The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

AIG’s $100 Billion I.O.U.

Posted on | June 10, 2010 | 4 Comments

Good luck collecting on this one:

A watchdog panel reviewing the bailout of American International Group Inc. said U.S. taxpayers “remain at risk for severe losses” and that the government didn’t act aggressively enough to protect U.S. taxpayers during the 2008 rescue.
In a lengthy report, the bipartisan Congressional Oversight Panel concluded that the U.S. government, which owns nearly 80% of the insurance giant, is likely to “remain a significant shareholder in AIG through 2012” and it is unclear if taxpayers “will ever be repaid in full.” . . .
Since September 2008, the Federal Reserve Bank of New York and the Treasury Department have committed up to $182.3 billion to support AIG and provided roughly $132 billion of those funds so far. AIG is on the hook to repay about $101 billion mainly through asset sales and stock sales, and the rest is to be recouped from mortgage securities the New York Fed took onto its balance sheet. . . .
It also said a controversial decision by the New York Fed in late 2008 to pay off AIG’s trading partners in full on $62 billion in soured mortgage trades “distorted the marketplace” and protected AIG creditors at the expense of taxpayers.
“Billions of taxpayer dollars were put at risk, a marketplace was forever changed, and the confidence of the American people was badly shaken,” the report said. The panel, which oversees the government’s financial-bailout program, is chaired by Elizabeth Warren, a Harvard Law School professor. . . .

Read the rest of that. And notice that the guy who put taxpayers on the hook for the AIG bailout has since failed upward:

The New York Federal Reserve under Timothy Geithner failed to exhaust all options to arrange a private-sector rescue of American International Group before launching a taxpayer-funded bailout in 2008, a government watchdog group said on Thursday.
A report by the Congressional Oversight Panel said Geithner, now U.S. Treasury Secretary, on Sept. 15, 2008 left the task of finding a private bailout for AIG to two Wall Street banks, JPMorgan Chase and Goldman Sachs Group. . . .
“The Panel is concerned that the government put the effort to organize a private AIG rescue in the hands of only two banks — banks with severe conflicts of interest as they would have been among the largest beneficiaries of a taxpayer bailout,” the report said.

Classic.

Category: Corruption, Economics

Comments

4 Responses to “AIG’s $100 Billion I.O.U.”

  1. dad29
    June 10th, 2010 @ 2:45 pm

    By the way, Barry Ritholtz (The Big Picture blog) runs with a McClatchy story which posits that Geithner/Paulson committed FRAUD when pursuing the AIG bailout.

    They mis-characterized AIG’s position in order to get the money.

  2. dad29
    June 10th, 2010 @ 10:45 am

    By the way, Barry Ritholtz (The Big Picture blog) runs with a McClatchy story which posits that Geithner/Paulson committed FRAUD when pursuing the AIG bailout.

    They mis-characterized AIG’s position in order to get the money.

  3. Estragon
    June 10th, 2010 @ 3:28 pm

    Everything in the post is true as far as I know, but except for the need to work harder to find a private solution, which MIGHT have worked but probably wouldn’t have been successful given the amounts needed and the uncertainty at the time, the AIG bailout was necessary.

    The situation was created by the federal government, which through their pushing of CRA and sub-prime mortgages at the behest of Frank and Dodd (most of which happened with Republican majorities who were cowed with the threat of being labeled RAAAAACISSST!!!!!1!) polluted the whole secondary mortgage market and CDOs and other instruments derived from it. Nobody had a clue what any of the securities were really worth – there was no way to tell if the particular issue you held was good-as-gold conventional mortgages or loaded up with garbage.

    The alternative was to allow a $1.5 trillion or so failure, the effects of which would make this recession look like a picnic in the park. Cheap at the price.

    Complaints are certainly in order, but they should be directed at the real culprits in our whole financial meltdown: Congress.

  4. Estragon
    June 10th, 2010 @ 11:28 am

    Everything in the post is true as far as I know, but except for the need to work harder to find a private solution, which MIGHT have worked but probably wouldn’t have been successful given the amounts needed and the uncertainty at the time, the AIG bailout was necessary.

    The situation was created by the federal government, which through their pushing of CRA and sub-prime mortgages at the behest of Frank and Dodd (most of which happened with Republican majorities who were cowed with the threat of being labeled RAAAAACISSST!!!!!1!) polluted the whole secondary mortgage market and CDOs and other instruments derived from it. Nobody had a clue what any of the securities were really worth – there was no way to tell if the particular issue you held was good-as-gold conventional mortgages or loaded up with garbage.

    The alternative was to allow a $1.5 trillion or so failure, the effects of which would make this recession look like a picnic in the park. Cheap at the price.

    Complaints are certainly in order, but they should be directed at the real culprits in our whole financial meltdown: Congress.