AIG Suddenly Takes the Full Disclosure Route

Late Sunday, AIG, which all of a sudden "recognizes the importance of upholding a high degree of transparency with respect to the use of public funds", finally caved to pressure to disclose the full list of recipients (.pdf) benefiting from collateral payments after its repeated rescues.

No major surprises among the bank recipients: the top 5 include Societe Generale (SCGLY.PK), Deutsche Bank (DB), Goldman Sachs (GS), Merrill Lynch (MER) and Calyon. Additionally, of the top 20 beneficiaries, 14 banks are non-domestic!

Payments were made as follows:

• $22.4 billion to satisfy CDS collateral postings by AIG Financial Products;
• $27.1 billion in payments made from Maiden Lane III To AIG FP counterparties;
• $43.7 billion in direct support to AIG securities lending counterparties;

U.S. Taxpayers will be thrilled to discover that of the $93.2 billion of their money spent to prevent financial collapse, over 70% went to bail out non-domestic banks.

Another $12.1 billion was spent to bailout out municipalities under Guaranteed Investment Agreements, the main beneficiaries being California and Virginia, both receiving just north of $1 billion.

In total, over $105 billion has been spent so far to bail out assorted entities that have been so far entangled in the AIG web.

Considering AIG's newfound understanding of the importance of upholding transparency regarding the use of public funds, the U.S. public now fully expects to see a list of all bonus recipients since the company's collapse on September 16, 2008.

Disclosure: No position

Comments

[jtsc:]

what's the big fuss all about? you think that saving AIG from the brink of collapse meant giving them a huge pile of money to just sit on? it's to pay counterparties and to put up collateral at counterparties, dummy, for all the mark-to-market losses they've incurred. If things turn around and these CDS'es turn out to be less toxic than what they're being marked at, all will be well and they will get (some or most of) their money back. By bailing AIG out, the taxpayer just bought hundreds of billions of (their own) credit paper when nobody else wanted it, but in effect saving the world from a mass unloading of said debt at fire sale prices. thanks, uncle ben!

Mar 16 07:20 AM

[LBX:]

Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.

Mar 16 07:31 AM

[LBX:]

Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.

Mar 16 07:32 AM

[prudentinve...:]

Interesting how bonuses paid from taxpayers' money are defended on the basis of being contractual.

Firstly, employment contracts are voided by bankruptcy. Although AIG, ML, C, BAC, and other WS rescued institutions are not technically bankrupt, the only reason they did not file for bankruptcy is government stepping in to prop them with taxpayers' money. Claiming that they should be allowed to pay bonuses because their bankruptcy has been avoided (or delayed) by massive use of public funds is disengenious, to say the least.

Secondly, congress just passed a law that allows judges to modify legally binding contracts (aka mortgages). So, it should be possible to pass a similar law allowing judges to retroactively modify, or even recoup, egregious bonuses paid by entities which had to be bailed out by government intervention.

Mar 16 07:46 AM

[Ban11323:]

"U.S. Taxpayers will be thrilled to discover that of the $93.2 billion of their money spent to prevent financial collapse, over 70% went to bail out non-domestic banks."
- How is this a bailout? AIG was contractually committed to pay these sums. The fact that it was paid with public money is deplorable, but that's what the US government guaranteed when it took over the firm.

Mar 16 08:56 AM

[silverfox:]

And to add insult to injury AIG says they will pay out 135 million in bonuses to their executives.
The American taxpayer should be furious.
call your MLA, Governor whoever will listen and scream
until the message gets through.
this is nothing short of ridiculous.

Mar 16 11:27 AM

[silverfox:]

I stand to be corrected it is 165 million AIG will payout to Executives announced March 16/2009
Somebody please shut these people down now!!!!!!

Mar 16 11:54 AM

[Henry Buttal:]

Possibly the most offensive element about the entire process is how far ahead Goldman Sachs is going to come out ahead on the deal. To wit:
- they had significant CDS exposure if AIG failed
- GS had numerous holdings that were offset by "insuring" swaps with AIG as the counterparty. Hence the receipt of the collateral postings
- GS clearly had both "bet" and guarantee holdings, which account for the large amount paid out directly to GS from AIG.

So Government Sachs ensured that Goldman Sachs was paid with OUR MONEY!! Shameless, and a clear breach of fiduciary duty, if not actually criminal.

Mar 16 12:06 PM

[Moon Kil Woong:]

Henery Buttal, yah that's what happens when you promote the CEO partially responsible for AIGs mess to be head of the Treasury (Paulson). Paulson was in power as one hand of Golman was encouraging AIG to get into CDS while the other hand was buying the contracts to short mortgage bonds they underwrote. Can you say sweet.

The only downside hitch would be if AIG and other counterparties went belly up before paying them out. We can see how they resolve that.

It seems AIG is finally disclosing to pressure their counterparties to pull their political strings so they won't go under. It's the "well if the government is about to let me fry then you better do something or I'll drag other bankers down with me.". This tactic works well holding the economy hostage for bailout money so why wouldn't it work on the bankers who are doing this tactic as well?

After all, the easy solution is just keep using others people's money. Sure the public will howl but it's obvious they don't give a rats ass about the public or taxpayer.

Mar 16 12:27 PM

[mr freddo:]

I am in agreement with prudent investor. A judge should be able to invalidate these ridiculous bonus contracts. As a former CEO familiar with bonus structuring, I find it unbelievable that there weren't clauses in the contracts that invalidated or at least reduced the payments in the event of severe financial distress.

$100 million bucks for the division that blew the company up? Yes, we really don't want to lose any of those talented players.

Mar 16 01:04 PM

[oldumbguy:]

Absolutely amazing that anyone at AIG could "earn" a bonus for performance. Any $s they get can only be described as ransom for agreeing to help in the cleanup or outright theft.

I want to see people in orange jump suits. Bring on the perp walks.

Mar 16 02:24 PM

[999abcd:]

After Obama’s speech and actions today regarding the looters at AIG, it certainly appears that the ‘big swinging dicks’ on Wall Street are going to be cut off from their money supply --- or maybe simply ‘cut off’.

Alan MacDonald
Sanford, Maine

Mar 16 04:05 PM