What did AIG do with our $40 billion?
Second only to Citigroups $45 billion, AIG pulled down $40 billion from a special TARP category for "Systemically Significant Failing Institutions". AIG did most of their CDS writing in London through their Financial Products subsidiary. Did all the $40 billion go off-shore?
State Street and BNY-Mellon got $2 billion and $3 billion respectively.
Other notable recipients (at least $2 billion) not at last weeks hearings were:
$3.50 B SunTrust
$3.13 B BB&T
$2.25 B Comerica
$3.50 B Regions
$3.55 B Capital One
$2.50 B KeyCorp
$6.60 B US Bancorp
$7.58 B PNC
$3.41 B Fifth Third
$2.33 B CIT Group
$5.00 B GMAC
$10.40 B GM
$4.00 B Chrysler Holding
For the whole list, right down to the $1,549,000 doled out to the Saigon National Bank of Westminster, CA, see http://www.treasury.gov/initiatives/eesa/docs/Fourth-Tranche-Report-Appendix.pdf
There are about 215 TARP recipients total.
And every penny has been borrowed. What we'll likely get back won't even cover the interest.
February 14, 2009 11:40 AM | Reply | Permalink
Meriel
Thanx for digging this up. I have been looking for theis numbers for some time. Just a little ammo for my little coffie club members who have yet to pull their heads out of the sand...
I am wagering that any number of the top three fail in ten to twenty days.
If we are lucky.
M. Paul
February 14, 2009 4:14 PM | Reply | Permalink
For a moment I thought you were listing the creditors of AIG who got the $40B (more than that overall, right?)!
Maybe letting Lehman fail wasn't the bogeyman. Maybe saving AIG this was. AIG is not a bank. It presumably wrote CDS etc. on various bonds and securities, insuring cash flows and principals. If AIG had been allowed to fail/restructure in an orderly way, its assets could have been liquidated or restructured to pay off creditors until all the assets were gone leaving the over wound vampire creditors out to lunch. The pecking order could have been arranged in number of rational ways. My preference is that suspected crooks are last, proven gamblers next to last, suspected gamblers next, and investors with material interest first. Assuming the last category is the dominant one (that it wasn't just a house of cards for the most part), another pecking order might be needed within the investor class. And I'm not calling for 100% coverage for even the investor class.
Has that moment simply been postponed? What is the current status of AIG financial statements? And does it have "vampire liabilities" to go along with the "toxic assets" we've heard too much about?
February 14, 2009 8:11 PM | Reply | Permalink
The total amount poured into AIG appears to be about $150 billion, with $40 billion from TARP and the rest from various Treasury and Federal Reserve programs.
AIGs problem was the derivatives written by the London-based Financial Products subsidiary, managed by Joseph Cassano, who was compensated to the tune of $280 during his 8 years with AIG.
The government brought in Edward Liddy, formerly CEO of Allstate, to break up and sell/salvage the parts of AIG. However, I haven't seen deals announced which would total anything close to $150 billion.
I should have made clear that the firms listed in the original post were not recipients of "winnings" from bets made with AIG on derivatives. They are other TARP recipients who received more than State Street, and hence should have qualified for a seat at the table during last week's Congressional hearings.
They include some interesting firms, such as Capital One, headquarterd in McLean VA. Capital One owned the now defunct Greenpoint Mortgage of Calabasas, CA, one of the pioneers and large purveyors of Alt-A mortgages. They might have had answers to some questions.
February 14, 2009 9:59 PM | Reply | Permalink
Liddy seems not interested in large scale fire sales, but had said he was aiming to sell off 65%. The new question is: Divest or rebuild. Greenberg is pushing for the latter.
http://www.thedeal.com/dealscape/2009/02/aig_the_house_that_hank_built.php#bottom
February 14, 2009 10:32 PM | Reply | Permalink
"Wrong-way bets on credit-default swaps pushed AIG to the brink of collapse last year."
So that is presumably where a lot of money went. But who had the other halves of the deals? And should we have financed all those payouts, whether made before or after the government started funding AIG?
http://www.bloomberg.com/apps/news?pid=20601109&sid=aBvuO8cVLtwU&refer=home
February 14, 2009 10:42 PM | Reply | Permalink
Not everyone could have been on the wrong side of the Lehman CDS.
Most likely a lot of the $150 B went to off-shore entities.
But some of the US banks may have won big as well. Or at least their off-shore subsidiaries might have, such as the Schroders part of Citigroup.
February 14, 2009 11:15 PM | Reply | Permalink
Lehman CDS have what to do with AIG? (I have no idea what Lehman was into, except I know someone who got screwed on a "structured note" with them)
I'm thinking that GS "insured" some of its mortgage assets via CDSes with AIG, to protect itself. That would explain the $20B figure I've seen thrown around. Not sure I'd call it "won big" but certainly it could have reduced GS and GS client losses on MBS etc.
February 15, 2009 2:06 AM | Reply | Permalink
If you look at the GS numbers, their MBS & ABS exposure went down from 46 to 22 billion during 2008. I saw no sales à la Merrill Lynch. I'm guessing this has something to do with the 20 billion number thrown around w/ regard to their AIG 'winnings'.
February 15, 2009 8:09 AM | Reply | Permalink
From http://www.dtcc.com/news/press/releases/2008/dtcc_closes_lehman_cds.php
DTCC also acted to minimize risk for its OTC derivatives customers from the Lehman bankruptcy. The actions included stopping the automated central settlement of credit default swap (CDS) payment obligations on Sept. 15 that were maintained in DTCC's Trade Information Warehouse (Warehouse) for counterparties of Lehman Brothers International (Europe) and Lehman Brothers Special Financing, Inc.
On Oct. 21, DTCC also completed, without incident, the automated credit event processing of Lehman Brothers Holdings Inc. (LBHI) involving $72 billion of credit default swaps. DTCC calculated and bilaterally netted all amounts due on credit default swaps written on LBHI. This resulted in approximately US$5.2 billion owed from net sellers of protection on LBHI to net buyers of protection.
Note that $72 billion of CDS is a pretty small percentage of total CDS, which run into the tens of trillions. AIG could well have written $150 billion notional value of unhedged and unregistered over-the-counter CDSs on Lehman paper. These would have caused massive losses to AIG in London after the Lehman bankruptcy.
This appears to have come as a surprise to Bernanke and Paulson, and only the good luck to have had TARP passed with a lot of flexibility allowed them to rescue AIG and prevent a chain reaction meltdown.
But although we know that AIG was the big loser, we don't know who got paid off.
February 15, 2009 11:35 AM | Reply | Permalink
This is important:
"This resulted in approximately US$5.2 billion owed from net sellers of protection on LBHI to net buyers of protection."
That is out of about $72B notional value. I'm pretty sure AIG would have laid off some of its bets. Maybe GS got insurance with AIG who got reinsurance with Lehman.
AIG could have had notional values well over $150B, maybe a trillion or more. The net is what counts. It's interesting that it was apparently fairly easy to unwind Lehman CDS etc. on Oct 21. If that applies to BAC et al, then my concern about unwinding is not as big as it has been. I've guessed at massive complications and uncertainties.
February 15, 2009 7:40 PM | Reply | Permalink
UBS CEO is one of Geithner's senior financial advisors. Bill Moyer mentioned that UBS is currently under CRIMINAL investigation, see below:
"According to a Wall Street Journal article, Federal criminal prosecutors and the SEC are investigating whether Swiss bank UBS AG, Europe's largest bank, intentionally misled investors by overpricing mortgage-backed securities (CDOs):"
http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e080202b
February 14, 2009 8:37 PM | Reply | Permalink