How the Fed Bungled AIG's Rescue, Enriched Bankers and Screwed Taxpayers

[NeoConsSuck]

Source: Business Insider

It is by now well known that the banks on the other side of credit default swaps sold by AIG got paid out at par when the government bailed out the insurance giant.

But what isn't as well known is that by deciding to pay AIG's counter-party in full, the Federal Reserve was reversing months of work AIG executives had done to convince the banks to take a haircut on their positions.

In the months leading up to the bailout of AIG, the chief financial officer for AIG's financial products unit worked day and night and through the weekends to work out a deal with the banks that had purchased $61 billion of credit default swaps from AIG. AIG was trying to get the banks to accept as little as 40 cents on the dollar to retire the swaps.

But when the New York Fed stepped in on September 16, 2008,with an $85 billion credit line for the company, those negotiations ground to a halt. Beginning early in November, a team lead by Tim Geithner at the New York Fed took over negotiations with the banks. Geithner’s team offered the banks 100 cents on the dollar.

Read more: http://www.businessinsider.com/how-the-federal-reserve-bungled-the-aig-rescue-enriched-bankers-and-screwed-taxpayers-2009-10

---

Edited to fix link.

[Captain Hilts]

1. Also enriched Manchester United...we should have made them sell ManU.

or put the US Dept. of Treasury logo there...

[ixion]

2. not a bungle. A calculated daylight robbery.

Pure and simple.

[TacticalPeek]

4. Weapon: fountain pen.

Very effective at close range.

[mule_train]

6. ever notice how 'bungles' always fall in the favor of the person (or their buddies) who make the

'error'?

[ThomCat]

10. Yes, and the more money is involved, the louder all the news media

insists that of course it was just an harmless accident or mistake. No reason to examine anything very closely or hold anyone responsible. Really! :grr:

[ronnie624]

11. Definitely.

Very subtle editorializing. Use of the word 'bungle' implies an accident. If the "content of its deliberations has never been made public", I wonder how the author of this piece of propaganda determined this was the result of "bungling".

A clear example of corporate owned media running interference for the plundering of our treasury.

[optimator]

12. definitely

agree

[Ikonoklast]

3. Geithner made sure Goldman wasn't going to incurr any losses.

AIG only got to wave at that money as it passed through directly covering the potential losses of the big houses and banks.

[mule_train]

5. A-I-G, that's the name, tax-pay-er money, down the drain nt

[mule_train]

7. Unreal that banks are made 100 percent whole on such risks

unreal how bad this SCREWS the average citizen

[edc]

8. Goldman Sachs

Seems like no one can mention financial corruption in this country without mentioning Goldman Sachs.

[Raster]

9. Goldman is at the dead-center of American financial corporate corruption.

[TomPaine76]

13. Some state AGs are on this

Remember the fuss over State Street? It was one of the 9 TARP banks, and I expect big news in coming weeks and months.

[Romulox]

14. Ever notice that DU has a bout a half dozen "economists"

and that not a single one of them will post in a thread like this? What gives? :shrug: