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Report Cites Big Shortfall in Reserves at A.I.G.
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An independent analysis of whether the insurance industry has been setting aside enough money to pay its claims estimates that the American International Group has a shortfall of $11.9 billion in its property and casualty business.
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Other researchers have raised doubts about A.I.G.’s total worth since it was bailed out last year, and even the federal government has acknowledged that the company might have difficulty repaying all the money it owed taxpayers, currently about $120 billion.
Corruption, Panic and Incompetence Fueled Geithner's Backstairs Intrigue
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Neil Barofsky, special inspector general for
the federal Troubled Asset Relief Program, has now
issued a harshly critical report on Geithner's handling of
the AIG bailout. -
Barofsky's report [pdf]
details how the bailout vehicle "Maiden Lane III" was created,
and why Geithner quickly decided to pay 100 cents on the dollar
to AIG counterparties -- including Goldman Sachs, Deutsche Bank,
and others. (Go to page 23 for the full list.) The deal ended up
costing taxpayers at least $13 billion. - 1 more annotations...
New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers
The Federal Reserve, after conferring in secret with investment banks, agreed to cover all of their losses with taxpayer money. This is how government works in the real world.
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Habayeb, 37, was chief financial officer for the AIG
division that oversaw AIG Financial Products, the unit that had
sold the swaps to the banks. One of his goals was to persuade
the banks to accept discounts of as much as 40 cents on the
dollar, according to people familiar with the matter. -
After less than a week of private negotiations
with the banks, the New York Fed instructed AIG to pay them par,
or 100 cents on the dollar. The content of its deliberations has
never been made public.
The New York Fed’s decision to pay the banks in full cost
AIG -- and thus American taxpayers -- at least $13 billion.
That’s 40 percent of the $32.5 billion AIG paid to retire the
swaps. Under the agreement, the government and its taxpayers
became owners of the dubious CDOs, whose face value was $62
billion and for which AIG paid the market price of $29.6
billion. The CDOs were shunted into a Fed-run entity called
Maiden Lane III. - 1 more annotations...
AIG feels at home in the government
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To judge by the rhetoric coming from Capitol Hill liberals, you would think the recently bailed-out American International Group (AIG) was some sort of free-market, government-hating, leave-me-alone-to-make-my-profits capitalist cowboy before it came begging this week for a handout from Uncle Sam. The company’s lobbying record and campaign contributions tell a different story.
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