Pretty incriminating stuff.. The arciel is well worth reading in full. The best part is the following: "People familiar with the transaction say the New York Fed considered a range of options, including guaranteeing the banks’ CDOs. They say that by buying the securities, AIG got the best deal it could."
If paying in full's the best deal AIG could get, I'd really like to know what a bad deal would look like? Paying double what they owe? Another gem: "One reason par was paid was because some counterparties insisted on being paid in full.. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says." http://www.bloomberg.com/apps/news?pid=20601109&sid=a7T5HaOgYHpE ---------------------------------------snip In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb. Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter. [...] Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations. Subprime Mortgages CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks. Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public. The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III. Habayeb, who left AIG in May, did not return phone calls and an e-mail. -raghu. -- "I bought some batteries, but they weren't included." - Steven Wright _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
