Rebel Traders reports that AIG must fail.
(emphasis mine) [my comment]
AIG Must Fail
By · 12:58 a.m. March 16
It has been said over and over that AIG represents a "systemic risk" to the global economy. This has been used not only for AIG but for Citigroup, and many others.
What is it that the U.S. Government is so afraid of? What is systemic risk anyway?
When we hear the term 'systemic' we often think of medical conditions which are very severe. A 'systemic infection' to the financial sector is the equivalent of a lymphatic cancer. But is the diagnosis of a systemic risk as it pertains to these individual companies really warranted? Or is simply an 'excuse' to garner public support for actions that actually have other objectives?
Today AIG released its counterparty obligations. Those obligations were essentially obligatory payments that AIG was responsible to make good on to other companies, governments, and states that were for the most part linked to losses on securities linked to U.S. mortgages and were sold by AIG.
So who was it that a failure of AIG would have resulted in severe losses to?
From AIG Counterparty disclosure statement:
AIG Chairman and Chief Executive Officer Edward M. Liddy said that the counterparty and collateral information show that billions in government assistance flowed to dozens of financial counterparties and municipalities during a time of acute stress in the economy.
Mr. Liddy emphasized that AIG's disclosure of the counterparties does not change AIG's commitment to maintaining the confidentiality of its business transactions. "Our decision to disclose these transactions was made following conversations with the counterparties and the recognition of the extraordinary nature of these transactions," Mr. Liddy said.
Payments made by AIG after September 16, 2008, the date on which AIG began receiving government assistance:
[US tax dollars at work]
Societe General (FRANCE) - $11.9 Billion
Deutsche Bank (GERMANY) - $11.8 Billion
Goldman Sachs - $12.9 Billion [US Treasury Secretary Henry Paulson lead the push to bailout AIG. Henry Paulson is an ex-CEO of Goldman Sach. This stinks to the heavens.]
Merrill Lynch - $6.8 Billion
Calyon (FRANCE) - $2.3 Billion
Barclays (U.K.) - $8.5 Billion
UBS (Switzerland) - $5.0 Billion
DZ Bank (GERMANY) - $700 Million
Wachovia - $1.5 Billion
Rabobank (HOLLAND) - $800 Million
KFW (GERMANY) - $500 Million
JP Morgan - $400 Million
Banco Santander (SPAIN) - $300 Million
Danske (DENMARK) - $200 Million
HSBC Bank (U.K.) - $3.5 Billion
Morgan Stanley - $1.2 Billion
Bank of America - $5.2 Billion
Bank of Montreal (CANADA) - $1.1 Billion
Royal Bank of Scotland (U.K.) - $700 Million [RBS was nationalized last year, so this $700 Million went directly into the pockets of British taxpayers.]
BNP Paribas (FRANCE) - $4.9 Billion
Credit Suise (SWITZERLAND) - $400 Million
ING (HOLLAND) - $1.5 Billion
Deutsche Zentral (GERMANY) - $1.0 billion
Dresdner Bank (GERMANY) - $2.6 Billion
Citigroup - $2.3 Billion
[Total paid to foreign institutions = 58 Billion (so far...)]
There is what the Government claims is a 'systemic risk'. The failure of AIG would have resulted in many billions of dollars in losses for numerous other banks and financial institutions, but none of them should have been anything near a 'systemic' collapse. Instead the U.S. taxpayer money was immediately transferred to bailout and protect the losses in other institutions and countries.
So the bailouts of AIG amounted to nothing more than a conduit for distributing tax payer funds around the world in this authors view with the threat of 'systemic failure' only to gain public support, to 'justify' their bailouts.
Is AIG a systemic risk capable of bringing the entire financial system to a 'crashing' halt... not in my view.
But what the U.S. Government is doing by providing bailout after bailout IS a systemic risk to the entire financial system.
In other news tonight AIG announced they will be paying nearly $1.2 Billion in bonus and retention payments to employees. Many of which are those who were directly responsible for the catastrophic failure and reckless risks that AIG put themselves in.
Mr. Liddy, AIG CEO, said in a statement that it was important to retain the top talent needed to unravel the mess the company was in. And to be able to continue attracting top talent.
Why are those who had their hands in creating the largest financial disaster since the Great Depression being considered 'top talent'? [Good question] And why is it important to keep them? [Even better question]
I say that AIG must fail. This company is an embarrassment to the United States, the tax payers, and to the financial community [Agreed]. AIG is 'too big to be allowed to survive'. It is time for this company to be put out of 'our misery'.
Minyanville reports about bailing out AIG like Goldman's life depended on it.
Bailing Out AIG Like Goldman's Life Depended On It
How Wall Street's finest benefited from the Too Big To Fail doctrine.
Mar 16, 2009 1:25 pm
Goldman Sachs (GS) is about $13 billion richer, thanks to money from the Federal Reserve funneled to the Wall Street firm through American International Group (AIG).
This appears to dent, and maybe demolish, Goldy's reputation as a sage, button-down company that knows how to limit risk better than its competitors.
The money Goldman Sachs received via AIG between last September and December is stunning: $2.6 billion in collateral from AIG Financial Products, $5.6 billion to purchase securities underlying selected credit swaps and $4.8 billion to meet lending agreements.
The federal bailout of AIG now totals about $160 billion and Goldman Sachs is one of the largest beneficiaries. Federal officials say the money was needed to prevent the collapse of the insurance company and avoid the threat its failure posed to the US financial system. On Sunday, AIG bowed to public pressure and said it shoveled a total of about $105 million to Societe General, Deutsche Bank (DB), Goldman Sachs, as well as several US states, including California and Virginia.
Someone is bound to ask why US taxpayers bailed out foreign companies when Lehman Brothers was allowed to fail [That is a good question: why did US taxpayers bail out foreign companies while allowing Lehman Brothers to fail?]. But that's almost a side issue for Wall Street watchers because of the amount of bailout money that flowed to Goldman Sachs. This plays out against AIG's announcement that it awarded about $165 million in retention bonuses to workers who handled the deals that helped set off the global credit crisis.
In the past, Goldman Sachs said it had no significant exposure to AIG [This is called lying.] and noted that what few dealings it had with the insurer were offset by collateral and hedges. In short, Goldman said its ties to AIG were, in the jargon of Wall Street, "not material."
The exposure may have been hedged, but $13 billion is still $13 billion more than Uncle Sam has given John Q. Citizen, directly or indirectly, in the economic downturn. Moreover, that amount of money suggests Goldman Sachs had significant interests in AIG. [No kidding. No about of spin can reconcile Goldman's claim of "no significant exposure to AIG" to the $13 billion it has received from AIG.]
It therefore appears that Goldman Sachs, like many others in the banking industry, was heavily dependent on AIG's health. The argument that AIG is too big to fail appears to be a good one, but that doesn't explain Goldman's prior denials that it was deeply involved with AIG. Ego is the simple explanation, but Goldman Sachs probably understood AIG's dicey condition and quickly calculated the hole it would punch in its finances and image if the insurer failed.
The federal money also may underscore Goldy's reputation for having the best political contacts in Washington. Henry Paulson served as US Treasury Secretary when the decision was made to bail out AIG and had previously served as CEO at Goldman Sachs. But this quickly veers into grassy knoll territory populated by conspiracy buffs because there's no suggestion that Paulson or anyone else bailed out AIG specifically to benefit Goldman Sachs. [Ex-Goldman Sachs CEO Henry Paulson, as secretary of the treasury, bailout AIG and saved Goldman Sachs. Can you say "massive conflict of interest"?]
The upside to the latest revelation -- and it's bank-shot, double-backflip good news -- is that contrary to conventional wisdom found in the general press, French and German banks were no more cautious than their American counterparts. France's SocGen received about $11.9 billion from the Federal Reserve via AIG and Deutsche Bank received about $11.8 billion. Barclays (BCS) received about $8.5 billion .
This suggests there would have been the blood of American, British, German and French banks on the floor if AIG had failed.
The irony is that rescue thanks to the US taxpayers required no superior insight, planning or market smarts - just the dumb luck to be hitched to AIG, a company Uncle Sam deemed too important to fail.
If you can't be good, it helps to be lucky. But don't expect any of the companies to write thank-you notes to the US taxpayer any time soon, or for Goldman Sachs to think any less of its lofty self.
My reaction: Seems like AIG bailout overwhelmingly benefited:
A) Foreign firms (58 Billion)
B) Goldman Sachs ($12.9 Billion)
While I am sure that the German, Swiss, French and British readers of this blog are happy that the US taxpayer is subsidizing their financial system, I am not too happy about it. However, I am even less happy about the 13 billion received by Goldman Sachs. In fact, I am pretty upset.
The government official who led the charge to bailout out AIG with taxpayer money was US Treasury Secretary and former Goldman Sachs CEO Henry Paulson. Now what do we find out? Goldman Sachs is the single biggest recipient of AIG/taxpayer funds.
So did Henry Paulson save AIG because:
A) It was "too big to fail" and posed a "systemic risk"
B) He wanted to give his Wall Street buddies taxpayer funded handout to reward them for making risky bets and wrecking the economy.
The answer is probably both.
If all this wasn't bad enough, there are also the bonuses being paid to the financial unit responsible for the AIG's catastrophic failure. The whole AIG mess is revolting.