We’re Finally Getting Around To The Real Scandal At AIG
The bonuses at AIG have been the hot button issue, but now we’re starting to get to the real meat of the problem,
Members of Congress and the New York State attorney general demanded detailed information Thursday on how tens of billions of taxpayer dollars flowed through the American International Group during its crisis last fall and ended up in the coffers of several dozen big banks, shielding them from losses.
…”We would like to know if the A.I.G. counterparty payments, as made, were in the best interests of the taxpayers who provided the funding,” said Representative Elijah E. Cummings, Democrat of Maryland, in a letter to Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program. The letter was also signed by 26 other members of the House, all of them Democrat.
…The banks and investment firms that ended up with A.I.G.’s bailout money last fall were, in many cases, counterparties to derivatives contracts it had sold, known as credit-default swaps, which guaranteed the value of assets in their investment portfolios. Had A.I.G. not been bailed out, and simply allowed to go bankrupt, they would have suffered investment losses running into the billions of dollars.
A.I.G. released the names of its major counterparties this month, at the urging of the Federal Reserve Board of Governors. They included Wall Street firms, like Goldman Sachs, JPMorgan Chase and Merrill Lynch, that have successfully resisted efforts to regulate credit derivatives in the past, on the argument that such contracts were valuable risk management tools, safe in the hands of the experts.
In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401(k) accounts and other investments.
Some have also been dismayed to learn that taxpayer money had ended up bailing out foreign banks. Some of the biggest beneficiaries of the bailout of A.I.G. were banks in Europe, including Société Générale of France and Deutsche Bank of Germany, each of which received nearly $12 billion, Barclays of Britain, which received $8.5 billion, and UBS of Switzerland, which received $5 billion.
This brings up so many obvious questions…
* Why are only Democrats signed up for this? The GOP should be just as interested.
* Why do people need to demand “detailed information” in the first place? When 170 billion dollars in taxpayer money is involved, we should ALREADY know every detail.
* Why is it that AIG’s “trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses?”
* At a time when we’re destroying our children’s future by piling on so much debt, why are billions of dollars in taxpayer money being used to bailout banks overseas?
The entire bailout process has been an utter and complete disaster from start to finish. In my view, those of us who opposed these bailouts from the beginning have been proven right. And the idea that Obama and Geithner should be given even more power to take over other companies? So far, this entire process has been a long, violent, slow motion train wreck. Why in the world would we want to expand that rolling disaster?