In AIG flap, it's not just about bonuses anymore

[talloulou]

"Look at where the money went: Goldman Sachs, Paulson's firm, foreign banks," Sen. Jim Webb (D-Va.) said Wednesday. "AIG gave more money to foreign banks than we gave in loans to the auto industry."

"The real outrage over the AIG bailout isn't executive bonuses, it's that billions in taxpayer funds intended for AIG have been passed through to benefit foreign banks and Wall Street behemoths like Goldman Sachs," former House Speaker Newt Gingrich wrote in an e-mail letter to conservatives Wednesday morning.

http://www.latimes.com/business/la-fi-ig-bailout19-2009mar19,0,2707699.story


So the foreign bank thing....is that an issue or not? Was the money AIG gave to foreign banks money that AIG owed foreign banks? If it was I don't see how we can be irate over it.

Quick someone explain; my brain is all fizzled out.

 

[Kushinator]

http://www.latimes.com/business/la-fi-ig-bailout19-2009mar19,0,2707699.story


So the foreign bank thing....is that an issue or not? Was the money AIG gave to foreign banks money that AIG owed foreign banks? If it was I don't see how we can be irate over it.

Quick someone explain; my brain is all fizzled out.

Yes AIG was bailed out to guarantee the payment of credit default swaps (massive mortgage defaults).

Insurance companies do not just take your payments, and put them in an account where they pay out claims. Instead they invest it to create more capital. Credit default swaps are used to minimize risk to lending, and what AIG did was a real no no (Don has made this point quite a bit last year); they purchased the securities they insured against.

Not only were they hit with the massive payouts, but the assets their massive payouts were marked to were virtually "worthless" (pennies on the dollar).

Yes they paid out large sums of insurance payments to foreign banks, and big wig banks on Wall Street with bail out money.