15 AIG Bailout Counterparties Revealed

AIG has received between $160 billion to $180 billion in government bailout funds over the course of just the past few months. The original bailout request from AIG of $85 billion was bad enough but was soon followed by three additional requests. Each time the US Treasury Department transferred money to AIG the government proclaimed that AIG is “too big to let fail”.

Until recently AIG and the Treasury Department refused to disclose what AIG was doing with all of that taxpayer money and why they were burning though it so fast. Congress has been wondering along with the public.

This week Donald Kohn, vice chairman of the Federal Reserve, learned about blackmail, Senate style. When he refused to disclose the names of financial institutions benefiting from the bailout of American International Group he was confronted by several committee members. Finally the congressmen got to the point of threatening Kohn with no more dollars for the credit crisis – ever – if he didn’t spill the information.

Said Sen. Jim Bunning, R-Ky., “You will get the biggest ‘no’ you ever got. I will do anything possible to stop you from wasting the taxpayers’ money on a lost cause.”

In a way the threat worked. While Sen. Bunning and the committee still haven’t directly been given the sweetheart list a list has surfaced. A reliable source gave FORTUNE a list of 15 counterparties, with no dollar figures attached. Here it is:

Société Générale (France)
Goldman Sachs (GS, Fortune 500)
Merrill Lynch International
Deutsche Bank (Germany)
Calyon, Crédit Agricole(France)
UBS (Switzerland)
Barclays (England)
Coral Purchasing, DZ Bank (Germany)
Bank of Montreal (Canada)
Rabobank (the Netherlands)
Royal Bank of Scotland
Bank of America
Wachovia
HSBC (England)
Barclays Global Investors

While the Treasury didn’t list the amount that each bank on the list received you can be sure it was plenty. Basically, all of the banks on the list insured CDOs with AIG. When the investment went bad the banks turned to AIG for payment. AIG didn’t have the money so they turned to the government for a bailout.

Basically, AIG became a money laundering operation. The government made its “too big to fail” case, got the money, poured it into AIG, and AIG made payments to make the counterparties whole at tax payer expense. So AIG was used as a conduit though which billions of dollars were poured to bailout banks who had made risky bets that went bad.

Committee chairman Christopher Dodd, D-Conn., describes the counterparties as less than “innocent victims” who used AIG’s rating (then AAA) to take “enormous, irresponsible risks.” He complains, “It is not clear who we are rescuing.”

Well now we know. Do you feel any better about the bailout?