Saturday, March 7, 2009

WSJ: Top US, European Banks Get $50 Billion of US Taxpayer Money thru AIG

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Forgive me for focusing on this story so much - I just think it is a complete farce the government powers that be refuse to let American taxpayers know to whom their money is REALLY going to. I will be very interested what the public reaction is when German, UK and other foreign banks are disclosed as receiving American taxpayer money. So not only do we have to pay for our banks screw ups, we have to pay off the world over? Why doesn't the UK government or German government pay us back in kind - these are THEIR banks? How do you feel about bailing out Deutsche Bank? Barclays? Banco Santader (Spanish)?

If you are new to the story, keep in mind our previous Secretary Treasury Hank Paulson was the CEO of Goldman Sachs at the height of the actions that caused this house of cards to go down. No conflict of interest there.

If you are new to the story three stories to peruse
  1. AIG Counterparty Furor Grows
  2. Your Tax Money Paid to Investment Banks and Hedge Funds via AIG
  3. AIG - Propping Up a House of Cards
Here is the latest information via the Wall Street Journal as information is starting to leak - this data is only thru December - remember that has been MORE infusions SINCE and there will be MORE infusions in the future (trust me on that)
  • The names of all of AIG's derivative counterparties and the money they have received from taxpayers still isn't known, but The Wall Street Journal has identified some of them and is publishing others here for the first time.
  • The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
  • Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter. Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.
  • More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.
If you don't know what the heck is going on here is a quick summary
  • Since September, the government has had to extend more aid to AIG as its woes have deepened; the rescue package now has swelled to more than $173 billion. The government's rescue of AIG helped prevent its counterparties from incurring immediate losses on mortgage-backed securities and other assets they had insured through AIG. The bailout provided AIG with cash to pay the banks collateral on the money-losing trades; it also bought out underlying mortgage-linked securities, many of which are currently worth less than half their original value.
  • Now, other problems are popping up for AIG. The insurer generated a sizable business helping European banks lower the amount of regulatory capital required to cushion against losses on pools of assets such as mortgages and corporate debt. It did this by writing swaps that effectively insured those assets. Values of some of those assets are declining, too, forcing AIG to also post collateral against those positions. And if the portfolios incur losses, AIG will have to compensate the banks.
Some banks that were paid by AIG after it was bailed out by the government
  • Goldman Sachs
  • Deutsche Bank
  • Merrill Lynch
  • Société Générale
  • Calyon
  • Barclays
  • Rabobank
  • Danske
  • HSBC
  • Royal Bank of Scotland
  • Banco Santander
  • Morgan Stanley
  • Wachovia
  • Bank of America
  • Lloyds Banking Group

Source: WSJ research


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