomy of the crash. ''

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Subprime mortgage crisis

Cassano sold hundreds of billions of credit protection in the form of CDSs without having to put up any real money as collateral as this form of insurance had been deregulated with the Phil Gramm-sponsored

Commodity Futures Modernization Act of 2000 The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that ensured financial products known as over-the-counter (OTC) derivatives remained unregulated. It was signed into law on December 21, 2000 by President ...

, signed by Bill Clinton. When, in the

, investment banks requested insurance money for their collapsing derivatives, AIG was unable to deliver and received a bail-out from the taxpayers. Just one year earlier while discussing the company's CDS portfolio with analysts, he said "It is hard for us, and without being flippant, to even see a scenario within any realm of reason that would see us losing $1 in any of those transactions." During his career at AIGFP from 1987 until he was forced to retire in March 2008, Cassano received $315 million: $280 million in cash and an additional $34 million in bonuses.Cassano retirement agreement
via House Committee on Oversight and Government Reform An initial $1 million-a-month consulting fee was later canceled.Daly, Michael (March 17th 2009)
Pin AIG woes on Brooklyn boy: Joseph Cassano walked away with $315 million while company staggered.
/ref> According to

In fact, Cassano remained on the payroll and kept collecting his monthly million through the end of September 2008, even after taxpayers had been forced to hand AIG $85 billion to patch up his mistakes. When asked in October why the company still retained Cassano at his $1 million-a-month rate despite his role in the probable downfall of Western civilization, CEO Martin Sullivan told Congress with a straight face that AIG wanted to "retain the 20-year knowledge that Mr. Cassano had." (Cassano, who is apparently hiding out in his lavish town house near Harrods in
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
, could not be reached for comment.)

In the wake of the scandal, United States regulators and the United Kingdom Serious Fraud Office began investigating Cassano's dealings to determine whether they were just excessive and risky, or criminal.Palmer, Elizabeth (March 19, 2009)
AIG Credit Swapper Under Investigation.
CBS News A two-year investigation by the U.S. Department of Justice ended in May 2010 with no criminal charges brought against Cassano, who was represented by lawyers Jim Walden and F. Joseph Warin of

Gibson, Dunn & Crutcher Gibson, Dunn & Crutcher LLP is an American multinational law firm headquartered in Los Angeles, California. Founded in 1890, the firm includes approximately 1,400 attorneys and 1,000 staff located in 20 offices around the world, including North ...

Political contributions

Cassano was a political contributor to the campaigns of Democratic Senators

Chris Dodd Christopher John Dodd (born May 27, 1944) is an American lobbyist, lawyer, and Democratic Party politician who served as a United States senator from Connecticut from 1981 to 2011. Dodd is the longest-serving senator in Connecticut's history. ...

and

Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...

and the Republican Representative Nancy L. Johnson. In March 2009 Cassano was linked to e-mails he authored in 2006 which solicited contributions from AIG executives for Dodd's campaign due to Dodd's position as incoming chairman of the

Senate Banking Committee The United States Senate Committee on Banking, Housing, and Urban Affairs (formerly the Committee on Banking and Currency), also known as the Senate Banking Committee, has jurisdiction over matters related to banks and banking, price controls, ...

Early life

Cassano grew up in

Brooklyn, New York Brooklyn () is a borough of New York City, coextensive with Kings County, in the U.S. state of New York. Kings County is the most populous county in the State of New York, and the second-most densely populated county in the United States, be ...

, where his father was a

policeman A police officer (also called a policeman and, less commonly, a policewoman) is a warranted law employee of a police force. In most countries, "police officer" is a generic term not specifying a particular rank. In some, the use of the ...

. He earned a

political science Political science is the scientific study of politics. It is a social science dealing with systems of governance and power, and the analysis of political activities, political thought, political behavior, and associated constitutions and la ...

degree from Brooklyn College in 1977. He worked in the back office at investment bank Drexel Burnham Lambert during their

junk bond In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events ...

phase.

References

External links

Joseph Cassano's Involuntary Profile, LittleSisJoseph Cassano Retirement from AIG AgreementThe Big Takeover
Matt Taibbi, Rolling Stone, March 19, 200
(no longer available online)The Man Who Crashed the World
Michael Lewis, Vanity Fair, August 2009 {{DEFAULTSORT:Cassano, Joseph Living people American businesspeople in insurance Drexel Burnham Lambert 1955 births Brooklyn College alumni