*****AIG pays 58 Billion to foreign firms since receiving taxpayer bailout*****

Rebel Traders reports that AIG must fail.

(emphasis mine) [my comment]

AIG Must Fail
By Chuck · 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.
Scott Reeves
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.


This entry was posted in Bailouts, Market_Skepticism, News_Developments, Wall_Street_Meltdown. Bookmark the permalink.

8 Responses to *****AIG pays 58 Billion to foreign firms since receiving taxpayer bailout*****

  1. Martijn says:

    Letting AIG fail would definitely cause a world wide collapse in financial markets I believe; hence "systemic risk".
    We all know how the "shadow banking system" has taken over a large part of the lending business from banks over the past decade. This was done by packaging loans, insuring and redistributing them. These "insurances" are one of the reasons that some of the products are still (artificially) holding up their value. Since AIG is one of the main world wide counterparties for this insurance, letting AIG fail would be a guarantee to a new round of even yet unprecedented write offs. The systemic risk is obvious here guys, so this is not something made up by Paulson at all.
    It could however be true that Goldman obtained a relatively large part of the bailout money with the help of Paulson.

  2. Anonymous says:

    I would like you to comment if possible these news:

    "IMF poised to print billions of dollars in 'global quantitative easing'"

    http://www.telegraph.co.uk/finance/financetopics/recession/4986287/IMF-poised-to-print-billions-of-dollars-in-global-quantitative-easing.html

    Why did IMF insist to print money and to force them down the throat of a lot of east european countries? and not only.

  3. Steve Jones says:

    If it is any consolation, there was a huge flow of money into the US economy from "sub prime" mortgages that have now turned bad. The losses on those have forced many non US banks to be bailed out by their respective governments. It is far from the case that non-US citizens are being subsidised by the US taxpayer.

    Arguably a lot can be laid at the door of appallingly lax regulation regimes (not just confined to the US) where unappreciated systemic risk was being carried. For that, governments (and, unfortunately, that does of course mean their respective taxpayers) are going to have to deal with. The real disgrace is that many of those most responsible for this mess are going to be the least affected having built up wealth over the good times (which were demonstratively only good in the sense that financial manipulation gave the appearance on success).

  4. Anonymous says:

    That's only a little over $70 billion given to counterparties. Wonder what they did with the other $90 billion?

  5. occdude says:

    Somebody needs to go to jail. I think in addition to being an idiot Paulson was a crook.

    If AIG failed all their counterparties would've failed GS chief amoung them.
    He thought Goldman sucks was too big to fail, too integral for the system. Hubris, incompetence mixed with a little self interested larceny and of course cronyism.

    Sounds like the typical government operation, anybody a Libertarian yet?

  6. This article "AIG pays billions to foreign firms.." is clearly a deception.
    The main transaction happend on 15 September, 2008 the biggest chunks of the pie went to Bank Of NY Mellon, JP Morgan and themoney market mutual funds the Reserve Fund, privately owned and others. All these boys havily borrowed from EU Banks before the event, as ECB refused to low interest rates a month before, and this created huge swap in rates, so the money were heading to home to Europe. (This money released in the process of unwinding US stock market).
    So, basically suck all the public money in one day, closed shops and showed naked ass to europeans.
    If the Fed would not intervene the next days from 16 September, all US woke up without 401k and Medicare.
    As for AIG, it is merely was caught in transaction and CDS wars. In fact, AIG payed less by their obligations to the foreign banks and know all this dirt, that is why the bonuses will be payed.
    See the data to confirm my explanation at the Bank of Inetrnational Settlements (my comment to TIC post).

  7. Anonymous says:

    This is why a financial system based on imaginary money will never work. It will look like it is working for years and then all the deceiptful practices that have happened over the last couple of decades eventually will catch up. I personally would rather they let the system crash so that the people that made all the bad decisions don't keep getting more and more chances to do it all over again. All I keep hearing is we need to pay out these bonuses to the top talent that destroyed the economy so that they will stick around and make more horrendously greedy decisions. All they care about is more money. Buffett had a great example of just give the taxpayer the bailout money because they will actually put most of it back into the economy unlike companies like AIG. My friend tried to get a loan on a used car but was denied by 3 places. They each contacted him the next week and said he could get loans on a brand new car. This is what makes me sick. They just want to make people fall farther into debt than they want too. They just want to subsidize their losses and care nothing about the Americans that supported their POS's for so long. The car company only wants to sell a brand new shitty car that may last about 1-2 years longer than a used shitty car.

  8. Are there real money?
    I thought that all money are imaginary and the work only as long we believe in them.

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