Yesterday, in Backdoor Bailouts for Goldman Sachs?, we noted that GS, as well as Morgan Stanley, Merrill Lynch, and Deutsche Bank, were all made whole on their bad bets with AIG.

That’s right, what was misleadingly described as systemic risk turned out to be in large part little more than a counter-party bailout — money for the very same people who helped cause the problem.

Only the $25 billion figure I mentioned was off by 100% — the WSJ is reporting this morning it was $50 billion dollars, almost a third of $173 billion total AIG loot:

“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.”

Now you know why the Fed was so reluctant to reveal who the coutnerparties were.

This is a giant FUCK YOU to the American taxpayer. Isn’t there some Congressmen (besides Ron Paul) who are morally offended by the Paulson plan, which is slowly becoming the Geithner plan?  Isn’t there anything that can be done?

According to the WSJ, these are the counter-party banks paid by AIG with bailout money:

Covered Counterparties
Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group

This is simply unconscionable . . .

>

Previously:
Backdoor Bailouts for Goldman Sachs? (March 5, 2009)

http://www.ritholtz.com/blog/2009/03/backdoor-bailouts-for-goldman-sachs/

Solvent Insurer / Insolvent Insurer (March 4, 2009)

http://www.ritholtz.com/blog/2009/03/solvent-insurer-insolvent-insurer/

Top U.S., European Banks Got $50 Billion in AIG Aid
SERENA NG and CARRICK MOLLENK
WSJ, MARCH 7, 2009

http://online.wsj.com/article/SB123638394500958141.html

Category: Bailouts, Corporate Management, Finance, Legal, Markets, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

141 Responses to “iBanks Grabbed $50 Billion in AIG Bailout Cash”

  1. doug says:

    while not advocating it, I am beginning to think it will take violence to correct the situation

  2. philipat says:

    The reason for the total lack of disclosure, despite the promises of a new Democratic Administration, is that Pitch forks and peasants on Wall St not only block the way to the nice restaurants but also don’t look good in the media. Let them eat cake.

    Second revolution anyone?

  3. WiseSnake says:

    I am not sure what is exactly so surprising. The amount? This is well within the parameters of the bailout. Is it the fact that foreign banks are bailed out as well?

    The Bank oligarchs are protected from the consequences of their failures by their political class which they own. What is exactly so special in this latest development? In truth, it is a leak rather than a development. It was well within what was imaginable given all that “we know we don’t know”.

  4. yoodman_jimmyy says:

    This is just as scary as HR 1955 (Violent Radicalization and Homegrown Terrorism Prevention Act of 2007) passed in Oct 2007 … aka “Thought Crimes”.

    worthwhile 5 min clip:
    http://www.youtube.com/watch?v=4Op3x154z2I

  5. philipat says:

    “It was well within what was imaginable given all that “we know we don’t know”.”

    Ah yes, but what about what we don’t know we don’t know?

  6. johnbougearel says:

    Barry,

    While we all know the counterbparties are fleecing us, it was worth the read. In the simplest terms, it has been a “GIANT Fuck You” The Fed and US Treasury, and it is about time mainstream media let’s them know we know it.

  7. Marcus Aurelius says:

    Continuing criminal enterprise. RICO Act violations. Systemic fraud. Political Party-independent, Government involvement. Fascism.

    Of, for, and by the people?

  8. Marcus Aurelius says:

    philipat Says:
    March 7th, 2009 at 9:18 am
    “It was well within what was imaginable given all that “we know we don’t know”.”

    Ah yes, but what about what we don’t know we don’t know?
    ________

    The problem is that we DO know.

  9. philipat says:

    “The problem is that we DO know.”

    Sorry, just qouting Rummy. Doesn’t seem like much has changed?!

  10. Bill Werner says:

    Now that the counter-party mystery solved “Credit Default Swaps” (CDS) should be renamed “Taxpayer to Casino-Banker Swaps” (TCBS).

  11. Marcus Aurelius says:

    philipat:

    No dig at you, and you’re right – nothing has changed.

  12. philipat says:

    Of, for, and by the people?

    And that truly does need revisiting, doesn’t it. It’s a fine and correct sentiment but it has been systematically corrupted, not only in the US. It requires we the people to get back to fundamentals and find change.

    What’s for sure now is that US living standards are on a downward trend mainly because of the corruption within the US system, Government, Banks, Corporations in general. But I suppose that we the people are also complicit, having taken the pill and lived high on credit for so long.

    So where next?

  13. Degarmo says:

    I own a small business that has been around since 1976. In the non to far distant past I had 16 employees, now there are five (not counting myself). Those much missed employees who are gone can thank our leadership and Congress for their inept and/or corrupt servitude.

    I have a good friend in PA that owns a company that has a couple hundred employees; he had to lay off a quarter of his workers in December (he does not own a seasonal business). He called me a couple weeks ago, after E-mailing me some documents he had received pertaining to COBRA coverage for the laid off (or released) workers. He was sick to his stomach. He was telling me that now, due to one part of this stimulus package, the company is in jeopardy of closing due to mandatory COBRA payouts for the 1/4 of the employees he “had” to let go in order to save 3/4 their jobs. This is insanity.

    I bring all this up because many people who do not own businesses do not realize all that we as business owners are subjected to; not that I am discounting all the other people who do have a working knowledge or understanding even if they don’t own a business.

    Business has been hard enough to keep going with all the laws, restraints, taxes and such that have been piled upon us for years… but now it is as if they are planning on how to make the majority of us fail.

    What on God’s green earth do we need to do to wake up people to what is going on?

    Thanks for listening to me vent.

  14. WiseSnake says:

    Agreed: “what we do know” is ground in itself for some extreme house cleaning (revamping really((revolution in truth))).

    I was just pointing out that this particular WSJ leak has no impact whatsoever on what I think about the all thing.

  15. Steiny says:

    A piece should be added on this site or in the comments section that would send a generic article like this to our local congressmen to the tune of 5mm, 10mm, 50mm votes, similar to favoring or opposing a bill. Something needs to drastically changed or shareholders and taxpayers will get continually slapped in the face. These high profile decision makers treat us exactly like some war scenario, “wipe out X amount of pawns in order to become better positioned and much stronger”, unreal. Shareholders and hard working taxpayers are taking all the risk in this market while these greed driven companies continue to move forward and getting all their drastic mistakes corrected, sounds more and more like the fall of an empire. Pull back the curtain, I wanna see the wizard.

  16. awilensky says:

    Armed revolt. Assemble my fellow citizens with your arms in Boston, the cradle of our our Republic, and March by Foote to the Capital – and we shall process to dismantle this cursed and perverted Congress, the executive, and shall leave the Judiciary for now to redeem the remains.

    March! We shall strike in the Ides of March.

    General AW

    I voted for Obama and I am sorely nonplussed.

  17. awilensky says:

    I want a total clawback of all bailout funds.

  18. VoiceFromTheWilderness says:

    None of these bailout plans has ever been anything but a giant FU to the society in general. They have all been quite clearly, right out in plain sight, been giveaways to the big players in the financial industry with a ‘hope that this will stimulate new lending’. 1) you don’t give away 10% of your GNP on a hope — if you are serious, you make it legal binding. Conversely not invoking federal legal powers means… not serious about stated aims. 2) As everyone here knows well, ‘new lending’ is not what’s needed, but the banks sure would like to get that profit making enterprise going again. Ergo the bailouts real purpose is… get the profits going at the banks. Which benefits? Corporate personel and owners of bank stock and debt. 3) Unfettered bonus payouts, and no attempts to claw back ill gotten gains means? This is all about making sure that corporate insiders at major finance and PE firms continue to enjoy a huge revenue stream.

    All of the proposals to date have as their clear outcome (not verbal spin associated with selling these ‘plans’) continued massive economic benefit to a small number of individuals. All of the plans to date offer ‘hope’ that the plans will benefit ‘the economy’, meaning us. Real plans to benefit ‘the economy’ would do so directly — we need to find meaningful use for the labor that is being wasted, and we need to direct cash to the places where value comes from, not to those who are best able to swindle, lie, cheat, and steal. Small parts of the current plan do move in that direction, but they are very small compared to the amounts being spent to create a two-tiered society.

    Regulatory capture is really not even the half of it. The reality is that Washington (the executive, the legislature, and the judiciary) has been entirely captured by high flying wall st. manipulators. Perhaps all those ‘smart’ business types who were so enthralled with the grandeur of the Republican spin machine are starting to wake up. Perhaps they realize now that the Republican party never had their interests in mind, but rather represented a power grab of the highest order.

    Unfortunately for our new owners they are about to discover that the economy is more like an eco-system than a chess game. When the predators gain too much advantage, and become too succesful, they destroy so much of the prey that their own lives become at first threatened, and then ended, as the food they depend on slowly at first, and then more rapidly as the competition becomes more fierce, disappears.

    Bailouts that support the prey only hasten the end game.

  19. philipat says:

    @Degarmo

    Welcome to the world. In Europe we call this socialism and it seems to be catching on in the US?

    Why should that poor neighbour who bought a home he could never afford be thrown out on the street? Poor him, give hime a break paid for by the taxpayer?!

    The US HAD the most flexible economy in the world, allowing rapid adjustment to change. Get it over with, adjust and move on. And now? Socialism? But starting with the rich and perhaps with a little trickle down? Is that the US?

  20. VoiceFromTheWilderness says:

    wups, should read: “Bailouts that support the predators only hasten the end game”

  21. BG says:

    Barry,

    I am in a state of FFF (financially fucked & fatigued). I, really am. I am sick and tired of all of this stuff and just worn-out.

    It pisses me off to no end recalling in years past how the public sat idly by and let the banks buy each other up continually getting bigger and bigger and no one considered this might not be a good idea for creating all of these too-big-fail institutions.

    I remember well way back when, it was rationalized as absolutely necessary if the US financial institutions were remain competitive with other global financial institutions. Remember that? Well, that worked out just fucking great didn’t it? Remove Glass-Steagal and here we are.

    The public in general (while much more informed thanks to the internet from decades ago) is still basically a bunch of sheep. The Wall Street crowd over-reached and as a result has exposed the greed and criminality that has always exists there just beneath the surface.

    In regard to the Bank Nationalization (of the largest of the too-big-to-fail) issue….I don’t think the Government wants any part of it. Their thinking is you “fucks” created this mess and you SOBs are going to clean-up your own mess.

    I don’t think the Government feels it has the required expertise (sorry for the terrible absurdity here) to manage all of the derivatives that are blowing up on a daily basis. In short, I think the government feels it simply can’t manage the complexity of this stuff. And I must agree…I don’t think they can either.

    They have instead resorted to just giving them money when necessary and letting each institution manage its own mess. In essence, the US Government is hiring all of these folks to continue to manage their own stuff as best they can. They are the people closet to the raging fire so-to-speak.

    Lastly, I think the US Government basically only knows what they are told by this crowd anyway. Normally, the Government would nationalize these banks to show their disapproval; but, these are extraordinary circumstances where the Government is already over-its-head in managing what they are already involved in i.e. Freddie, Fannie and all the banks they have taken over. They don’t have the staff to manage any more of this stuff; but, the “fucks” do. So, here we are.

  22. awilensky says:

    We are all truly “the forgotten man”, the Tax payer who has no vote, no say inn the matter, and will have our pockets empties by the people we elected. I am expecting nothing now from the President that I helped elect. His team? The worst.

    If not a violent overthrow, then how about a national tax revolt?

  23. try2bamused says:

    I rest easy knowing that the U.S.Federal Reserve and the Treasury Department are working as hard as they can to make global banking interests as whole as possible. Wouldn’t want to see the porkers man-up and actually have to take a loss. That’s for the too-small-to-bails.

    Wouldn’t want to risk any “systemic collapse” now would we, children?

  24. SS says:

    Barry,

    The reduction of complex problems to rhetoric is the clearest sign of a society in trouble and given your background one would have hoped that you would be more sensitive to it.

    Quite clearly the argument for this bailout is that pushing still more major international banks into receivership, including foreign banks with substantial U.S. presence, would hardly be stimulative to the economy. I presume, with out much risk of being contradicted by the facts, that this is the argument prevailing in the Obama circles and not some hidden Freudian desire to impoverish one of its principal constituencies, the U.S. tax payer. which it is otherwise trying to court through a more balanced tax structure.

    One can question whether this bailout will have the desired effect but the rhetoric and nonsensical accusations of intent can not further that argument. On the other hand it mistakenly incites public anger. We have a long history in this country of political assinations, lynchings and other manifestations of misplaced public wrath gone out of control. As a member of a minority which has experienced this not infrequently I would have thought you more sensitive to the problem and restrained in your public pronouncements. Try again we need your reasoned voice on these issues.

    SS

  25. Blurtman says:

    It may be worse than described.

    It has been reported that the ratio of CDS insuring GM bonds to GM bonds is 100:1. That means that 99% of GM CDS holders are not hedging risk exposure, but purely speculating, i.e. placing bets on the downfall of GM.

    It has been reported that much of the CDS that AIG wrote was for insuring CDO’s, much of it mortgage derived. I have not seen reports of CDS ratios to these securites, but it is possible that the taxpayer is bailing out pure speculators, investors placing bets on the decline of mortgage backed securities. Sounds like an obvious bet now. But these securities were rated as Triple A at one time.

    Now when you consider that the very same institutions, Goldman Sachs, Morgan Stanley, etc. profited very greatly by creating and selling these CDO’s, which conveniently were “incorrectly” rated by the agencies that the issuing institutions paid to rate them, and that the issuing institutions, as well as the rating agencies, knew how really bad these securites actually were, well then you have quite a situation here.

    You create and sell toxic garbage that appears to be Triple A securities. You make billlions.

    And as you know how truly bad this stuff is, you take on CDS insurance on it, even if you do not own it, and multiple CDS per security, and wait unti the securities that you know are crap and unmasked as being just that.

    This is wonderful arbitrage. But it is arbitrage based upon fraud.

    And now one more troubling detail – the architect of the AIG bailouts, the architect of the transfer of billions of taxpayer dollars to Goldman Sachs, Merrill Lynch, etc via AIG, is Tim Geithner. Obama chose this fellow to be his Treasury Secretary, after the fact.

  26. VoiceFromTheWilderness says:

    The talk that one hears on even these quite intelligent blogs about ‘pitchforks’ is quite frankly sad, and foolish. The US military has been doing training excercises on ‘civil unrest’ for 10 years now. They are so far ahead of you people it’s laughable. The right wing loving, republican voting, NRA is about to find out just how much freedom their shot guns and colt-45′s can do against a modern military. Those of us with calmer heads already know the answer: Absolutely Nothing.

    Any ‘civil unrest’ will only hasten the rise of the empire, providing the excuse needed to convert the police to a military force. The only people that will be harmed by such an action are the general populous, and of course ‘the real economy’. In fact, the Bush administration made plans to even use a medical crisis, such as a flu epidemic, to convert the civilian infrastructure to a military infrastructure.

    Quite honestly, the plethora of foolish beliefs about a) the real state of affairs, and b) ‘solutions’ to it IS the problem.

  27. Steiny,

    though your point is a good one, e|mail is highly ineffective..

    you’d have to tie it to a print/envelope stuffer like this:
    http://www.martinyalepaperfolder.com//EnvelopeFolderstuffers.html?gclid=CMG8j4SQkZkCFQETGgodDX1GZw

    BR may want to form a 501(c)(3), or similiar, the reduce frankage rates are an additional +
    http://www.thefreedictionary.com/Franking
    yes, def. #3

  28. BG says:

    Blurtman,

    What you say is very consistent with the way Wall Street thinks and acts. I think You are on the money with your post. Even when the thief has been cornered, he still continues to innovate in order to create his escape.

  29. Joseph T says:

    75% are foreign banks. We will not get that money back. Its a taxpayer bailout of foreign banks.

  30. Moss says:

    Any of these funds received by the criminal enterprises that got direct TARP funds should be treated exactly the same. That is they owe it back under the same terms. These MF’ers have no bounds.

  31. Joseph T says:

    The information was leaked out on Friday evening. A typical PR tactic when you want to bury a story.

  32. VoiceFromTheWilderness Says: March 7th, 2009 at 10:24 am

    all, too, readily, verifiable..

    as I’ve mentioned previously, Paul Revere had it easy. He, merely, had to alert that ‘they’ were coming..

    much more difficult, this go ’round..

    b. A turning or rotational motion about an axis.

    B, may be a good grade, but, also denotes the inclusion of incorrect answers..

    IOW, being ‘above average’, isn’t what’s called for, nor will it suffice..

  33. Blurtman says:

    The underlying belief of entitlement that is at work here goes something like this:

    We gamed the system, making money both ways, ad we demand to be paid.

    If AIG cannot pay, then dammit, the taxpayer will.

  34. try2bamused says:

    And unfortunately for the US Federal Reserve and Treasury Department, thanks to their bad bets, the bailout money pit of the global banking interests is probably bottomless, but the patience of US taxpayers is probably not.

  35. Marcus Aurelius says:

    awilensky Says:
    March 7th, 2009 at 10:02 am

    Armed revolt.
    _______

    Peaceful revolt is possible (see Vaclav Havel and the Czechoslovakian revolution). Violence invites suppression, tyranny and even worse government (see Milošević and the Yugoslavian revolution).

  36. Joseph T says:

    The thing is, this money comes out of the Federal Reserve, the taxpayers and Congress don’t have a say on it. Paulson conned Bernanke and Bush and the foreign governments are putting pressure on the US to keep sending money.

  37. b_thunder says:

    Not only FUCK YOU to the taxpayer, it’s as Fed vice-chair Donald Kohn put it, ” With all due respect, FUCK YOU Mr. Senator.” I mean, what did you expect from the Fed which is owned by the banking industry (that now includes GS and MS?) What did you expect from Hank Paulson? He doesn’t know the world outside of Palm Beach mansion, Dartmouth campus and Wall St. For them it’s their job, their duty and their worldview that they have to save the industry.

    Can Senate subpoena Fed officials to testify? If the got Karl Rove to testify, is Fed so far outside of the laws of this Nation? If it Fed (like Dick Chaney) doesn’t fall under any jurisdiction, can in be ABOLISHED?

  38. Blurtman says:

    If your Senator voted to approve the architect of the AIG bailouts, he or she has to go.

    Double that if he or she voted for TARP I.

    Never again.

  39. “Peaceful revolt is possible (see Vaclav Havel and the Czechoslovakian revolution). Violence invites suppression, tyranny and even worse government (see Milošević and the Yugoslavian revolution).”
    –Marcus Aurelius

    If we, merely, change our consumption/investment patterns we’ll find, quickly, contra to the best designs of Mad Ave., what “new&improved” can really mean..

  40. Lars39 says:

    Echos from the past…

    “Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action.”
    - George Washington

  41. Patrick Neid says:

    Oh please, gag me with all this faux outrage.

    Everyone was told by the few voices, that the original Plan, the plans since and the plans coming will ALL look like this. Stop with the I’m shocked bullshit. What you should be shocked by is your own stupidity if you were a Plan supporter under the pretense that something had to be done because the free market had run amuck and only, only the GOVERNMENT could fix it..

    There were a few of us that warned all plans are doomed to failure. Sitting around now picking through the entrails and crying the blues is a little rich.

    This disbursement of public funds is minor compared to what is coming with the previously passed stimulus bill, the foreclosure bill and countless spending yet to be announced. The government is graft, payoffs, featherbedding and the mob for all intents and purposes. They run bust outs for sport. At least we know where the money went in the AIG fiasco. The trillions to be wasted will have no trail to speak of.

    Just think , we can now have another congressional committee look into this with the same results they had looking into Fannie and Freddie years ago. Call Maxine Waters, she’ll get to the bottom of it.

  42. Greg0658 says:

    “the architect of the transfer of billions of taxpayer dollars to Goldman Sachs, Merrill Lynch, etc via AIG, is Tim Geithner”
    we could hope .. that the Presidents choice was “fix it or jail” … besides the “helleva job Timmy .. carry on”

    SS (some name) good call for peace in the streets …. riots really won’t help

    unless the end game is to destroy the FDR inspired social structures …. and get a global civil war going because the system believes me when I said “to many people making to many problems”

    and the Degarmo post …. moving . troubling ….. my mind pulled up the Wal*Mart lawsuits for insurance infractions .. we the people don’t wanna be taking on more and more insurance needs of business do we ………… so all we are posting here .. gotta wonder if the government is doing what governments do .. follow the law for the benefit of the most as they see it .. until they see the light from a different prism …………. a rainbow prism one could hope

  43. jmay says:

    Barry, I’m curious if you’ve read or have any comment on this:

    http://www.talkingpointsmemo.com/archives/2009/03/im_sure_the_knowledgeable_people.php

    They’ve been reporting that under a provision of the most recent 2005 Bankruptcy Bill, the I-Banks would HAVE to be paid out first if AIG went under. The I-Banks were going to get their payout one way or another.

    ~~~

    BR>: Yes, I’ve been researching the specifics of the law — I think its overstated, but I am getting the low down from, the pros.

    See this for some more info on it . . .
    http://www.isda.org/speeches/pdf/TBR-CP-Final-Response05-27-05.pdf

  44. RW says:

    It is good to think of a leader like Václav Havel these days. I voted for Obama in the hope he might become a leader like that and still have not completely abandoned that belief despite disappointing signs. But leaping to conclusions in search of certitude seems a greater threat and so I continue to watch, read, talk and (re)consider, keeping in mind another Václav Havel quotation in the process: “Keep the company of those who seek the truth, and run from those who have found it.”

  45. Kyle says:

    When sheep vote to be led by wolves, why are they surprised when they get eaten?

    When people elect Nero, why are they surprised that Rome is burning down again?

  46. spudvol says:

    Did we sign a Foreign Asset Relief Treaty(F.A.R.T.)?

  47. Transor Z says:

    @ Philipat:

    “Trickle-down Socialism”

    I love it.

  48. natoK says:

    “This is a giant FUCK YOU to the American taxpayer. Isn’t there some Congressmen (besides Ron Paul) who are morally offended by the Paulson plan, which is slowly becoming the Geithner plan? Isn’t there anything that can be done?”

    SOmetimes the only way to truly express one’s feeling is using the vernacular. Well done BArry.

    Nice to see a ‘mainstream’ blogger tell it like it is.

    I am CAnadian, and certainly no Republican, but is this change we can believe in?

    The lobbyists and tentacles of the banks and financiers run so deep that there is no acting without consulting them. Isn’t it obvious that it is they who run the country?

    While some of Ron Paul’s views may be off-putting to some, I hope that more and more people are realizing that the US is a ONE party system with 2 different colors/logos. Read The Revolution by Ron Paul – he has some ideas that don’t seem as off base after all that has transpired.

    This country needs another Andrew JAckson to Kick ASS, destroy the FED, restore money creation to elected (accountable? much debate there!) officials and make the tough decisions, force everyone to suffer a little for the betterment of the country.

    Again I suggest you listen to the 40 minute interview with the author of The Creature From Jekyll Island: A Second Look at the Federal Reserve. It is a well-researched, in-depth, non-hysterical book. HE outlines where all of these baillouts are taking us. SACRY.

    The interview is on MArch 7th, and there is an mp3 link.

    http://www.financialsense.com/fsn/main.html

  49. Marcus Aurelius says:

    If you like Ron Paul’s economic ideas, but can’t stand his social agenda, Kucinich may be worth a look.

  50. Movie Guy says:

    You can’t make this stuff up.

  51. Marcus,

    do us a favor, delineate the “social aganda”, of Rep. Paul’s, that one “can’t stand”– would find objectionable..

    I ask, b/c I doubt many could even begin to articulate his positions, wholesale, let alone his ‘social aganda’..

  52. stantam says:

    A rotten corrupt system will destroy itself… from the inside out. What market bottom? Given what we know (to say nothing of what we don’t know yet), we’re on a long ride (or maybe not so long ride) to zero or something in that proximity. Sigh!

  53. Init4good says:

    Enjoy this blog immensely – at least we can express ourselves here…

  54. mrjain says:

    Barry,

    This is a MASSIVE FUCK YOU…all this talk about transparency is total BS. The financial giants are getting all the bailout money to help their friends and family. Let the whole damn thing collapse and then like a phoenix let it rise from the ashes.

  55. Steve Barry says:

    I don’t think they will get away with it, as main street is so pissed off, they will shun equities for a very long time, thus destroying the business models of the offenders. Personally, I am getting my share by being short this f’ed up system.

  56. MRegan says:

    @Degarmo

    Thanks for that post on changes to COBRA. I appreciate the opportunity to learn something about that.

    WRT more theft by GS et al

    The outrage that this provokes has to become fuel for action. In reply to Awilensky, the big boys are threatening the Federal govt with a cash flow choke off. As such, a national tax revolt would be a form of beating them to the punch. That is, force their hands, tilt the machine. The only problem is that the Feds would drop like a ton of bricks on any one or group that seriously organized and promoted a tax revolt. Only Ronald Reagan was allowed to do that.

  57. Joseph T says:

    I wonder if this is what Gordon Brown had in mind with his grand global rescue. If so, no wonder Obama treated him badly.

    There needs to be a tax on the American I-Banks that originated these CDS’s that expires only when the US taxpayer is made whole from all the money that flowed to the foreign banks and Goldman Saches and Morgan Stanley as a result of this inside rigging.

  58. Degarmo says:

    MRegan,

    More detailed info regarding the COBRA changes can be found at:

    http://www.hrstndassociates.com/

  59. haven’t read the comments but:

    I guess now you know why they felt they were deserving those ridiculous bonuses

  60. ottovbvs says:

    BR:…Er……were these legal contracts?………Or is the abrogation of contracts now part of the standard shtick here…..And if these contracts had not been honored what would have been the effect……to make a lots of American and European banks with ops here more fragile……I’m bound to say Barry given your sophistication I find this original posting very superficial to put it mildly…….Needless to say we then have the usual Greek chorus of protesters who don’t get it, but I expected more of you.

  61. Blurtman says:

    @ ottovbvs

    Goldman Sachs states that their exposure to AIG is immaterial so what are you talking about?

  62. zot23 says:

    People are either outraged and have no outlet in which to vent (calling congresspeople is like masterbating with a cheese grater for all the good it does), or they simply have no connected the dots yet.

    How can someone not connect the dots? Well, if you read Krugman or a handful of the other rightfully pissed off writers you’d have a clue, but if you watch FOX, CNBC, or read one of the other 85% of America’s papers you’d think Obama was crashing the market via his desire to take our guns away.

    We are in the destruction phase where anything that doesn’t work gets burned away (and takes some of that which does work with it unfortunately.) CNBC, Jim Cramer, FOX, Limbaugh, corporate newspapers, everything will burn away before things get better. The newer parts that work (like blogs provide news info) don’t quite fill the gap yet as the old status-quo apparatus is in the way. Sort of a “the king is dead, long live the king” scenario.

    Obama is a vision of the new way for America, he is also the last of the old guard. I suspect he’ll be 50/50 by the end, bold and visionary in some venues and just as blind as GWB in others (Afghanistan, Pakistan anyone?)

  63. rww says:

    Otto — I must be missing your point. So what that the “contracts” were legal? Doesn’t mean that the taxpayers have to see to their fullfillment. And what are the protesters missing? Why aren’t you outraged?

  64. anitamcb says:

    DeGarmo,
    When I read the page that you referenced in your post, it states that the portion paid by the employer for Cobra is then deducted from your payroll tax deposits. Other than bookkeeping, it doesn’t seem to cost the employer any more money.

    You said that you were disturbed at having to layoff your employees. Wouldn’t it be helpful to know that they could still have some medical coverage even while unemployed?

  65. Estragon says:

    What’s missing from this discussion?

    1. The intent was to allow AIG to continue operations as a going concern, not to put it through a normal bankruptcy. Paying out on offside derivatives would be a part of that.

    2. Derivatives are often hedged. Are the figures above netted to reflect the hedges, or are they only the offside portion?

    3. Isn’t it possible that the counterparties listed above are nominees or agents for client counterparties, and not the ultimate recipent of the settled transactions?

    4. Probably most important, NOBODY knows what would have happened had this (counterparty default) been allowed to go critical. We’ve talked about this on this blog before. Counterparty default could be defined and limited (through netting) reasonably well in bilateral derivatives, but real derivatives books are hedged multilaterally. Netting would be extremely complex, derivatives books worldwide would suddenly show huge increases in apparent values at risk, and the result would be impossible to predict, define, or control.

    What should really get us mad is just how close we came to the end of the world as we know it. This was predictable and predicted.

  66. glenstein says:

    What is with all this outrage? Can anyone tell me what else AIG should have been spending their money on, than its obligations to CDS counter-parties? Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt? Where the hell did all of you expect this money to go? AFAIK Mom and pop grocery stores don’t hold CDS’s,?

    What am I missing that has all of you in an uproar?

  67. Estragon Says:

    Estragon,

    Please tell us, even, more tales of Phantoms..

    I’ll bet you’re a real hoot on Camping Trips..

    “What should really get us mad is just how close we came to the end of the world as we know it.”

    sure, Oct. ’87 shouldn’t be included in that column either, right?

    what’s ending is the supply, necessary, to fuel the bubble of delusion that most choose to live in..

    Can’t have that, now, can we?

    as I’ve mentioned, previously: “Asymptotes are a tough customer..”

  68. Blurtman says:

    derivatives books worldwide would suddenly show huge increases in apparent values at risk
    ****************************
    I believe you may be dodging at least one point. The risk offsetting through the purchase of AIG CDS had been a fantasy from the get go. Somewhere in the calculation had to be the probability of the honoring of the CDS by the counterparty. It was a fantasy to assume that probablity at 100%. Taxpayers should not be liable to support the consequences of very bad due diligence on the part of the AIG counterparties, who likely did know quite well that AIG could not possibly pay under all likely scenarios, but were partying like it was 1995 anyway.

  69. Blurtman says:

    Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt?
    *****************
    Speculators. i.e., those that are not hedging the underlying security.

  70. mark mchugh says:

    C’mon people, connect the fucking dots…….

    Of the list of 15 above, 8 are primary dealers of the Federal reserve (there’s only 16 of them)
    http://www.newyorkfed.org/markets/pridealers_listing.html

    Goldman Sachs
    Deutsche Bank
    Merrill Lynch (BAC)
    Barclays
    HSBC
    Royal Bank of Scotland (Greenwich Capital)
    Morgan Stanley
    Bank of America

    This isn’t even a conspiracy, it’s an “in your face” money grab.

  71. Degarmo says:

    Anitamcb:

    Good question and easily explained as to how devastating this is on an employer that it applies to.

    Under the new law, the employer is to pay 65% of COBRA plan (many of which are family plans that can run up to $2000+ a month.

    For example sake, let’s pretend the employer has a payroll tax of $1000 per payroll. 65% of one ex-employees monthly COBRA policy of $2000 would equate out to $1,300. So, with this example, with just one employee the out-of-pocket expense to the employer would be $300. That’s just one employee. The government isn’t going to reimburse the employer for anything over and above what got negated via the payroll taxes once a 0% payroll tax liability has been met.

    In regards to you second question. I don’t believe I said I was disturbed at having to layoff my employees. You must have read that somewhere else, as that wasn’t in my post. Regardless, it disturb me that I had to let people go? Yes, without any doubt.

    This law doesn’t even affect my business. But it does affect many others, such as my friend’s I spoke about in my earlier post. This only applies to business with 20 or more employees where insurance insurance options were provided for during their employ. Many businesses could go bankrupt paying for 65% of past employees insurance plans.

  72. Estragon says:

    Blurtman

    I agree completely that counterparty risk should have been priced into contracts, but the point is it wasn’t. Taxpayers should have seen the systemic risks building and taken action to prevent a blowup, but didn’t.

    As for who, other than a bank, might be a counterparty, it could be a speculator, or it could also be a business with an economic interest in (eg.) hedging interest rate risk.

  73. glenstein says:

    Honest question, then, to followup: Do we know definitively that the status of any of those listed counterparties, like Goldman Sachs, Deutsche Bank, etc. etc. is objectionable? If they are banks, and they went to AIG for CDS’s, and AIG uses bailout money to pay back the CDS obligations, that doesn’t strike me as objectionable, especially if repaying helps filter liquidity through the financial system in such a way as to make lending possible again.

    So are any of Merrill Lynch, Société Générale, Calyon, Barclays in the role of nefarious hedging, speculating or other kinds of money manipulating such that this outrage is actually legitimate?

    Also, who could have been listed as counterparties that would not have met with outrage?

    I ask in part because I really don’t know, and also in part because I think a few of the commenters above who are outraged also probably don’t know.

  74. anitamcb says:

    Degarmo,

    You just scared me so I went to the IRS website for more info. As an employer, you DO get a refund if your payroll taxes are less than your COBRA payments. It is not an expense to you.

    This is an important issue for me. As a small business owner, I am in a quandary as to how to weather this financial storm without laying off employees. I have cut everything else I can, and now I have to make the awful decision to layoff people who have been with me for twenty years or more. Some of my employees would be able to get individual policies because they are perfectly healthy. Other employees, however, will be completely screwed because they have ongoing or pre-existing medical concerns. I would be pleased if the government would help with their COBRA payments because I don’t think that they should have to burn through what little is left of their 401k’s or their savings accounts on order to get medical care. If I put my employees on part time status, then they no longer will qualify for health benefits, according to our insurer. So I can’t even solve this problem by reducing hours.

    In California Blue Shield and Blue Cross have been charging higher premiums for COBRA than the state mandated rates allow. So in addition to paying our ridiculously high premium amounts, laid off workers can expect to pay even more just to keep their existing coverage. Any help that the government can provide to these employees that I must let go in order to stay viable, well, I’m grateful.

  75. ottovbvs says:

    rww Says:

    March 7th, 2009 at 1:09 pm
    Otto — I must be missing your point. So what that the “contracts” were legal? Doesn’t mean that the taxpayers have to see to their fullfillment. And what are the protesters missing? Why aren’t you outraged?

    ……….Well you see I have this touching attachment to the law of contract……..We’ll see how happy you are when someone breaches a contract with you……. Quite apart from the abrogation there were as a practical matter immense financial consequences for the banking counterparties when we’re trying to prop up the banking system…….And I’m not outraged because I’m over 21.

  76. 10 cc says:

    “The right wing loving, republican voting, NRA is about to find out just how much freedom their shot guns and colt-45’s can do against a modern military. Those of us with calmer heads already know the answer: Absolutely Nothing.”

    Well, I am most assuredly none of the above but I’d say …

    Tell that to the Vietnamese.

  77. ottovbvs says:

    glenstein Says:

    March 7th, 2009 at 1:22 pm
    What is with all this outrage? Can anyone tell me what else AIG should have been spending their money on, than its obligations to CDS counter-parties? Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt? Where the hell did all of you expect this money to go? AFAIK Mom and pop grocery stores don’t hold CDS’s,?

    What am I missing that has all of you in an uproar?

    Glenstein………What you’re missing is that most of the posters here are suffering from either a surfeit of moral outrage or they don’t know their ass from their elbow…….Somewhat amazingly to me BR seems to have joined the guys with tar and feathers…..Perhaps he thought all the counterparties to these swaps were The Salvation Army and the Knights of Columbus (actually the latter could be since they own a large insurance company).

  78. impermanence says:

    For all of you out there who believe that representative government works, I’ve got news for you, it doesn’t. How could it? It never has, it never will. Human nature just isn’t that way.

    The reason everybody has just been standing around doing nothing for the past several decades (it has been fairly apparent to anybody paying just a little attention that things have been seriously wrong for years and years) is that they believe that if they work hard enough, or are lucky enough, that they too, can be part of this grand “something for nothing” scam. Deep down inside, I have to believe that the majority of people realize that this wonderful economic system of ours (whatever you wish to call it) is horribly exploitative, as well as being absurdly corrupt.

    So folks, you bought it, you wear it.

  79. 10 cc says:

    The sad part of all this is, in terms of opportunity, this is probably the best we’ve had in 100 years to throw off the shackles of the banking vampires…and it will probably be squandered. So close and yet so far.

  80. robertf says:

    Folks,

    What’s the outrage? In 1980 Ronald Reagan ran on a platform that he would cut taxes for the wealthy, in the process transfering a significant share of the nation’s wealth to those who were already the most wealthy. It worked.

    Real median incomes are lower today than they were in 1973, yet income for the top 1% is more than 300% higher. ALL of the gains of the past 30 years have gone to the richest people in the country. I suspect that is not most of you reading these comments.

    In wealth terms, the effect has been even greater. The top 1% now own more than 60% of all the nation’s assets while the bottom 40% have a net worth of zero.

    This is Republican economics in action. We’ve known about it for 30 years. All we’re seeing now is its logical conclusion: an even more frantic stripping of assets from the public to the plutocratic–looting–on a scale never seen in the history of the world.

    This is what most of you have been celebrating in Republicanism. Congratulations. You’ve gotten what you asked for.

  81. 10 cc says:

    “……….Well you see I have this touching attachment to the law of contract……..”

    Yeah, I’m kinda’ fond of it too. Makes for a more civilized society. Problem is…for the life of me, I can’t remember personally signing any contracts with AIG or its’ counterparties. I’ll go through all my papers if you like but… I’m pretty sure.

    Now I’m no lawyer but, silly me, I always thought that if there are only two parties in a contract and one can’t fulfill, then the other is just shit outta’ luck.

  82. ottovbvs says:

    10 cc Says:

    March 7th, 2009 at 3:24 pm
    Now I’m no lawyer but, silly me….for the life of me, I can’t remember personally signing any contracts with AIG or its’ counterparties

    …….I can see that………Your agents did.

  83. Blurtman says:

    Estragon Says:

    March 7th, 2009 at 2:01 pm
    Blurtman

    I agree completely that counterparty risk should have been priced into contracts, but the point is it wasn’t. Taxpayers should have seen the systemic risks building and taken action to prevent a blowup, but didn’t.

    As for who, other than a bank, might be a counterparty, it could be a speculator, or it could also be a business with an economic interest in (eg.) hedging interest rate risk.

    ***********************
    Estragon,

    I am not certain I understand your statement that taxpayers should have seen the systemic risk that was building and acted on it.

    I don’t believe you mean to say that taxpayers should have been involved in the business of a corporation like AIG. There are free market rules about how this situation should play out that are not being adhered to. Whether speculator, bank of other business, if you did not perform proper due diligence, that is regrettable, but don’t go reaching into the pocket of Joe taxpayer to cover your losses.

    And by “taxpayer” certainly you mean a representative of the interests of the taxpayer, such as a regulator. I think all agree that regulatory oversight was abyssmal.

    That being said, the CDS contracts were written by AIG, a public corporation, and not by the taxpayer. Everyone knows the rules.

  84. Gawdfather says:

    Wow, robertf, that is quite a leap of logic you try to pull off. A big decrease in tax rates equals a transfer to the wealthy. Really? People keeping more of their own money equals a transfer to themselves? Wonder how that works…

    Here is reality: in 2006, the top 1% (those with an AGI over $364,657) made 21% of all income that year, yet paid 40% of all income taxes. The dollar amount they paid in income taxes is equal to the dollar amount paid by the bottom 95% of taxpayers. A progressive tax system in action. The top 25% earned 67% of all income that year, and paid 86% of all income taxes. Quit yer bitchin’.

    Source: http://taxprof.typepad.com/taxprof_blog/2007/10/top-1-pay-more-.html

  85. Mannwich says:

    @Voice: I hear you and think for most “pitchforks” is a metaphor for SOME form of civil disobedience and protest. For me that would be mostly large, nonviolent protest, civil disobedience, which is usually far more effective than violent ones. I still think it’s going to come but things have to be truly in the tank for that to happen. Unfortunately I am worried it won’t be nonviolent but very violent as the anger is channeled in an unproductive manner.

  86. Pat G. says:

    “Isn’t there anything that can be done?”

    Oh, it’s coming….

  87. glenstein says:

    @Blurtman:

    >That being said, the CDS contracts were written by AIG, a public corporation, and not by the taxpayer. Everyone knows the rules.

    The argument goes, if we were to let AIG collapse, a whole host of financial instituitions that depend on AIG’s fulfilling its CDS obligations go down with it, which would entail the collapse of some large portion of the financial world that is associated with the counterparties to those CDS’s. And then any business that needs access to capital to balance its budget, meet payroll, and any form of accounting whatsoever that involves the accumulation of debt becomes impossible.

    I don’t know if that’s worse than the great depression because I can’t know the extent of the shockwaves of the collapse of AIG or others, but that seems to be the standard argument. If that is the gist of it, I don’t think outrage against financial institutions for getting us to this point and supporting bailing out AIG are mutually exclusive positions.

  88. Foghorn Longhorn says:

    A word to the wise.
    Do not say anything on the internet you would not tattoo on your forehead and walk down main st. USA, while screaming like a banshee.
    Mr, Orwell was an optimist.

  89. Ramstone says:

    I’m with WiseSnake — what exactly did all of you think all that was for? Of course it was to payout on some of the “free money” contracts AIG wrote. Wax indignant about how opaque is being about the amount, not the too-big-too-fale money.

  90. Pat G. says:

    @Voice:

    History has a tendency to repeat itself.

    Wikipedia: “The American Revolution refers to the political upheaval during the last half of the 18th century in which the Thirteen Colonies of North America overthrew the governance of the British Empire and then rejected the British monarchy. In this period the colonies first rejected the authority of the Parliament of Great Britain (U.S. government) to govern them without (with pseudo) representation.” (My insertions).

    While the U.S. military would obviously have an advantage in training and hardware, the American public has an advantage in numbers. In addition, there are many average citizens who have ample military experience through serving in our military. Look at the military casualties in the Mideast and realize that of all the different types of wars to fight, the ones fought in urban areas (or door to door) are by far the most deadly. Besides, do you really think that those in the military would just blindly follow orders to kill their own countrymen? Let us hope that our government can get it’s shit together before any of this becomes a reality. You can provoke the American people but you would be best advised to back away before you get to the point of really pissing them off. That goes for Uncle Sam too.

  91. Foghorn,

    they called this thing the World Wide Wiretap, while it was still ARPANet

    http://www.dei.isep.ipp.pt/~acc/docs/arpa–1.html

  92. SS says:

    @Pat G

    Barry,

    I hope you’re proud of yourself. In order to get some publicity and traffic on the site and promote your media credentials you’ve stirred public outrage without adding any intelligent light to the discussion.

    I applaud those above @Voice, @RobertF shedding some light on the situation and @antiamcb apparently trying to sincerely come to grips with the problems of his now unemployed workers.

    Yo’ Barry why the silence? One can only offer you a Bronx cheer for the effort and wonder what your good mother thinks of all this rabble rousing!

    SS

  93. awilensky says:

    We’ll be fighting in the streets
    With our children at our feet
    And the morals when they worship will be gone
    And the men who spurred us on
    Sit in judgement of all wrong
    They decide and the shotgun sings the song
    Who…..

    When we are all in line for Government bread, and Federal guns are at our head, we will not vote with a ballot but with a gun. Slipping into darkness of a D.C. night, we are cloaked in black to fight, and burn down the capitol just for fun.

  94. SS,

    a little further South from here, one might, still, hear: “Iffin’ you don’t shake bushes, you’ll flush no Quail.”

    and, to RobertF’s point, to think it’s “Republicanism”, is to have you’re thinking done for you..

  95. formershrink says:

    @glenstein:

    While I appreciate your attempt to bring reason to bear on an emotional issue, I think your questioning why people are outraged misses the obvious. There is actually not the slightest mystery as to why people are outraged.

    Really, I think the rational question is the validity of the domino theory of economic collapse: what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?

  96. moonoverseattle says:

    The market will squeeze the corruption out, since the government are beholding to the banksters. The best money government can buy.

  97. sailorwill says:

    I am really getting sick of these rants about “taxpayers”. The Right rants the “taxpayers” shouldn’t pay for irresponsible homeowners, The Left complains the “taxpayers” shouldn’t pay for greedy bankers.
    Suddenly we have become a nation of innocent “taxpayers” that had nothing to do with what happened. While just a few years ago these same “taxpayers” were reaping the benefits of the bubble directly and indirectly. If you believe all these ranters, our nation collectively has been a frugal, living by the means icon of the world. Our national debt and zero savings rate tells a different story. This whole “I had nothing to do with it” scenario reminds me a little of Germany after World War II almost. The Daily Show should really do a segment on this.

    So taxpayers, we lived large collectively and elected governments that lived large on our behalf. Now suck up and pay for it! And accept that some money will go to the less deserving.

  98. VennData says:

    Where is Rick Santelli on this? Where are his trader buddies who don’t want to pay for their neighbor’s slip ups? If homeowners didn’t know house prices were going down, don’t tell my you don’t think Goldman Sachs didn’t know AIG could, that’s why you buy a CDS on THEM when they’re your counter party, right?

    Are you listening Rick Santelli?

  99. glenstein says:

    @formershrink:

    >There is actually not the slightest mystery as to why people are outraged.

    That’s absolutely true of the issue as a whole, but my question is whether the revealing of counterparties counts an appropriate object of outrage. To me, this hasn’t actually been settled one way or the other.

    >what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?

    Well for me, it’s largely that Paul Krugman says so, as well as other financial experts predicting doom and gloom; which has been corroborated by job losses and a general sense of panic amongst lawmakers. Also, the first full paragraph of this comment.

    Also noteworthy is that it seems that none of us really know (and among them, commenters who have expressed outrage)- we come here, as I do, asking for evidence of the case contrary to the one we subscribe to rather than affirmatively presenting some argument.

    While I’m here I’ll reiterate to anyone listening- what is so bad about the fact that AIG’s counter-parties were big banks?

  100. awilensky says:

    Me to the Pheds who arrest me for fomentation:

    Me: “I want to Kill Kill Kill Kill …etc.”
    Phed:”You’re our kind of Boy, want to come work for us?”