Alarming stuff coming out with the House of Representative's Committee on Oversight and Government Reform probe into the debacle that is American International Group. A good summary from BusinessWeek.

An alarming picture starts to emerge when you go through the document's on the committee's site. Consider, for example, this letter from the Office of Thrift Supervision. What was lacking, it said, was the "accuracy and granularity necessary to understand 'the impact of key valuation components on AIG's financial reporting disclosures."

"Corporate management did not obtain sufficient information to completely assess the applicability of the negative basis adjustment, a critical component of the valuation method. In view of this occurrence and the observed similarity in reporting by other key subsidiaries; we are concerned that risk metrics and financial reporting provided to corporate management by AlGFP (AIG Financial Products) and other key subsidiaries may lack the independence, transparency, and granularity needed to provide effective risk management oversight."

That was in March, six months before the bailout by the US Government.

Even its own employees were raising concerns. Consider this letter from Joseph W St Denis, the firm's former vice-president of accounting policy and AIG's Financial Products Division. In that letter, he makes it clear his superiors were stopping him from trying to ensure the company properly accounted for liabilities in its risky financial products.