Lawmakers in Southern states have been among the fiercest critics of federal spending in the face of the financial crisis, most recently railing against the Congressional stimulus bill.But seven Southern states have received at least $100 million each from taxpayer bailout money passed through one of the biggest recipients of federal funds, American International Group.
Yesterday, under intense pressure, AIG released documents revealing what it's done with some of the $170 billion it's received in federal infusions. The records show that between September and December 2008, AIG used $94 billion in bailout money to pay off financial counterparties, largely banks it owed money from its losses in credit default swaps and its securities lending business.
In addition, the documents reveal that AIG used bailout money to pay $12.1 billion in Guaranteed Investment Agreements to municipalities -- usually bonds. Six Southern states received $100 million or more from AIG for this purpose -- including Mississippi and Texas, which are led by governors that have publicly decried federal bailout spending.
In the documents, AIG clearly states that all of the money it used to pay off counterparties came from federal bailout funds. This is especially notable given that many of the counterparties were already recipients of government bailouts.
Among the biggest beneficiaries of AIG's pass-through of federal money:
* Goldman Sachs topped the list -- as many financial insiders has long suspected -- receiving $12.9 billion of bailout funds that passed through AIG.
* Bank of America and Merrill Lynch combined were second, taking in $12 billion. BoA has received $45 billion directly in bank bailout funding.
* Wachovia, the Charlotte-based bank taken over by Wells Fargo, received $1.5 billion from AIG last year. Wells received $25 billion in federal infusions, and soon after bought Wachovia for $12.7 billion.
* Most shocking, two hedge funds -- Citadel and Paloma Securities -- each received $100 million, prompting the Wall Street blog Clusterstock to fume:
Market processes are excellent factors for punishing reckless lenders to financially irresponsible companies. But that process has been thwarted by the bailout.
Together, Bank of America and Wachovia received $13.5 billion -- meaning that North Carolina-based banks received 35% of the total AIG paid off to U.S. banks. ($50 billion went to foreign banks.)
In addition to the $98 billion AIG spent paying off banks, a smaller share -- $12.1 billion -- was used to pay off obligations to municipalities that were holding their money with AIG. Six Southern states were among the top 20 places getting money from AIG for this purpose, totalling $2.1 billion: Virginia, Georgia, Kentucky, Mississippi, Florida and Texas.
Mississippi and Texas are both headed by Republican governors who have publicly decried federal spending in the midst of the financial crisis, and have stated they will refuse at least a portion of the money in the Congressional stimulus bill slated for their states.
Mississippi received $180 million in federal pass-through money from AIG, and Texas received $100 million.
Perhaps most disturbing of all: the documents suggest that $84 billion of the taxpayer money AIG has received is unaccounted for.
This debacle was blueprinted in the spectacular failure of Long Term Capital Management in the late 1990's when LTCM was bailed out to the tune of $75m for its failed derivatives structuring business. Once that government bailout was funded and the industry continued to self regulate, the taxpayer was doomed. You can read the testimony to congress from 1999 when Goldman and others pleaded for less regulation and self policing. This episode was swept under the rug by the media infavor of the no less spectacular Monica Lewinsky scandle that Bill Clinton created through his own misdeeds at the time and his impeachment proceedings which followed. The press, congress and the voting public were asleep at the switch. Bush did not do enough to fight for tighter regulations and the democrats insured no further restrictions on the institutions, most notably Freddie Mac and Fannie Mae which became popular sponsors of Residential Backed Mortgage Securities (RMBS) and sold throughout the world banking system. The $50b downpayment to the foriegn banks as described in this article is just the beginning.
March 16, 2009 4:42 PM | Reply
One word..........hypocrits!
March 17, 2009 4:46 PM | Reply
http://www.boycottalabamanow.com/
March 26, 2009 5:35 PM | Reply
AIG ACTS AS A BROKER FOR FEDS AND TREASURY.
DEFINITE COLLUSION IN THE BANKING INDUSTRY
ALL AIG OFFICIALS SHOULD BE PUT IN JAIL
ALL BANKS BAILOUT MONIES SHOULD BE PAID BACK TO THE TAXPAYERS + INTEREST.
ALL FORECLOSURES MUST BE CANCELED IMMEDIATELY AND SECOND MORTGAGES SHOULD BE WAIVED BY BANKS RECEIVING BAILOUT FUNDS. BANKS HAVE RECEIVED PAYMENT IN FULL FOR THESE MORTGAGES IN THEIR BAILOUT PAYMENTS. WHY SHOULD THEY BE RECEIVING MONEY TWICE FROM TAXPAYERS.
BANKS SHOULD NEVER HAVE BEEN ALLOWED TO GET INTO THE INSURANCE AND STOCK BROKERAGE BUSINESS AND ONLY DO BANKING. SIMPLE ME KNEW IT WAS A BAD DECISION. IF SO, THIS NEVER WOULD HAVE HAPPENED. WHOEVER SUGGESTED THIS AND VOTED IN CONGRESS TO PERMIT THIS TO HAPPEN SHOULD BE FIRED AND ALL WHO VOTED IN FAVOR OF IT SHOULD BE IMPEACHED.
THEY ARE PERSONALLY RESPONSIBLE FOR BRINGING DOWN OUR COUNTRY AND MUST BE MADE TO TAKE THE RESPONSIBILITY FOR IT AND ITS CONSEQUENCES.
BANKS SHOULD DO ONLY BANKING. INSURANCE COMPANIES SHOULD ONLY SELL INSURANCE, WALL STREET BROKERAGE FIRMS SHOULD ONLY WORK AT HANDLING STOCK TRANSACTIONS. TALK ABOUT MONOPOLYS, THESE SHOULD BE SPLIT UP IMMEDIATELY.
FREDDIE MACK SHOULD BE DISSOLVED. FANNIE MAE SHOULD BE DISSOLVED. SEND BACK MORTGAGES TO THEIR ORIGINAL LENDERS FOR SERVICING OR CANCELATIONS AND CLOSE THEIR DOORS SAVING TAXPAYERS MILLIONS OF DOLLARS. OFFICIALS RATHER THAN HAVING TO COMMIT SUICIDE, THEY SHOULD BE MADE TO PAY HEAVY FINES AND GO TO JAIL FOR A PERIOD OF TIME FOR THEIR FINANCIAL DESTRUCTION OF THE U.S.
INSTEAD OF INVESTIGATING THE PAST WAR MISTAKES WHICH ARE OVER, WE SHOULD BE INVESTIGATING THIS ECONOMIC CRISES FOR BLAME INSTEAD OF TAKING THE PUBLIC AWAY FROM THE PRESENT FINANCIAL CRIMES.
CREDIT BUREAUS SHOULD BE OBLIVIATED AS THEY WERE THE CULPRITS THAT FORCED SUBPRIME MORTGAGES TO BE WRITTEN IN THE FIRST PLACE.
WHO IS KIDDING WHO. THEIR IDEA OF SCORING PEOPLE IS SO RIDICULOUS.
NO ONE CAN EXPLAIN IT AND THEY ONLY REPORT NEGATIVITY, NOT WORTHINESS OF THE BORROWERS. THEY DON'T EVEN REALIZE THAT MANY OF THEIR BAD CREDIT CLAIMS ARE DUE TO THE FACT THAT SOME PEOPLE CANNOT BE COERCED INTO MAKING PAYMENTS WHICH THEY DO NOT OWE BY THREATENING TO LOWER THEIR SCORES. PEOPLE OF PRINCIPAL CANNOT BE FORCED TO PAY WHAT THEY DO NOT OWE.
THERE SHOULD NOT BE NATIONAL CREDIT BUREAUS (3) CONTROLLING THE CREDIT OF OVER 300,000,000 (MILLION PEOPLE). IT IS IMPOSSIBLE SIGHT UNSEEN AND TAKING INTO CONSIDERATION THE NET WORTH OF THE PERSON. THEY HAVE ACTED UNFAIRLY AND DENIED GOOD CITIZENS CREDIT ON THE INFORMATION THEY RECEIVE FROM LARGE CORPORATIONS CHARGING PEOPLE FOR SERVICES AFTER CANCELLATIONS, AND CHARGING LARGE INTEREST AND LATE FEES WHICH INTELLIGENT PEOPLE WILL NOT BE COERCED INTO PAYING. THE CREDIT BUREAUS HAVE REMOVED MILLIONS OF PEOPLE FROM PURCHASING PRODUCTS THEY MAY HAVE PURCHASED FOR CREDIT BUT DECIDED TO STAY ON A CASH BASIS AND BUY WHEN THEY HAVE THE MONEY. THE SUB PRIME MORTGAGES CAN BE BLAMED COMPLETELY ON THE CREDIT BUREAU SCORING AND WHOEVER INSTIGATED THIS SYSTEM OF SCORING SHOULD BE BROUGHT TO JUSTICE AS THEY HAVE DEFINITELY ADDED TO THE ECONOMIC DESTRUCTIION OF OUR GREAT COUNTRY.
April 27, 2009 10:32 AM | Reply