Who Got the AIG Money? Inquiring Minds Want to Know!

During a March 5th, 2009 Senate Committee hearing, the Federal Reserve Vice-Chair, Donald Kohn, refused to disclose who is getting the money from AIG:

 

The Wall Street Journal has a bombshell story, Top U.S., European Banks Got $50 Billion in AIG Aid . Is is really a bombshell, don't we know that behind closed doors is always where the real theft occurs? Isn't that the entire definition of the Enron style shadow state of the derivatives markets?

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Here's the list:

  • Goldman Sachs - $6 billion
  • Deutsche Bank - $6 billion
  • Merrill Lynch
  • Société Générale
  • Calyon
  • Barclays
  • Rabobank
  • Danske
  • HSBC
  • Royal Bank of Scotland
  • Banco Santander
  • Morgan Stanley
  • Wachovia
  • Bank of America
  • Lloyds Banking Group

AIG has already received $173 billion in U.S. taxpayer money (that we know of). AIG is losing $465,421 Per Minute

Naked Capitalism has this insight as to why so many European Banks used AIG's CDSes.

Another reason for the bailout was that AIG's guarantees allowed European banks to circumvent minimum capital requirements, which means the AIG salvage operation was a backstop to European financial firms.

Remember the boys club where Goldman Sachs was in on the negotiations of what to do with AIG? Now, magically Goldman Sachs is gets the largest payout.

The Financial Times Willem Buiter has some earlier numbers on what were AIG payouts to other banks:

An LSE colleague has shown me an earlier report in the Wall Street Journal (in December 2008), citing a confidential document and people familiar with the matter, which estimated that about $19 billion of the payouts went to two dozen counterparties between the government bailout of AIG in mid-September and early November 2008. According to this Wall Street Journal report, nearly three-quarters was reported to have gone to a group of banks, including Société Générale SA ($4.8 billion), Goldman Sachs Group ($2.9 billion), Deutsche Bank AG ($2.9 billion), Credit Agricole SA’s Calyon investment-banking unit ($1.8 billion), and Merrill Lynch & Co. ($1.3 billion). With the US government (Fed, FDIC and Treasury) now at risk for about $160 bn in AIG, a mere $19 bn may seem like small beer. But it is outrageous. It is unfair, deeply distortionary and unnecessary for the maintenance of financial stability.

According to this comment on Naked Capitalism's post:

This article raises a much bigger question. In AIG's Q4 earnings call earlier this week, Ed Liddy said AIG had a 2 trillion financial products operation, with over 1 trillion concentrated with 12 major institutions.

The big question is this: on a MTM basis, how much does AIG owe the counterparties under its 2 trillion of financial products? That would give a taste of how much money Obama/Geithner/Summers will burn by funding future losses to AIG.

neutron bomb
Meanwhile Myron Scholes is recommending the government simply eradicate the OTC (over the counter) derivatives markets and start over. He should know, considering his own derivatives folly with LTCM.

Amazingly enough, I said that in a comment earlier this week. Take the entire fictional financial money system offline, decouple it from the network, clean the entire mess up, erase the fake money with fictional gains and fiction returns, say bummer to all those around the world who lost the fictional money, the concept being global losses are relative, and if everyone loses, well, no one really loses, and reboot the entire system with stable, valid derivative vehicles only. When one has a major virus, sometimes the best thing to do is wipe the hard drive clean and start over.

Call this Geekonomics.

Of course cluster bombs often hit the innocents so perhaps a more surgical approach is needed. Yet the strong need to plain kill this derivatives insanity with it's nonsensical mathematical models where anyone with a statistics or multi-variate calculus background can see are invalid....should be stopped. It's the modern day Dutch Tulip Bulb.

Meta: 

Comments

Are there any?

You claim:

reboot the entire system with stable, valid derivative vehicles only

I'm not at all sure that isn't an oxymoron in and of itself.  Derivatives, like fractional reserve banks and short sells, are inherantly unstable- they're based on little more than lies and promises.  

So while I agree with you that we need a reboot of the system, I don't think we can base the new system on credit and derivatives; in fact, these things need to be either outright banned or minimized in whatever new system we end up with.  Otherwise, 70 years from now, we'll be going through this all over again.

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Moral hazards would not exist in a system designed to eliminate fraud.

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Maximum jobs, not maximum profits.

Bailout MOney - India has first dibs on the Jobs

With Millions of Americans Unemployed how can we JP Morgan Chase, who received some TARP money suddenly help Indians instead of Americans.
Is there anything we can do about it? Oh America Wake Up
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http://www.businessweek.com/globalbiz/content/mar2009/gb2009039_431274.htm

The second-biggest bank of the US, JP Morgan Chase, which acquired Washington Mutual and Bear Stearns recently, will increase its outsourcing to India by 25% this year to nearly $400 million. It will also manage the integration of the acquired companies from India to bring down the cost of integrating different information technology (IT) systems.

Right now, JP Morgan outsources $250-300 million worth of IT and back-office projects every year to Cognizant, TCS and Accenture, apart from to its own captive centre in Mumbai.

"JP Morgan CIO Guy Chiarello said last week that he will increase outsourcing to India, and will drive several integration projects from there," a New York-based expert, familiar with JP Morgan’s outsourcing plans, told ET last week, on conditions of anonymity. A spokeswoman for JP Morgan India could not reply to an email query sent by ET on Friday, and the bank’s spokesperson in the US too did not reply.

"JP Morgan is one of the first banks in the US to have fleshed out its outsourcing

strategy ever since the banking meltdown happened. Many others are still undecided about their IT spend," said a senior official at one of the technology firms, who did not wish to be quoted.

The bank, which cancelled its $5-billion outsourcing contract with IBM in 2004—following the merger with Bank One—had brought back around 4,000 IT staff in-house after the new CIO Austin Adams had proposed a "do-it-yourself" strategy for the merged entity.

"In this economic environment, Mr. Chiarello, the current CIO, wants to ensure that he helps JP Morgan meet cost-reduction goals," the expert added. With large global banks like Lloyds TSB and HBOS, and Bank of America & Merrill Lynch merging, India’s top tech firms, including Infosys, TCS and Cognizant, are bidding for at least three $100 million-plus contracts.

As these banks merge, they face a huge task of integrating their software applications, consolidating their data centres and other trading platforms into a single entity, so that their customers are able to transact without having to face any merger-related issues. And since offshoring will help them save costs by 30-40%, these merged banking entities are seeking to partner with a vendor having significant offshore presence. "Apart from looking at cost-saving opportunities, such as offshore outsourcing, these banks also want to partner with their existing vendors because they would know the systems better," said a consultant on condition of anonymity.

As reported by ET recently, Lloyds TSB—which merged with HBOS—is seeking partners to help the merged entity integrate its retail and wholesale banking systems through an IT platform. The company has already outsourced its HR functions to Xansa two years ago, in a five-year deal.

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Indian Hb-1 & Outsourced Services

One thing we can do is...insist on automated drive- throughs at fast food restaurants. It's really difficult when franchise owners of In & Outs are forced to pay exhorbitant sums to minimum wage hispanics, many of whom require effort to verify their legal documentation. Indeed, having to use a part-time highschool student to go online and use E-Verify can be highly humiliating. Just ask Tim Geithner, or whoever is now heading up I.C.E. The Indian workers here know nothing about feelings of reverse discrimination or practices of favoritism to their own kind...all are extremely objective. Just ask the hiring teams at the top 25 Silicon Valley Tech Firms. They'll confirm that..."We love Indian workers. They're the folks we hire." And why not...they're willing to work at very reasonable wages...even if it mean stacking many bachelor new graduate engineers into single apartments.:-)

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aig

The reason AIG got all those billions first, was that senate and congress members 401k's are tied into AIG. If AIG fails they lose their retirement. It's OK for the average Joe to lose there's. The fact they loss track of 62 billion is cover they are money hungry pirates, F--- off aig

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