NY Fed Told AIG to Limit Details of Bank Payments

Discussion in 'Politics and Religion' started by arthurracoon, Jan 7, 2010.

  1. arthurracoon

    arthurracoon The Cardinal Smiles

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    http://online.wsj.com/article/SB10001424052748704130904574644542588515508.html?mod=googlenews_wsj

    The Federal Reserve Bank of New York told American International Group to withhold details from the public about more than $62 billion the insurer paid to banks at the height of the 2008 financial crisis, according to emails disclosed on Thursday by congressman Darrell Issa (R., Calif.).

    AIG said in a draft of a regulatory filing that it paid banks including Goldman Sachs Group and Société Genéralé 100 cents on the dollar for credit-default swaps they bought from the insurer's derivatives unit AIG Financial Products.

    The swaps were sold as protection against defaults on complex mortgage-related vehicles known as collateralized debt obligations, or CDOs. As the housing meltdown grew into a full-blown financial crisis, AIG was forced to post billions of dollars in collateral on these contracts, pushing it to the brink of collapse.

    The insurer was saved by the federal government, which committed more than $100 billion in taxpayer money to the bailout. A lot of that money was quickly transferred to major banks that were counterparties on the CDO-linked derivatives.

    The bailout has been among the most controversial of the financial crisis because the banks were paid 100 cents on the dollar during a period when many similar obligations were being settled at large discounts.

    The emails disclosed Thursday suggest the New York Fed, at the time led by current Treasury Secretary Timothy Geithner, was concerned that the decision to pay 100 cents on the dollar would be controversial.

    The emails were earlier reported by Bloomberg News.

    "The AIGFP counterparties received 100% of the par value of the Multi-Sector CDOs sold and the related CDS have been terminated," AIG wrote in a December draft of a Securities and Exchange Commission filing.

    The New York Fed crossed out the reference, according to emails disclosed on Thursday by Rep. Issa, ranking member of the House Oversight and Government Reform Committee.

    "The outstanding question is why the [New York Fed] didn't fight for a better deal for the American taxpayer," Rep. Issa said in a statement on Thursday. "Clearly, the New York Fed wanted to suppress details and limit disclosure of the counterparty deal from the American people. The only question is why?"

    "If AIG's securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do," Federal Reserve Bank of New York General Counsel Thomas Baxter said in a statement.

    It was "appropriate" for the New York Fed to weigh in on AIG's disclosures because Maiden Lane III, a New York Fed entity, was an integral part of the transactions that settled the insurer's CDS obligations, Mr. Baxter added.

    Still, "the final decision rested with AIG's securities counsel," Mr. Baxter said.

    AIG spokeswoman Christina Pretto declined to comment.

    Other major AIG counterparties that got big payments include Bank of America Corp., Merrill Lynch and Deutsche Bank AG.
     
  2. LVG

    LVG Who?! Contributor

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    You mean we bailed out the world's major financial instutitions?

    Well, duh.
     
  3. conraddobler

    conraddobler I want my 2$

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    There's probably a word for transfering American dollars to foreign interests.

    At present that term eludes me.
     
  4. RedStorm

    RedStorm Next NY Gov Contributor

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    Who was the person in charge at the Fed when this took place?
     
  5. AzCards21

    AzCards21 Registered User

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    Treason? When you are in charge of our money I can't think of any other word.
     
  6. arthurracoon

    arthurracoon The Cardinal Smiles

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    "The emails disclosed Thursday suggest the New York Fed, at the time led by current Treasury Secretary Timothy Geithner, was concerned that the decision to pay 100 cents on the dollar would be controversial."
     
  7. DWKB

    DWKB Registered

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    I believe it was still Hank Paulson who was in charge of the government side of the Bailout (Treasury) and of course Bernake in charge of the Fed as a whole.
     
  8. Southpaw

    Southpaw Provocateur aka Wallyburger Contributor

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    Whoo hoo. Payback time.

     
  9. DutchmanAZ

    DutchmanAZ Registered

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    Wait a minute...they were loaned 182 billion, have paid back 4 billion, and owe 101 billion? Where is the other 78 billion (plus interest)?
    The article states they owe ~101 billion which seems wrong. If they've paid back ~4, they still owe 178 B plus interest, right?
     
  10. MigratingOsprey

    MigratingOsprey Thank You Paul!

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    this one was individual sale - a single payment
     
  11. DutchmanAZ

    DutchmanAZ Registered

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    Yeah I know. I'm questioning the math of the remainder owed per the article.
    Theres a huge chunk of change missing if you total it up, or am I missing something?
     
  12. conraddobler

    conraddobler I want my 2$

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    No you're not missing something, but a larger question would be why do all the articles you see tend to skew towards telling you how non-bad things are?

    Who's behind the agenda of sunshine up the posterior?

    Why would independent news sources blow sunshine?

    That's something more folks should pay attention to, why on earth would they skew a story like they just did?
     
  13. MigratingOsprey

    MigratingOsprey Thank You Paul!

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    You are missing other payments ......

    If I lend you $100 and you make ten $2 payments and then a single $20 payment the total you still owe me is $60

    so if I wrote an article that you just made the largest payment ($20) however there is still $60 remaining there is no disconnect in that $100-$20=$80

    they just aren't commenting on the other payments as they are in the past and not pertinent to this payment

    There have been dozens of transactions with AIG so far - some have been cash, some have been the monitization of securities where the gov't takes some ownership control/shares, some has tied into other government interests where there is forgiveness

    It's a pretty complicated mess and no article is every really going to sort it out accurately

    there real story to this is the story behing ILF - they are a really unique company and have been a cash cow that AIG pretty much let run independently .... they used the financial strength of AIG to leverage the marketplace and get incredible interest rates to buy aircraft creating a nice spread when they leased them

    however, when the AIG parent took their financial hit it hurt their ratings and the ability for ILF to obtain as favorable of lease terms and the relationship between ILF and AIG turned very contentious ..... they were pretty much in revolt demanding to be set free

    sounds like that has been sorted now though
     
  14. LoyaltyisaCurse

    LoyaltyisaCurse IF AND WHEN HEALTHY...

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    Yeah, this makes no sense...Obama adminisration was not in office during the height of the crisis; election not until Nov. 2008...

    Is there an agenda in naming Giethner here? Or was he with the Fed before Obama appointed him T.S. ?
     
  15. DWKB

    DWKB Registered

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    It makes sense, Geithner was in charge of the NY Fed at the time. I was just clarifying the decision to make the deal as structured most likely came from Paulson and Bernake, although the email probably came from Giethner.
     

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