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AIG Role Still Haunts James Cole's Chances to be Deputy Attorney General

Bea Edwards, December 07, 2010

As the 111th Congress draws to a close, the heat is on to confirm James Cole as Deputy Attorney General. Despite the last-minute push, Cole still has serious problems that haunt and disqualify him from taking a senior position at the Justice Department.

From 2005 through December 2009, James Cole served as an independent monitor in the Compliance Office of the American International Group (AIG), placed there by the Securities and Exchange Commission (SEC) as part of a deal that allowed AIG to escape prosecution for fraud.

While Americans and their elected representatives are notorious for their short attention spans, it’s worth remembering, in this case, that AIG was the corporation that nearly drove the US economy off a cliff in September 2008. AIG’s Financial Products Division (AIG-FP), based in London, wrote credit default swaps involving staggering amounts of money that had to be covered with a US government bailout in the range of $180 billion.

The AIG rescue, courtesy of US taxpayers, was the single largest bailout of any corporation that went belly up in the Great Recession. In the aftermath, Congressional investigators found that Cole had specifically exempted AIG-FP from his oversight. When Senator Charles Grassley (R-Iowa) asked him for a written explanation of the lapse, Cole replied that AIG-FP was doing too many of these deals for him to monitor (Question h, p. 5). He allowed the division to design its own risk analysis model to assess the viability of the swaps AIG-FP itself was writing. He left it at that.

Nor was Cole forthcoming in answering Grassley about what he had done at AIG. As we reported at the time:

Cole’s entire response set to Grassley’s questions about his role at AIG before, during and after the financial collapse that nearly took out the international economic system is reminiscent of NPR’s “Not My Job” segment (also known as “Someone Else’s Problem”).

As markets around the world still struggle to recover, and the cold light of day hits the epidemic of financial crime still eating away at economic stability, the US Justice Department needs a new Deputy Attorney General who is more responsible than James Cole.

Beatrice Edwards is International Reform Director for the Government Accountability Project, the nation's leading whistleblower advocacy organization.