Who can forget when the US Treasury Department decided to bail out some banks, even banks that didn’t want to be bailed out. They let others fail, but they were American banks. The biggest recipient of funds was the insurance giant AIG. Did you know that AIG turned around and bailed out foreign banks?
My Way News: But the report says that if the U.S. had gotten more data on which foreign banks would benefit the most, the government might have been able to ask those countries to share some of the cost.
“There were no data about where this money was going,” panel chair Elizabeth Warren said in a conference call with reporters on Wednesday. “The American people have a right to know where the money went.”
An example: Major French and German banks were among the biggest beneficiaries of the U.S. rescue of American International Group Inc., yet the American government shouldered the entire $70 billion risk of pumping capital into the crippled insurance titan. The report compares that with the $35 billion that France spent on its overall financial rescue program and the $133 billion that Germany spent.
Much of the $182 billion in federal aid to AIG – the biggest of the government rescues – went to meet the company’s obligations to its Wall Street trading partners on credit default swaps, a form of insurance against default of securities. The partners included French banks Societe Generale, which received $11.9 billion in AIG money, and BNP Paribas, which got $4.9 billion, and Germany’s Deutsche Bank, $11.8 billion.
Of the 87 banks and financial entities that indirectly benefited from the U.S. aid to AIG, 43 are foreign, according to the report. In addition to France and Germany, they include banks based in Canada, Britain and Switzerland.
In addition to AIG, many of the U.S. banks and automakers that received billions in bailout aid derive a large proportion of their revenue from operations outside the U.S., the report noted.
It’s estimated that we the taxpayers lost about $36 billion on the AIG bailout. Further, while the US government aided about 700 banks, all foreign governments combined only helped a total of 50! I don’t know about you, but I’m starting to feel like a chump.
What the heck do people think all this Credit Default Swap stuff was about ?
The essence of the ‘too big to fail’ stuff is that all these financial institutions try to hedge everything from every angle – knowing that Mortgage Backed Securities are basically JUNK. It has nothing to do with BIG – it has to do with all the CDS that get triggered if Lehman goes bankrupt -then it ripples into the Global Economy. CDSs are supposed to be “insurance” against bankrupcy, but with Trillions of dollars of junk – how do you “insure” that ????????????
That is why there is a MESS.
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