Fed Under Pressure to Reveal AIG Bailout Recipients

By: Declan McCullagh
Topics: Federal Reserve

(AP Photo/Gerald Herbert)

File photo: Republican Sen. Jim Bunning wants to know who benefited from the $173 billion AIG bailout

A report that U.S. and European banks benefited by about $50 billion through the bailout of ailing insurer American International Group may increase pressure on the Federal Reserve to be less secretive.

The Wall Street Journal reported in its weekend editions that the indirect bailout recipients were Goldman Sachs, Germany's Deutsche Bank AG, Merrill Lynch (now part of Bank of America), French bank Soci?t? G?n?rale SA, Royal Bank of Scotland Group PLC and HSBC Holdings PLC.

When the Federal Reserve announced a bailout of AIG on Sept. 16, 2008, it claimed that a "disorderly failure" could harm markets and cause "materially weaker economic performance." Since then, the Dow Jones industrial average has fallen by 37 percent.

In its announcement at the time, the Federal Reserve and Treasury Department did not identify AIG's banks and other counterparties who were the indirect (or, arguably, the true) beneficiaries. Since then, the initial $85 billion AIG bailout -- which allowed the firm to avoid bankruptcy -- has increased to over $173 billion.

At a hearing last week, Fed Vice Chairman Donald Kohn refused to identify AIG's counterparties, saying that the ultimate bailout recipients were "expecting confidentiality" and the list could not be disclosed. (Bloomberg News has sued the Fed over its penchant for secrecy; so has former AIG CEO Maurice "Hank" Greenberg.)

Sen. Jim Bunning, a Republican from Kansas who has been a bailout critic, told Kohn: "You are telling us that the counterparties that got par for their bonds or for whatever -— the American taxpayer shouldn't know who they are? And then you may come back to us and ask for more money for more banks and more corporations? You will get the biggest 'no' you ever got."

Ed Liddy, AIG's chief executive, recently defended the bailout as saying "government actions that have been thought of as strictly assistance to AIG have benefited the entire financial sector. Working with our partners in the government, we really have provided more stability to the financial sector." That's according to a transcript of the March 2 earnings call posted on SeekingAlpha.com.

Assuming about 105 million households in the United States, the AIG bailout cost per household is about $1,640.

The more taxpayer money that AIG and other bailout recipients consume, the more political pressure will build for transparency. An article from last fall in the Columbia Journalism Review says: "But what strikes me as utterly unacceptable—a true scandal—is that the recipients of U.S. taxpayer funds in the AIG bailout are not even disclosed. We pay them, and we don't even get to know who they are? Has this ever happened before?"

And the Sunlight Foundation, a non-partisan group in Washington, D.C., noted recently that: "AIG counterparty transparency is quickly becoming a bipartisan populist issue." If the Federal Reserve isn't more forthcoming voluntarily, Congress has the choice of forcing it to be.

Declan McCullagh is the chief political correspondent for CNET. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
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by cbsblogger March 19, 2009 12:20 AM EDT: One silver lining to this cloud - the American people are finding out once and for all who owes Wall Street the favors.... and its not the Republicans.

I'd would like to know exactly what Pelosi, Reid and Obama actually collected in cash 'contributions'. It must be staggering.
Posted by despido at 4:20 AM : Mar 10, 2009
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Democrats have always been controlled by the Wall Street financier tribe. Republicans by the CEOs in the Business Round Table and Chamber of Commerce.

As a result American people and middle class goy are ZERO for ZERO.; Reply to this comment


by Human-kindof March 11, 2009 8:47 PM EDT: Human kind .... Greed or desparation are the only real motivators in life. How long did the Roman empire last before it collapsed??; Reply to this comment


by whitemale08 March 11, 2009 10:10 AM EDT: Read the ABC New's report on AIG countrerparties.

There they confirm the British conspiracy that I rant about everyday.

Over 500 billion sucked out of the taxpayer through AIG because of London's worthless derivatives and credit-default swaps.

Folks, If we don't kick the British lobbyists and those defend the British empire out of our country, our nation is doomed to serfdom and destruction!; Reply to this comment


by robinhodge March 10, 2009 12:34 PM EDT: Oh, AIG American General is also telling us that we are not under the unbrella of AIG. Oh, then whose umbrella are we under? Travelers?; Reply to this comment


by robinhodge March 10, 2009 12:32 PM EDT: I work for AIG, you would not believe the arrogant corporate spin those slackers are telling us. That we are not bankrupt, what the F**k, then what are we if we aren't bankrupt?; Reply to this comment


by harpoot March 10, 2009 7:35 AM EDT: The bailout money doesn't belong to Congress so they don't care where they throw it. Grease up all their supporters.; Reply to this comment


by despido March 10, 2009 7:20 AM EDT: One silver lining to this cloud - the American people are finding out once and for all who owes Wall Street the favors.... and its not the Republicans.

I'd would like to know exactly what Pelosi, Reid and Obama actually collected in cash 'contributions'. It must be staggering.; Reply to this comment


by popeye_1 March 10, 2009 7:03 AM EDT: The U.S financial system is a big joke!! U.SA have no money. ***!! U.S.A owe billons of money to China and India. Pack your bags folks, U.S.A is for sale at 80% discount price.; Reply to this comment


by nursemark-2009 March 10, 2009 1:45 AM EDT: Sen. Jim Bunning, a Republican from Kansas Kansas??? Maybe Kentucky? I think you need more fact checking.; Reply to this comment


by tbuckl March 9, 2009 11:56 PM EDT: "I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Jefferson; Reply to this comment