I wrote in the past that the bailout of AIG was actually a bailout of AIG's counterparties, mainly large banks and investment banks. No way should these banks get paid 100 cents on the dollar when they are actually due nothing. This is what I call the "Goldman Sachs Enrichment Act". Goldman was the largest beneficiary of the AIG bailout recieving about $13 billion in "make good" derivative bets with AIG. The Treasury Department is infested with former Goldman Sachs honchos. Both former Treasury secretary Hank Paulson and current Secretary Timothy Guithner are former Goldman executives. This is a multi-billion dollar heist of American taxpayers.-Lou
Why didn't Fed force big banks to take less of AIG bailout?
McClatchy Newspapers
WASHINGTON — The Federal Reserve Bank of New York in November chose not to pursue tough negotiations with large foreign and domestic banks and instead allowed them to receive 100 cents on the dollar in government funds to settle tens of billions of dollars of exotic financial bets guaranteed by American International Group.
WASHINGTON — The Federal Reserve Bank of New York in November chose not to pursue tough negotiations with large foreign and domestic banks and instead allowed them to receive 100 cents on the dollar in government funds to settle tens of billions of dollars of exotic financial bets guaranteed by American International Group.
At the time, Timothy Geithner, now Treasury Secretary, headed the powerful New York Fed. On his watch, the decision was made to forgo a reduced payout — called a "haircut" in industry parlance — to creditors of AIG to prevent financial chaos around the world, the officials told McClatchy.
Had the Fed negotiated a reduction of just 10 cents to 15 cents on the dollar, it could've saved between $2 billion and $3 billion.
The revelation sheds new light on last month's disclosure by AIG that it used loans from the New York Fed to pay more than $17 billion to foreign creditors such as France's Societe Generale and Credit Agricole, and Germany's Deutsche Bank. U.S. investment banks, including Goldman Sachs and Merrill Lynch, also were paid $10 billion in what amounted to a back-door bailout of the troubled institutions that had financed the insurer's risky investments.
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