Top U.S., European Banks Got $50 Billion in AIG Aid

[kpete]

Source: Wall Street Journal


By SERENA NG and CARRICK MOLLENKAMP
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.

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.


Read more: http://online.wsj.com/article/SB123638394500958141.html

[aquart]

1. Well, isn't that special.

[Bolo Boffin]

2. Dang, I am working on a diary about this

I found this from Business Week back in December.

http://www.businessweek.com/magazine/content/08_52/b411...

ETA: Goldman Sachs and Deutsche Bank each got $6 billion. That's $12 billion altogether.

Maiden Lane III, the special purpose LLC buying up toxic assets on which AIG had issued credit default swaps, only took on $62 billion in the toxic CDO's. $12 billion out of $62 billion, that's about 20% of the whole shebang.

Man. Goldman got about 10% of this cash. Man, it's good to have a former CEO of Goldman as the Treasury Secretary. Yeah, that's probably not all of the CDO's Goldman has, but they managed to offload $6 billion at par. Wow.

And AIG took the hit. Maiden Lane III now holds the assets, but they purchased them at "market value", either 43 or 58 cents on the dollar. (I'll bet there are a lot of companies looking for that market.) AIG then covered the rest and the credit default swaps were then terminated.

How much was AIG's bill for these CDS terminations? $38 billon.

But there was another Maiden Lane dealing with AIG, Maiden Lane II. It was buying toxic CDO's from AIG subsidiaries, AIG itself. They bought about $40 billion worth (at par), but AIG didn't get par. They got about 50 cents on the dollar and had to write off the other $20 billion.

Now they are down $58 billion.

And, don't you know, the Treasury had ALSO injected an additional $40 billion from TARP into AIG during the same period in exchange for newly issued Senior Preferred Stock in AIG.

But that was not enough for AIG's losses. With the $18 billion difference and another $5 billion they had to give Maiden Lane III to guard against those CDO's losing value (by law the Maiden Lane LLCs CANNOT lose money), that's about $23 billion in losses right there - over one-third of the $62 billion record loss reported by AIG in the fourth quarter.

But Goldman Sachs is doing fine.

[defendandprotect]

3. Tell me someone is going to untangle all of this and put some of these people in . . ..

maybe Guantanamo . . . ???

[No Elephants]

4. We used to give foreign aid to feed poor people. Now, it goes to banks. I hate this anymore.

[Supersedeas]

11. feeding the weathy who gambled on risky investments and come to taxpayers for blood and coin

we fight their wars for profits

we pay taxes to cover their gambling losses

[ShockediSay]

5. I recently read where Moe {call me Hank} Greenburg

followed the 'best defense is a good offense'

tack by suing AIG. I believe AIG got into this

mess with the guidance of Moe. Whaddya really

really know Moe?

[leveymg]

6. Brilliant. We pay billions to German, UK and Swiss banks to bailout a Chinese insurance company

Who says US foreign aid is too stingy? See, http://journals.democraticunderground.com/leveymg/399

[Lasher]

7. And we're doing it with money we're borrowing from China!

For the life of me I just can't see the wisdom in it.

[jody]

8. What some call "wisdom" may be "naive ignorance". n/t

[Lucky Luciano]

9. This should come as no surprise - the AIG bailout

was for collateral calls due to a ratings downgrade. If AIG filed and did not post the money, then all those banks would be writing down all those huge numbers and possibly being forced out of business as well. If you are ok with that, then you need to be reminded that Lehman's bankruptcy was the turning point that sent our economy into freefall - I know I lost my own job as a DIRECT result of Lehman.

[mbperrin]

10. Last I looked, Europe had their own governments charged with

looking after their own people. I feel zero responsibility for bailing our foreign gamblers who lost.

I'm doubtful about bailing domestic gamblers, but I'll talk.

What has thrown the economy into the dumpster is no productivity. Nothing real was produced with trillions in debt.

Four guys sit in a room with a deck of cards, a pen, and a pack of Post It notes. How long will it take them to all become billionaires by playing poker in that locked room?

Answer: never. It's just a deck of cards, a pen, and pack of Post It notes no matter how big the IOU's are that are written on them.