Keeping it real

The war between who is to blame (Wall Street/Washington) for the financial crisis continues. Here is the Wall Street Journal:

The housing trouble began -- as most of AIG's troubles did -- when the company's board buckled under pressure from then New York Attorney General Eliot Spitzer when it fired longtime CEO Hank Greenberg. Almost immediately, Fitch took away the company's triple-A credit rating, which allowed it to borrow at cheaper rates. AIG subsequently announced an earnings restatement. The restatement addressed alleged accounting sins that Mr. Spitzer trumpeted initially but later dropped from his civil complaint.

Having layed the blame at the feet of a figure hated on Wall Street, the WSJ continues:

Other elements of the restatement were later reversed by AIG itself. But the damage had been done. The restatement triggered more credit ratings downgrades. Mr. Greenberg's successors seemed to understand that the game had changed, warning in a 2005 SEC filing that a lower credit rating meant the firm would likely have to post more collateral to trading counterparties. But rather than managing risks even more carefully, they went in the opposite direction. Tragically, they did what Mr. Greenberg's AIG never did -- bet big on housing.

Shorter WSJ: malicious investigations forced AIG to bet on housing. What does this evil doer have to say for himself?

When my office, along with the Department of Justice, warned that some of American International Group's reinsurance transactions were little more than efforts to create the false impression of extra capital on the company's balance sheet, we were jeered at for attacking one of the nation's great insurance companies, which surely knew how to balance risk and reward.

Ouch, what does he say about the current state of affairs?

The appearance that [the AIG bailout] was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

So, the WSJ piece knocks on Spitzer for being too aggressive in the context of a piece questioning the lack of oversight by the government (huh?). Meanwhile, Spitzer points out something that is verifiable and public - AIG is shoveling government money over to wealthy people. Yeah, I'm going to go with the zealous prosecutor.