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Will Akio Toyoda Testify on Brakes?

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As you may know, there are a slew of hearings scheduled next week to try to understand the Toyota brake problems. The head of Toyota (and grandson of the company founder) caused a bit of a stir yesterday when he tried to correct the mistaken impression that he would testify personally.

Akio Toyoda told a press conference Wednesday morning that he would not travel from Tokyo to Washington, D.C., to answer questions from a Congressional panel on car safety. No, this is not as bad as when General Motors sicked detectives on Ralph Nader, but Toyota is getting there.

“I trust that our officials in the U.S. will amply answer the questions,” Toyoda said.

Rather than have a guy bearing the company name testify, Toyota was sending Yoshimi Inaba, President of Toyota North America and–rather significantly–someone who was away from the company for two of the years in which Toyota was not responding to its own brake problems. In addition, Inaba’s background with the company is also primarily in sales, not engineering. In other words, rather than have Toyoda testify, the company was sending a guy who, just six months after he assumed a position of authority, agreed to recall millions of cars.

At the same press conference yesterday, Toyoda said he might consider testifying personally if he was invited.

But after persistent questioning, Mr. Toyoda said he “would consider” appearing before Congress if he receives a formal invitation, which none of the committees have issued.

So, in an unsurprising move, the House Reform Committee has now done just that, invite Toyoda to testify publicly.

Dear Mr. Toyoda:

As you know, there is widespread public concern regarding reports of sudden unintended acceleration in Toyota motor vehicles.  Toyota has recalled millions of its vehicles and even halted production.  In addition, there are reports that this problem may have been the direct cause of serious injury and even death.

There appears to be growing public confusion regarding which vehicles may be affected and how people should respond.  In short, the public is unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it.

To help clarify this situation, I am inviting you to testify at a hearing of the Committee on Oversight and Government Reform on Wednesday, February 24, 2010, at 10 a.m. in room 2154 Rayburn House Office Building.

[snip]

Sincerely,

Edolphus Towns

Chairman

It’ll be hard for Toyoda to decline this invitation and save face. So it’ll be interesting to see how serious Toyoda is about not testifying under oath to the US Congress.

Update: Toyoda accepts.

We are pleased Mr. Toyoda accepted the invitation to testify before the Committee.  We believe his testimony will be helpful in understanding the actions Toyota is taking to ensure the safety of American drivers.

Hank Greenberg Sorta Liveblog

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For reasons I explained here, I’m not going to do a full liveblog of Hank Greenberg’s appearance before Oversight today, though will keep half an eye on it. If you want to follow along, it’s on CSPAN3 and this Committee stream (which I can’t get to work).

Most interesting detail, thus far, is that Issa insisted that Greenberg’s lawyer be sworn in, as well as Greenberg. 

Greenberg’s complaining that by nationalizing AIG, it chased employees away. He’s saying it needs a new management team with experience in insurance (as if Edward Liddy doesn’t have insurance experience), emphasizing that said management team needed an internationalist focus, bc that’s what AIG is involved in. He’s arguing too that the govt should just limit its ownership to 15% so that private investors will get involved. He did say that AIGFP should be walled off–that’s a stance I suspect is smart.

Issa just asked Greenberg about the Ferguson case (involving Gen Re) in Connecticut, suggesting Greenberg was an unindicted co-conspirator. Greenberg’s name is all over that, but his lawyer wants to claim he was never tied to that. Also, apparently Greenberg has received a Wells Notice from the SEC. His lawyer didn’t explain what the Wells Notice pertained to.

Hank says to Kanjorski that he is a big fan of transparency. Issa takes that opportunity to introduce an SEC settlement showing that under Hank AIG was engaged in sham reinsurance schemes (this is the Gen Re thing). 

Lynch: The Maiden Lane CDS "are in the toilet."

Hank: Maiden Lane III terrible deal for the taxpayer. Purchased at par, even though the marks on those CDOs way down. 

Hank trying to assure Lynch that it was just chance that they picked OTS as regulator, rather than someone tougher. 

Patrick Kennedy just said he’s going to submit a bill to repeal the repeal of Glass-Steagall!!!

Hank had several conversations with Baxter NYF President, and two conversations with Geithner.

Hank’s Dog and Pony Show

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Hank Greenberg will testify before the House Oversight Committee about the AIG collapse today at 10 AM.

I’m uncertain that it’ll be useful in unpacking what happened with AIG at all. If Greenberg’s planned testimony from last fall is any indication (he called in sick for an October 7 AIG hearing, but had already submitted his testimony), he will say that the CDS before he left were hedged properly, not in subprime mortgages, and watched closely by management (that is, by him); but all that changed after he was forced out.  

AIG’s strategy, accordingly, was to look for opportunities in businesses that benefitted from its AAA rating, strong capital base, risk management skills, as well as the intellectual capital needed to manage such diversification.

That led to the creation of AIGFP in 1987. At that time, the derivative market was small and growing. From the beginning, AIG’s policy was that AIGFP conduct its business on a "hedged" basis – that is, its net profit should stem from the differences between the profit earned from the client and the cost of offsetting or hedging the risk in the market. AIGFP would therefore not be exposed to directional changes in the fixed income, foreign exchange or equity markets.

AIGFP, at that time, reported directly to me and Ed Matthews, Senior Vice Chairman, and later to William Dooley, Senior Vice President, supported by AIG’s credit risk and market risk departments. When I was AIG’s CEO, AIG management closely monitored AIGFP and its risk portfolio. AIGFP was subject to numerous internal risk controls, including credit risk monitoring by several independent units of AIG, review of AIGFP transactions by outside auditors and consultants, and scrutiny by AIGFP’s and AIG’s Boards of Directors. Every new type of transaction or any transaction of size, including most credit default swaps, had to pass review by AIG’s Chief Credit Officer.

[snip]

AIGFP reportedly wrote as many credit default swaps on collateralized debt obligations, or CDOs, in the nine months following my departure as it had written in the entire previous seven years combined.

Moreover, unlike what had been true during my tenure, the majority of the credit default swaps that AIGFP wrote in the nine months after I retired were reportedly exposed to sub-prime mortgages. By contrast, only a handful of the credit default swaps written over the entire prior seven years had any sub-prime exposure at all.

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