Sunday, March 08, 2009

AIG's making news again and not in a good way.

One quick observation after perusing the Sunday talk shows - the leaders on both sides of the aisle are completely clueless as to the complexity of the challenges facing our financial system.

I know it's not feasible but I'd love to add a fourth branch of government to handle our finances.

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Speaking of complex financial situations - word broke over the weekend that big firms like Goldman Sachs (isn't it funny how often that name comes up?) and Deutsche Bank were recipients of some big payouts from AIG after AIG had already taken taxpayer dollars. When you hear people speak of the SYSTEMIC RISK to the financial system if AIG goes under what they are really saying is that these counter-parties (the other side of AIG's trade) would suffer large losses if AIG went under.

"The beneficiaries of the government’s bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany’s Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.

Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.

More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.”

I'm not one to whip up populist angst, but billions in taxpayer money to avoid losses at a German bank, a French bank, a Scottish bank and a Hong Kong bank might turn into a pretty good campaign ad for someone in 2012.

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Cheers.

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