AIG: It’s Not the Bonuses. It’s That AIG’s Counterparties Are Getting Paid Back in Full

March 18th, 2009

I’d bet that the choreographers of this scam assume that the average person doesn’t know the difference between million and billion. That’s the first bet.

The second bet I’d make is that this entire spectacle has been concocted to shift the focus away from where the really big money is going. (Hint: Goldman Sachs.)

So, while the drama is happening over $165 million in bonuses, another roughly $30 billion goes down the gugrler.

—Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses

Mmm hmm.

Via: Slate:

Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

…

The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

Posted in Dictatorship, Economy, Elite | Top Of Page

5 Responses to “AIG: It’s Not the Bonuses. It’s That AIG’s Counterparties Are Getting Paid Back in Full”

  1. Eileen says:
    March 19, 2009 at 1:33 am

    Awesome. Elliot Spitzer speaks! Methinks Geithner has some ‘splaining to do. Spitzer got the boot shoved up his butt and was defamed, most likely by this same gang of crooks and liars that cooked up this inside job.

    Spitzer should be Treasury Secretary. We need a “cop” like him. Someone that knows the insides and outs of all these banking scams in charge of that den of iniquity.

  2. tochigi says:
    March 19, 2009 at 2:22 am

    What did Goldman, and all the other counterparties, know about AIG’s financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn’t they bear a percentage of the risk of failure of their own counterparty?

    obviously, counterparty failure is not a risk when you are GS. you just call up the Fed and Treasury Dept. bosses and tell them to cover it. no problem.

    what i am more intersted in is the structure and basis of the payouts. what were the bets made on? what money did the gamblers put down? what ROI does the payout represent? really, this is a scam in Madoff proportions (x100). HA!

  3. Eileen says:
    March 19, 2009 at 2:46 am

    Yes, I guess Spitzer was a target of AIG. (scroll down in article).
    http://www.nytimes.com/2008/02/26/business/26insure.html?_r=1&emc=eta1
    This takes the cake.
    Providing bail out money to AIG – who is associated with a reinsurer that cooked its books!
    Scuse me while I pull on my waders. The shit is getting deeper and deeper.

  4. tochigi says:
    March 19, 2009 at 3:30 am

    >Michael Hudson comments:

    Here?s the problem with all the hoopla over the $135 million in AIG bonuses: This sum is only less than 0.1 per cent ? one thousandth ? of the $183 BILLION that the U.S. Treasury gave to AIG as a ?pass-through? to its counterparties. This sum, over a thousand times the magnitude of the bonuses on which public attention is conveniently being focused by Wall Street promoters, did not stay with AIG. For over six months, the public media and Congressmen have been trying to find out just where this money DID go. Bloomberg brought a lawsuit to find out. Only to be met with a wall of silence.

    the rest of the article is a reasonable analysis, as far as it goes. worth a read, imho.

  5. tochigi says:
    March 19, 2009 at 3:32 am

    the link looks like it got mangled…let’s try again:

    http://www.counterpunch.org/hudson03182009.html

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