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Fed Releases Names of AIG’s Creditors

Posted by Larry Doyle on March 6, 2009 9:03 PM |

Under pressure from Congress this week  to release the names of AIG’s creditors, the Federal Reserve’s Vice Chairman Donald Kohn clearly got the message. The Fed has acquiesced in releasing that Top U.S., European Banks Got $50 Billion in AIG AID.

My immediate reaction to this news is how interesting that the bulk of these institutions are European. What does that tell me? These European banks were getting plowed by Wall Street with a lot of sub-prime backed CDOs and when the dam was breaking they wanted to hedge their position. Market speculation is that European institutions own twice the amount of toxic assets as U.S. based institutions. That exposure on top of their delinquent loans in eastern Europe is crushing a number of western European banks.  Who are they? Start by looking at the list, included in the above-referenced article, of AIG creditors.

In providing the hedge – which is the insurance – AIG received a fat premium but has been paying for it ever since. Actually, AIG only truly paid for it up until last September . . . the American taxpayer has been and will continue to be paying for it for a long time. Where were the regulators when we really needed them?

LD

 

  • fiscalliberal

    Based on what we heard yesterday from Senator Corker and Warner questions in the AIG hearing, the counterparties were paid at 100% par. Warner seemed to think they should take a haircut like everybody else is.

    This think is still out of control. I am beginning to feel more and more the time honored process of bankrupcy is still the best process to resolve this. Yes people will get hurt, but they were all counterparties to the action and profits. They took the risks and lost.

  • Larry Doyle

    Whatever happened to capitalism ??

  • getfitnow

    LD. what would happened if AIG filed bankruptcy? I keep hearing it IS too big to fail. Seems to me it has already taken on too much water.

  • Larry Doyle

    The concern is that a bankruptcy filing may be the domino that brings other firms down. Additionally AIG has millions of individual policyholders who would be impacted.

    Not sure a lot of people fully appreciate the credit risk in buying insurance.

    Where were the regulators to monitor the risk? Also, how and why haven’t some of AIG’s executives been more fully investigated if not arrested for their business practices?






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