Joseph J. Cassano, whose derivative bets on subprime loans forced American International Group Inc. into a U.S. bailout, defended the deals while the insurer's chief risk officer said the firm was "wrong" on the trades.
Cassano, head of AIG's financial products unit until March 2008, said he "never compromised our standards" on the credit-default swaps blamed for the firm's losses, according to remarks submitted to the Financial Crisis Inquiry Commission.
"Often repeated are my words during an earnings call in August 2007 that I did not expect any realized, economic losses (as opposed to unrealized accounting losses) on this portfolio," Cassano said in prepared remarks for Wednesday's hearing in Washington. "I meant exactly what I said."
While the securities linked to swaps had not defaulted in late 2008, the market value of the assets collapsed, triggering collateral calls that drained AIG of cash, Robert Lewis, AIG's chief risk officer, said in prepared remarks.
"We were wrong about how bad things could get," Lewis said. "What ended up happening was so extreme that it was beyond anything we had planned for."