Neil Barofsky, the inspector general overseeing the financial bailout, launched an audit of American International Group on Thursday. Barofsky informed the office of Rep. Elijah Cummings (D-Md.) in a letter Friday afternoon that he had opened the audit.
UPDATE: Read the letter. (PDF)
Cummings has been closely watching AIG since the government seizure. A week ago, Cummings and 26 other members of Congress sent Barofsky a letter asking for such an audit.
In particular, the members of Congress wanted to know further details about payments made to AIG counterparties. The counterparties relied on AIG to insure bets they made on other transactions. Now that those bets have gone bad, they've still been able to collect 100 percent of what AIG had guaranteed.
The members of Congress asked Barofsky to find out if there was any effort to renegotiate that arrangement and demand the counterparties take "haircuts." The members were also curious how much exposure particular firms have to AIG. Goldman Sachs, for example, claimed it had little exposure to AIG. That was not true. Goldman Sachs has since received billions of dollars in counterparty payments from AIG.
Foreign banks, too, have been on the receiving end of tens of billions of dollars worth of AIG payments.
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