Oversight Committee AIG Hearing Highlights

The House Committee on Oversight and Government Reform is holding a hearing today, The Federal Bail Out of AIG.

All prepared statements are at the above link. The hearing has testimony from:

  • Treasury Secretary Timothy Geithner
  • Former Treasury Secretary Mr. Henry Paulson
  • SIGTARP Inspector General Mr. Neil Barofsky
  • Executive VP and NY Fed General Council Mr. Thomas Baxter
  • Senior VP and AIG CFO Mr. Elias Habayeb
  • Former NY Fed Chairman of Board of Governers Mr. Stephen Friedman

I'm still swimming through mountains of documents and tons of verbiage, but I will sum up what I do not know so far.

Firstly, it seems that when it comes to figuring out who precisely gave the go ahead for the 100% AIG counterparty payouts, magically top officials were not involved.

BlackRock AIG Presentation Online - Read it Yourself

The actual Black Rock presentation which proves Goldman Sachs was willing to take a hair cut on AIG CDS payouts is online.

The document availability is by the good graces of Zero Hedge, who I also highly recommend reading their analysis and details on the ongoing AIG payout saga. Here are some of their BlackRock presentation document conclusions on Goldman Sachs:


SIGTARP as released a new study report on AIG. The report found that the AIG 100% CDS payout was a grave mistake.

Guess whose mistake it was? Then New York Fed President Timothy Geithner.

For some background on this payouts, read The Real Screw Job: AIG used as a Funnel of U.S. Taxpayer money.

Here's the money quote from the SIGTARP report, right in the summary:

  1. The original terms of federal assistance to AIG, including the high interest rate it adopted from the private bank’s initial term sheet, inadequately addressed AIG’s long term liquidity concerns, thus requiring further Government support.

A Funny Thing Happened on the Way to the Senate Banking Committee Hearing

On May 20th, U.S. Treasury Secretary Geithner testified before the Senate Banking Committee on TARP Oversight.

Our Senators, bi-partisan, asked some very good common sense questions.

This hearing was right before Geithner announced they will be using the
Wall Street Plan
(read Goldman Sachs, JP Morgan Chase) for OTC derivatives trading, a seemingly contradiction of his earlier May 13th proposal.

Below are excerpts from the committee questioning.

Senator Mark Warner asks why AIG paid out on credit default swaps at 100%, in particular to Goldman Sachs:

Bail Out Hypocrisy - Manufacturing Gets the Shaft, Financials Get to Craft

The White House is in full hypocrisy mode. While Obama Treasury Secretary Geithner tries to do a massive power grab, invites financial sector CEOs to craft policy and cooperate in their multi-trillion dollar U.S. taxpayer money pig fest, the auto industry is shipped to bankruptcy court. Even worse, Chrysler is to be broken up into good cars and bad cars, yet Italy (Fiat) gets the good cars and the United States gets the bad.

Meanwhile Obama Press Secretary Robert Gibbs struggles as reporters immediately question the different standards:

Geithner & Bernanke in Financial Services Committee Hearing

Folks, I must recommend turning off the pundits on TV, CNBC and even many of the blogs and tune into CSPAN.

Today in the House Financial Services Hearing, Oversight of the Federal Government’s Intervention at American International Group, U.S. Treasury Secretary Tim Geithner, Federal Reserve Chair Ben Bernanke, along with New York Fed Chair William Dudley testified.

The Real Screw Job - AIG Used as Funnel of U.S. Taxpayer Money

large screw small screw
See these two screws on the left? Think of the little screw as AIG bonuses. That big nasty long screw is AIG funneling $183 billion dollars of your money to foreign banks and to banks that already have wads of cash on hand. Those two screw jobs are not even to scale because the large screw would go past the page. Look those two screws over. Now which one do you believe Populist outrage should be focused on?

So we are all outraged over AIG bonuses. Now lets amplify that outrage to the scale of the ripoff. The bonuses are only 0.001 of the real ripoff that just happened. Your tax dollars were funneled through AIG to foreign banks and to U.S. banks for worthless assets. Your own blind rage is a smoke screen, being used by media elites so you do not see the real screw job going on.

In an Instapopulist earlier we showed the AIG payout disclosure. Now I want to amplify those payouts. In the attached file AIG lists payouts to counter parties.

What happened? Basically a bunch of companies placed bets, called credit default swaps, that home mortgages weren't so great and would probably go bust. AIG (Financial Products), as the great global gambling hall, allowed these bets to be placed. Then AIG got a huge mega wad of cash from the government so they could pay out on these casino hall winnings instead of going bankrupt. Banks who won big are foreign banks and of course Goldman Sachs, former Treasury Secretary Paulson's former company.

Think it's about unfreezing credit markets for you and me? Think it's about contracts? Don't you remember something about other nations taking care of their own banking system? Do you believe the United States should prop up the entire globe or payout U.S. taxpayer money to other nations?

Contracts are broken all of the time and considering this is U.S. taxpayer money footing the bill to pay for the below banks gambling bets, yeah, a nation can break such outrageous contracts. This is especially true considering these very institutions are getting billions of your money from the TARP and Federal Reserve. Did you know Goldman Sachs bought an energy speculation firm while receiving TARP funds?

The Wall Street Journal put together an image to show you how this Ponzi scheme works:




On Tuesday, March 18th, Senator Dodd gave a comletely different asnwer than the one he gave the day before. On Monday he said he had no idea how or why the key paragraph that limited Executive's bonuses to not more than $100,000 was removed from the TARP legislation.

Today, Tuesday, Senator Dodd had a miraculous revovery of his recollection as to what happened.

He said people from the Treasury Dept. were responsible for removing the key paragraph. When asked by Wolf Blitzer who from the Treasury Dept.had contacted him, Senator Dodd CONVENIENTLY said he didn't know who it was from Treasury and they had talked to his staff, but not him!!!!

i.e. Dodd stated it was his legislation but inferred that the paragraph that essentially gutted his legislation of any teeth had been removed by his staff without his knowledge and he had no idea who from Treasury had contacted his staff!

An "immoral" or possibly unconstitutional proposal of sorts

Yesterday I read about how the folks at AIG will be getting their bonuses. Like many of you, this infuriated me to no end. Once more, failed business people gaining reward for their bad decisions. The shareholder has lost most of the value in the equity in the company. The taxpayer (and also now a shareholder) has actually gotten two punches in the gut, including diminishing share value they've also had to put up billions of dollars. Frankly enough is enough.