AIG

3 posts / 0 new
Last post
RussB's picture
RussB
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
AIG

What should we think about today's outrage, this "unkindest cut of all"? Throughout this obscene bailout regimen, as the Bush/Obama crew lurches from debacle to debacle, AIG has been in the vanguard of arrogance, psychopathic sense of entitlement, and a gleeful will to spit in the face of the taxpaying public and walk away laughing. Today is their funniest prank yet. 

Here's a few preliminary thoughts:

1. What are CDSs? They constitute an insurance scam. It's claimed that they're insurance, and through this claim, with the blessing of the non-regulators, banks were able to greatly lessen the amount of capital reserves they had to hold.

But at the same time it was claimed they're not insurance, and therefore shouldn't be regulated as insurance; indeed that they shouldn't be regulated at all. "Regulators" again acquiesced.

Worst of all, most of these bets weren't even pseudo-insurance by the above loose, unregulated standard, but were rather flat out speculative gambling by parties completely unconnected to the underlying.

By no means are CDSs a feature of capitalism. They are rather the tool of parasitic rent-seeking fraud.

2. Summers and Geithner are whining about this? But they presided over the Clinton regulatory gutting. The CFMA is their baby. They personally own this policy which has established America as an anti-regulatory no man's land. 

3. The cadres at AIG knew this was a criminal enterprise. They knew these contracts were insolvent and yet kept writing them, engaging in conscious fraud for their personal profit. Every step of the way they fully expected that if things went wrong, the losses would be socialized while their private looting operation would be protected, since this government is in the business of facilitating crime. These bonuses are what is called fraudulent conveyance, or looting in a very literal sense.

4. Government has lots of muscle to deploy here, if it cares to flex it. Why not promise to intensively interrogate every bonus recipient, to see what if any indictments are indicated?

5. In particular, I wonder what applications RICO might have here and in the case of the banks. (Would this be an abuse of RICO? I don't believe so, if these really are the rackets they seem to be. Anyway, they've never been shy about "creative" RICO prosecutions before. Why start now, when it might actually be worthwhile?)

6. Getting beyond the legalities: Summers is quoted in the NYT: "this is a country of laws". No, it's not. That's why we're here. This finance industry has consistently wanted to be placed outside the law. That's been the entire focus of their anti-regulatory anti-legal lobbying campaign for decades now. And they got what they wanted. They are veritable outlaws, still rampant with the loot, still vandalizing and desecrating. So I'd be happy to treat them as the outlaws they are.

7. What could anyone involved here be thinking? I get that the AIG personnel are pure psychopaths and probably can't help themselves by now. There's nothing you can do with them; no rehabilitation is possible. You either let them continue to loot and destroy, or you don't. But what could Obama be thinking? I don't normally go in for hyper-Machiavellianism (if only because so few are competent to successfully carry it out), but this case is so extreme, so brazen, and so seemingly gratuitous, that I can't help wondering if it isn't actually a trial balloon to test the reaction of the people; to see whether or not the people really will stand for the Big Loot the adminstration clearly wants to facilitate for these corporations, where AIG is just one element among many.

Many commentators have reminded us how quickly insurrection can flare up, and we're already seeing examples around the world, just as we did a year ago with the food riots. Do the American people have any of the old spark still in them? If they let this AIG affront go by with just the same old griping, if there isn't a groundswell of elemental outrage DEMANDING that something severe be done to rectify this, then I guess the adminstration will have its answer. It'll feel emboldened to go ahead.

8. One last point: they say these contracts can't be broken? That spurned bonus claimants could sue? Let them! I'd love to see that. I'd like to see who has the audacity to go before the country and publicly demand a bonus. I'd like to see who would stand up in court under oath and defend his career in great detail. I'd like to see him go before the reporters and vouch for himself and his company. "Bring 'em on!"

But of course Obama and Geithner won't force AIG to do that. Why? Because they too agree with the bonuses and want the bonuses paid out. That's what Geithner's whole career has stood for, and that's what Obama's presidency has so far stood for. Now we'll see what comes next.      

MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 855
Re: AIG

Russ, I can't help but feel that, at some point, a lot of people will have had enough of this bullshit.  I hope it is sooner rather than later.  I will be at the "End the Fed" rally next month.  I am encouraging all I have contact with to do the same.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
AIG Publishes Counterparty List

 

 Contact: Teri Watson (Investment Community)
  (212) 770-7074
 
Nick Ashooh (News Media)
(212) 770-3523
 
 
AIG DISCLOSES COUNTERPARTIES TO
 
CDS, GIA AND SECURITIES LENDING TRANSACTIONS
 
 
NEW YORK, March 15, 2009 – American International Group, Inc. (AIG) recognizes the
importance of upholding a high degree of transparency with respect to the use of public
funds.  As a result, after close consultation with the Federal Reserve, AIG is disclosing
information identifying certain credit default swap counterparties, municipal counterparties
and securities lending counterparties.  Before disclosing this information, AIG consulted
with the Federal Reserve about the potential public benefit of counterparty disclosure and
the potential that such disclosure would cause competitive harm to AIG or its counterparties.
 
Severe valuation losses on the super senior multi-sector credit default swap portfolio
of AIG Financial Products Corp. (AIGFP) triggered collateral provisions in the swap
contracts, creating a liquidity crisis for AIG in September 2008.  The Federal Reserve Bank
of New York (FRBNY) provided an emergency $85 billion loan to AIG to meet short-term
cash needs.  The aid received by AIG helped avoid severe financial disruptions by providing
liquidity to important financial institutions and municipalities.
 
Using funds from the emergency loan, financial counterparties listed on Attachment
A (all attachments are posted online at http://www.aig.com/Related-Resources_385_136430.html )
received a total of $22.4 billion in collateral relating to CDS transactions from AIGFP
between September 16, 2008 and December 31, 2008.  This amount represents funds
provided to such counterparties after the date on which AIG began receiving government
assistance.  The counterparties received additional collateral from AIG prior to September
16, 2008.
 
On November 10, 2008, AIG and the FRBNY established Maiden Lane III, a
financing entity, to purchase the securities underlying certain CDS contracts from the
counterparties to such contracts, allowing the cancellation of the contracts.  Attachment B
lists payments made by Maiden Lane III to such counterparties.
 
Municipalities in the states listed on Attachment C received a total of $12.1 billion
from AIGFP between September 16, 2008 and December 31, 2008 in satisfaction of
Guaranteed Investment Agreement (GIA) obligations.  GIAs are structured investments with
a guaranteed rate of return.  Municipalities typically use GIAs to invest the proceeds from
bond issuances until the funds are needed.
 
Public aid was also used to satisfy obligations to financial counterparties related to
AIG’s securities lending operations. Securities lending counterparties listed on Attachment
D received $43.7 billion from September 18, 2008 to December 31, 2008.
 
--more--
 
 
 
 
AIG Discloses Counterparties…
March 15, 2008
Page two
 
AIG has used the balance of the public aid it received during that time period for
other purposes, including the funding of Maiden Lane II and III, debt repayment and capital
support for some of its businesses.
 
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.  
 
# # #
 
American International Group, Inc., a world leader in insurance and financial
services, is the leading international insurance organization with operations in more than 130
countries and jurisdictions.  AIG companies serve commercial, institutional and individual
customers through the most extensive worldwide property-casualty and life insurance
networks of any insurer.  In addition, AIG companies are leading providers of retirement
services, financial services and asset management around the world.  AIG's common stock is
listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and
Tokyo.
 
# # #
 
Counterparty Amount Posted
($ bn)
Societe Generale $4.1
Deutsche Bank 2.6
Goldman Sachs 2.5
Merrill Lynch 1.8
Calyon 1.1
Barclays 0.9
UBS 0.8
DZ Bank 0.7
Wachovia 0.7
Rabobank 0.5
KFW 0.5
JPMorgan 0.4
Banco Santander 0.3
Danske 0.2
Reconstruction Finance Corp 0.2
HSBC Bank 0.2
Morgan Stanley 0.2
Bank of America 0.2
Bank of Montreal 0.2
Royal Bank of Scotland 0.2
Top 20 CDS Total $18.3
Other 4.1
Total Collateral Postings $22.4
AIGFP Related Uses: $52.0 bn
Use of Direct Support to AIG from 9/16/08-12/31/08
Attachment A - Collateral Postings Under AIGFP CDS †
Maturing Debt &
Other, $12.5
Equity in Maiden
Lane III, $5.0
GIAs Held by
Municipalities,
$12.1
Collateral Postings,
$22.4
†The collateral amounts reflected in Schedule A represent funds provided by AIG to the counterparties indicated after September 16, 2008, the date on which AIG began receiving government assistance.
The counterparties received additional collateral from AIG prior to this date, and AIG’s SEC report relating to ML III reflects the aggregate amount of collateral that counterparties were entitled to retain pursuant to
the terms of the ML III transaction.
Attachment B – Maiden Lane III Payments to
AIGFP CDS Counterparties
Institution (Counterparty may differ) Maiden Lane III
Payments Made to
Counterparties
Maiden Lane III
Payments Made to
AIGFP
Deutsche Bank $2.8
Landesbank Baden-Wuerttemberg 0.1
Wachovia 0.8
Calyon 1.2
Rabobank 0.3
Goldman Sachs 5.6
Société Générale 6.9
Merrill Lynch 3.1
Bank of America 0.5
The Royal Bank of Scotland 0.5
HSBC Bank USA 0.0*
Deutsche Zentral-Genossenschaftsbank 1.0
Dresdner Bank AG 0.4
UBS 2.5
Barclays 0.6
Bank of Montreal 0.9
Other payments to AIGFP under
Shortfall Agreement
$2.5
Total $27.1 $2.5
($ billions)
* Amount rounds to zero
State Amount ($ bn)
California $1.02
Virginia 1.01
Hawaii 0.77
Ohio 0.49
Georgia 0.41
Colorado 0.36
Illinois 0.35
Massachusetts 0.34
Kentucky 0.29
Oregon 0.27
Delaware 0.26
New York 0.21
New Jersey 0.21
Mississippi 0.18
Washington 0.17
Pennsylvania 0.15
Florida 0.15
Rhode Island 0.14
Arizona 0.12
Texas 0.10
Top 20 Total $7.00
Other 5.10
Total GIAs $12.10
Attachment C – Payments Under
Guaranteed Investment Agreements
AIGFP Related Uses: $52.0 bn
Use of Direct Support to AIG from
9/16/08-12/31/08
Maturing Debt &
Other, $12.5
Equity in Maiden
Lane III, $5.0
GIAs Held by
Municipalities,
$12.1
Collateral Postings,
$22.4
Attachment D – Payments to AIG
Securities Lending Counterparties
Institution Payments to Counterparties by
U.S. Securities Lending
Barclays $7.0
Deutsche Bank 6.4
BNP Paribas 4.9
Goldman Sachs 4.8
Bank of America 4.5
HSBC 3.3
Citigroup 2.3
Dresdner Kleinwort 2.2
Merrill Lynch 1.9
UBS 1.7
ING 1.5
Morgan Stanley 1.0
Societe Generale 0.9
AIG International Inc. 0.6
Credit Suisse 0.4
Paloma Securities 0.2
Citadel 0.2
Total $43.7
($ billions)
Use of Direct Support to AIG from 9/16/08-12/31/08

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments