Begin forwarded message:
From: Alamaine <fratl...@gra.midco.net>
Date: March 9, 2009 5:23:20 AM PDT
To: CTRL <c...@yahoogroups.com>
Subject: [ctrl] Who got AIG's bailout billions? | Reuters.com
Reply-To: c...@yahoogroups.com
http://www.reuters.com/article/topNews/idUSTRE52624P20090308?feedType=RSS&feedName=topNews
Who got AIG's bailout billions?
Sun Mar 8, 2009 8:30am EDT
By Toni Reinhold
NEW YORK (Reuters) - Where, oh where, did AIG's bailout billions go?
That
question may reverberate even louder through the halls of government in
the week ahead now that a partial list of beneficiaries has been
published.
The Wall Street Journal reported on Friday that about $50 billion of
more
than $173 billion that the U.S. government has poured into American
International Group Inc since last fall has been paid to at least two
dozen U.S. and foreign financial institutions.
The newspaper reported that some of the banks paid by AIG since the
insurer started getting taxpayer funds were: Goldman Sachs Group Inc,
Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc,
Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan
Stanley, Wachovia, Bank of America, and Lloyds Banking Group.
Morgan Stanley and Goldman Sachs declined to comment when contacted by
Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed
Wachovia, could not be reached for comment.
The U.S. Federal Reserve has refused to publicize a list of AIG's
derivative counterparties and what they have been paid since the
bailout,
riling the U.S. Senate Banking Committee.
Federal Reserve Vice Chairman Donald Kohn testified before that
committee
on Thursday that revealing names risked jeopardizing AIG's continuing
business. Kohn said there were millions of counterparties around the
globe, including pension funds and U.S. households.
He said the intention was not to protect AIG or its counterparties,
but to
prevent the spread of AIG's infection.
The Wall Street Journal, citing a confidential document and people
familiar with the matter, reported that Goldman Sachs and Deutsche Bank
each got about $6 billion in payments between the middle of September
and
December last year.
Once the world's largest insurer, AIG has been described by the United
States as being too extensively intertwined with the global financial
system to be allowed to fail.
The Federal Reserve first rode to AIG's rescue in September with an $85
billion credit line after losses from toxic investments, many of which
were mortgage related, and collateral demands from banks, left AIG
staring
down bankruptcy.
Late last year, the rescue packaged was increased to $150 billion. The
bailout was overhauled again a week ago to offer the insurer an
additional
$30 billion in equity.
AIG was first bailed out shortly after investment bank Lehman Brothers
was
allowed to fail and brokerage Merrill Lynch sold itself to Bank of
America
Corp.
Bankruptcy for AIG would have led to complications and losses for
financial institutions around the world doing business with the company
and policy holders that AIG insured against losses.
Representative Paul Kanjorski told Reuters on Thursday that he had been
informed that a large number of AIG's counterparties were European.
"That's why we could not allow AIG to fail as we allowed Lehman to fail,
because that would have precipitated the failure of the European banking
system," said Kanjorski, a Democrat from Pennsylvania who chairs the
House
Insurance Subcommittee.
TOXIC ASSETS/TOXIC WASTE
As part of its business, AIG insured counterparties on mortgage-backed
securities and other assets. The collapse of the U.S. subprime mortgage
market, which triggered a global financial crisis, left the insurer and
some of its policy holders facing possible ruin as the value of assets
declined.
U.S. regulators failed to recognize how much risk AIG was piling on in
credit-default swaps, and by the time they understood, they had no
choice
but to pour in billions of public dollars, Kohn and other officials told
the Senate panel.
Senators were outraged by the lack of details about where the bailout
money has gone.
"That we find ourselves in this situation at all is ... quite frankly,
sickening," said Senator Christopher Dodd, the Democrat who chairs the
committee. "The lack of transparency and accountability in this process
has been rather stunning."
Eric Dinallo, superintendent of New York State's Insurance Department,
railed on Friday against AIG's failed business model, likening its
insuring credit-default swaps as gambling with somebody else's money.
"It's like taking insurance on your neighbor's house and even maybe
contributing to blowing it up," he said at a panel sponsored by New York
University's Stern School of Business.
U.S. lawmakers have said they are running out of patience with
regulators'
refusal to identify AIG's counterparties.
On Thursday, Richard Shelby, the top Republican on the banking
committee,
said: "The Fed and Treasury can be secretive for a while but not
forever."
(Writing Toni Reinhold; Additional reporting by Juan Lagorio in New
York;
Editing by Clive McKeef)
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