AIG: $105 Billion to Counterparties

The ongoing debacle that is the AIG bailout has entered a new phase. Outrage to follow.

The latest admission from the (defunct yet living) company is that well over $100 billion in taxpayer monies has gone to counter-parties at 100 cents on the dollar — no haircut, no penalty, no cost to those who made bad bets or chose their counter parties poorly. They were made completely whole by Uncle Sam and the American taxpayer.

This is a complex situation that is one part legitimate, one part outrage.

Some of this money was properly returned: $43.7 billion paid against lent securities is a perfectly valid transaction. $12.1 billion tied to guaranteed investment contracts paid to US states (California and Virginia in particular) is less clearcut — were these transactions with AIG the Insurer or AIG the hedge fund?

The counter-parties that bought credit-default swaps ($22.4 billion in collateral, $27.1 billion in payments) are more likely the structured finance trades, and unworthy of being made whole by taxpayers.

Among those who have partook in Uncle Sam’s munificence were Goldman Sachs, Merrill Lynch, Morgan Stanley, Wachovia and Bank of America. You might be surprised to learn the rest of the charity recipients were overseas banks: Germany’s Deutsche Bank and French bank Société Générale, as well as Calyon/Crédit Agricole (France), Danske (Denmark), HSBC (UK), Royal Bank of Scotland, Banco Santander (Spain), Lloyds Banking Group (UK), Barclay (UK) and Rabobank (Netherlands).

Not only are US taxpayers subsidizing the bad decisions made by executives in the US, we are also bailing out the poor judgment of the rest of the world.

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Previously:
Backdoor Bailouts for Goldman Sachs? (March 5, 2009)
http://www.ritholtz.com/blog/2009/03/backdoor-bailouts-for-goldman-sachs/

Solvent Insurer / Insolvent Insurer (March 4, 2009)
http://www.ritholtz.com/blog/2009/03/solvent-insurer-insolvent-insurer/

iBanks Grabbed $50 Billion in AIG Bailout Cash (March 7th, 2009)
http://www.ritholtz.com/blog/2009/03/ibanks-grabbed-50-billion-in-aig-bailout-cash/

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See also:
All Bailouts Are Counterparty Bailouts
Economics of Contempt, MARCH 14, 2009
http://economicsofcontempt.blogspot.com/2009/03/all-bailouts-are-counterparty-bailouts.html

AIG Says $105 Billion Flowed to Goldman, SocGen, U.S. States
Hugh Son and Robert Schmidt
Bloomberg, March 16 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=awiPvRbKoabA&

A.I.G. Lists the Banks to Which It Paid Rescue Funds
MARY WILLIAMS WALSH
NYT, March 15, 2009
http://www.nytimes.com/2009/03/16/business/16rescue.html

A.I.G. Paying $165 Million in Bonuses After Federal Bailout
EDMUND L. ANDREWS and PETER BAKER
NYT, March 15, 2009
http://www.nytimes.com/2009/03/16/business/16aig.html

AIG to Pay $450 Million in Bonuses
LIAM PLEVEN
WSJ, MARCH 15, 2009
http://online.wsj.com/article/SB123707854113331281.html