Another AIG Scandal?

Remember how in early March the banks, starting with Citi's (C) purposefully leaked memo, announced that they had operating profits? This was the beginning of a rally of over 20% on the S&P 500, which might now be over.

Zero Hedge reports that these profits everyone thought marked a turn for the economy actually resulted from AIG unwinding its CDS positions. Basically, the government gave money to the banks through AIG, and the banks said these payments were profits.

If that's how the banks booked profits in January and February, it would seem that the current optimism will disappear. The administration, which already has credibility issues, will no doubt face another round of criticism. And maybe this time Geithner will go.

Is what Zero Hedge reports true? I don't know. I'd certainly feel more confident about the reliability of the information if it came from a more established news source. After all, I'm a guy with a blog too. I can post made up stuff and have people link to it. Especially if it sounds true, like another AIG scandal. Nevertheless, we bloggers have reputations to maintain. It wouldn't be in Mr. Durden's interest to publish what he believes to be false (though I'm sure he has that soap company of his to fall back on).

So keep in mind, maybe it's just a rumor. But I think the article is true.

Comments

[the_feds_co...:]

This is a national disgrace! Where is the outrage? Where is the indignation? These people are thieves and con artists! There is no recovery! Its all based on lies and fraud!Tim G needs to resign! Where is the FBI? Where are the indictments?

Mar 30 03:19 AM

[James Wilson:]

IN OTHER WORDS THE GOVERNMENT WAS PAYING THE CLAIMS MADE BY BANKS ON AIG FOR FINANCIAL INSTRUMENTS AIG INSURED THROUGH UNDERWRITERS.

Say it right.


The FBI has so many cases that many will escape the time limits for prosecution. The FBI had to limit their fraud prosecution to $280.000 plus because there are so many.

Mar 30 04:06 AM

[cannedpawn8:]

Somebody's time is coming...I'm tired of all this. It is time for the Lady with the blindfold and scalesto ramp it up....

Mar 30 05:50 AM

[Moon Kil Woong:]

Ummm, I think they are partially wrong. I believe AIG paid out a lot to Goldman last year. It is nothing new.

This quarter the new regulations to tweaking mark to market will provide the lie to cover their financial asses.

Mar 30 06:19 AM

[prudentinve...:]

The economy will continue to "recover" as the banks will continue to state more "profits" emanating from more taxpayer-funded subsidies, obvious and hidden.

Mar 30 09:25 AM

[Allan Frain:]

With regards those who bid the market up in response to the Citi memo: A fool and his money are soon parted.

Mar 30 01:24 PM

[William Cowie:]

Barack Obama quote: “We cannot continue to excuse poor decisions. We cannot make the survival of AIG dependent on an unending flow of taxpayer dollars.”

He really did say that, except it was the auto industry he referred to, not AIG.

If only...

Mar 30 02:03 PM

[dkp:]

the future of capitalism is safe!

Mar 30 09:50 PM