Senator Chuck Grassley has received documentation from Goldman Sachs showing the top recipients of AIG money. The grand total is $4.3 billion. Below are the recipients and their amounts. As you can see, they are all foreign entities. In other words, U.S. taxpayer money, used to bail out AIG which in turn was used to pay off Goldman Sachs went straight out of the country and into foreign banks.
- DZ Bank AG Deutsche Zentrale-Genossenschafts Bank: $1.8 billion
- Banco Santander Central Hispano SA: $484 million
- Rabobank Nederland-London Branch: $182 million
- Zurcher Kantonal bank: $200 million
- Dexia Bank S.A: $105 million
- Calyon-Cedex Branch: $200 million
- The Hongkong & Shanghai Banking Corporation: $173 million
- Depfa Bank Plc: $126 million
- Sierra finance plc: $223 million
- PGGM Pensioenfonds: $47 million
- Natixis: $2 million
- Zulma finance plc: $416 million
- Stoneheath Re CRDV G: $68 million
- Hospitals of Ontario Pension Plan: $94 million
- Venice finance plc: $216 million
- KBC Asset Management NVD Star Finance: $191 million
- MNGD Pension Funds LTD: $69 million
- Infinity finance plc: $277 million
- Barclays Bank PLC: $27 million
- GSAM Credit CDO LTD: $13 million
- Signum Platinum: $38 million
- Lion Capital Global Credit I LTD: $2 million
- Kommunalkredit Int Bank: $11 million
- Credit Linked Notes LTD: $2 mlillion
- Ocelot CDO I PLC: $1 million
- Hoogovens PSF ST: $31 million
- The Royal Bank of Scotland: $4 million
The Washington Post:
-- International banks and financial companies were indirect beneficiaries of the government's 2008 bailout of American International Group Inc., according to newly released documents.
The documents released by Sen. Chuck Grassley, R-Iowa, contain a list of the 27 banks, hedge funds and financial companies that received $4.3 billion from Goldman Sachs Group Inc. The money was to reimburse them for losses on investments called credit default swaps that plunged in value during the financial crisis.
The money trail actually began with AIG, which sold the swaps to Goldman. The big investment bank in turn sold them to its customers, including the international banks and financial companies. When AIG received a bailout worth $182.5 billion, it reimbursed Goldman and other banks, which then repaid their customers.
Credit default swaps are essentially contracts that insure against the default of bonds and corporate debt. Sellers of swaps, such as AIG, are obligated to repay customers if the value of the underlying bonds or debt declines.
Much of the federal rescue money for AIG was used to pay its obligations to its Wall Street trading partners on credit default swaps. The biggest beneficiary of the AIG money was Goldman, which received $12.9 billion.
According to Grassley, the documents show that the five banks or companies ultimately receiving the largest amount of taxpayer money were DZ Bank AG in Germany, which received $1.18 billion; Banco Santander Central Hispano SA of Spain, which received $484 million; Ireland's Zulma Finance PLC, which received $416 million; Infinity Finance PLC in Britain, which received $277 million; and Britain's Sierra Finance PLC, which received $223 million.
Another $173 million went to Hongkong & Shanghai Banking Corp., which has HSBC operations throughout the U.S.
How many American jobs could have been created with that money? If one assumes each worker is paid $60,000 dollars, gross, that's 71,666 jobs. If one gave $3 million dollars to U.S. start-up companies, with the caveat they manufacture in the United States and hire U.S. workers only, that is 1566 companies which could have been funded.
Senator Grassley is now asking the GAO, the Congressional Oversight Committee (COP) and SIGTARP to look into this further with a series of questions. His letter is reposted below:
Questions for Richard Hillman – Government Accountability Office
1. What does Treasury need to do to successfully exit from TARP?
2. Will Treasury reach its goal for HAMP of helping 3 to 4 million borrowers? If not, how many borrowers do you think will get help from the program?
3. To what extent were CPP investment decisions influenced by political considerations or other external factors?
4. Does the increasing number of firms missing their CPP dividend payments indicate that more CPP firms are at risk of failure? And does the number of missed dividend payments show that Treasury made mistakes investing in these institutions?
5. Will the government’s equity stakes in Chrysler and GM be worth enough for the government to make back its entire investment? How long might it take for the government to recoup this money?
6. GM has announced that it plans to launch an initial public offering (IPO) by the end of this year. Is an IPO the only, or the best, alternative for recovering the taxpayer investment in GM, is an IPO on this timetable feasible, how will an IPO impact the government’s equity stakes in GM, and what role is Treasury playing in the IPO?
7. What work are you currently doing on Treasury’s aid to the auto industry?
8. GAO recommended last year that Treasury ensure it has adequate staffing to manage its investments in Chrysler and GM. Where does Treasury stand on this?
9. What is the likelihood of AIG repaying the government?
10. How is Treasury helping small businesses? Is Treasury meeting its goals for small businesses?
Questions for Elizabeth Warren, Congressional Oversight Panel
Several times in your Panel’s June report on the AIG bailout, you indicated that Goldman Sachs failed to provide information requested by the Panel. In particular, you indicated that Goldman did not provide information sufficient to identify entities you called the “indirect beneficiaries” of the AIG bailout — financial institutions with whom Goldman had hedged the risk of its exposure to an AIG default. You said, “And we want to know the identity of those parties partly just to know where American taxpayer dollars went, but partly to assess Goldman’s claim … that they had nothing at stake one way or the other in the AIG bailout.”
Following my suggestion to the Chairman that the Committee issue as subpoena if necessary, after the hearing, Goldman Sachs provided the Committee with the following spreadsheets and a briefing (see Attachments 1 and 2). My understanding is that Attachment 1 lists companies that wrote credit default swap protection on AIG for Goldman, meaning that in the event of an AIG default in September 2008, these entities would have been responsible for paying Goldman the amount in the “Net” column. Thus, these entities avoided losses in the amounts listed on Attachment 1 as a direct result of the taxpayers’ bailout of AIG in September 2008.
1. The fifth largest amount listed is about $175 million that Lehman Brothers would have owed Goldman Sachs on CDS protection. However, given Lehman’s financial position at the time (September 15, 2008), isn’t it true that the real value of this hedge to Goldman would have been much less than $175 million? Wouldn’t it have only been worth the approximate value of any collateral that Lehman had already posted to Goldman up to that date?
2. Similarly, is it possible that financial health of the other institutions on the list may have prevented them from being able to pay Goldman in the event of an AIG default? Does this undermine Goldman’s claim that it was “fully collateralized and hedged” with regard to the risk of an AIG default, and thus demonstrate that Goldman did, in fact, receive a direct benefit from the government’s assistance to AIG?
3. Will the Panel be seeking additional details about these transactions in order evaluate Goldman’s claim to have been indifferent to whether AIG went bankrupt? If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.
As I understand Attachment 2, it lists a series of entities that directly benefited from government assistance through the Federal Reserve’s Maiden Lane III facility, in that they received cash provided to AIG, which it owed to Goldman and which, in turn, Goldman owed them. The majority of these beneficiaries appear to be foreign entities.
4. Can you please explain how ensuring that these institutions were paid in full, rather than required to suffer the consequences of the risks that they took, benefited the U.S. taxpayer?
5. Will the Panel be seeking additional details about these transactions? If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.
Questions for Neil Barofsky, Special Inspector General, TARP
Last year it was estimated that although the TARP program itself amounted to about $700 billion, the total government risk from other programs at the Freddie Mac, Fannie Mae, HUD, and the Federal Reserve amounted to about $3 trillion. In the last year, this estimate has increased to $3.7 trillion. So, we’ve added a whole new TARP program worth of risk in the last twelve months in the amount of $700 billion.
1. How likely is it that taxpayers could start suffering actual losses from this $3.7 trillion in risk?
2. What are the potential pitfalls that could cause these risks to start causing losses to taxpayers?
3. The last time you testified before the Committee, I asked you about a Wall Street investment firm named Blackrock. I understand your office is auditing or investigated potential conflicts of interest involving this company and the Public-Private Investment Program, the $40 billion TARP program designed to buy toxic assets. As I understand it, BlackRock has a deal to work on Maiden Lane for the Federal Reserve Bank of New York as a toxic asset analyst, while a separate BlackRock company has a deal with Treasury to participate in the Public-Private Investment Program to buy toxic assets. What can you tell this Committee about the results of your investigation/review to date?
4. Your office has been investigating excessive executive severance payments to AIG executives that occurred earlier this year. I have asked you to conduct this investigation because the Treasury Special Master for Executive Compensation has been unwilling to get to the bottom of what happened. You also are investigating potential conflicts of interest within the Special Master’s office. Could you please update the Committee on your progress?