AIG Swaps: New York Fed's Secret Choice To Pay For AIG Swaps Cost Taxpayers $13 Billion

bloomberg.com:

Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

Read the whole story: bloomberg.com

Comments

[Chubbster]

Why is this utterly significant bombshell story buried here? This site bends over backwards in order to avoid shining any light on negative truths about the cherished Team Obama.

[sonofsamphm1c]

When I pointed out the article's numerous defects, it died.

[US1st2009]

geithner and all of goldman need to be completely investigated and prosecuted for financial terrorism.

some of us have been screaming about this for years but the public prefers to keep their heads in the sand and hope it will all blow away.

as a critical pin-hole view into the world of NY finance manipulating our congress, administration, tax dollars and economy to their personal benefit read the 4/26/09 NY Times article "Geithner, Member and Overseer of Finance Club" By JO BECKER and GRETCHEN MORGENSON and the accompanying graphic "Mr. Geithner’s World."

http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=1&em=&pagewanted=all

it's about time we all face up to facts and quit being cowed sheep. this is OUR country and OUR tax dollars being stolen in the greatest redistribution of wealth in history; UPWARD to the wealthiest few.

[Democratuser]

We need more stimulus spending. More jobs programs. Lets pray that Obama can get it done. Millions of lower & middle class Americans are falling through the cracks. We need a bailout to help them, not the banks.

hat tip to http://financeopinionss.blogspot.com

lets get unemployment benefit extension passed

[Chubbster]

Idiotic. The stimulus has been a waste of money. Spending? Sure, keep raping the average taxpayer.

[sonofsamphm1c]

The stimulus has been exceedingly effective, and its positives continue to expand.

[Energizer2009]

For those of you wanting more of an explanation, read this.

"There weren’t enough Americans with (bad) credit taking out loans to satisfy investors’ appetite for the end product. The firms used (financial bets) to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when (hedge funds) bought a credit-default swap, (they) enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets (hedge funds) and others made with firms like Goldman Sachs and AIG. (Hedge Funds), in effect, were paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all."

Why the market failed - http://twisri.blogspot.com/2009/03/why-market-failed.html

Adam Smith on the Current Financial Crisis - http://twisri.blogspot.com/2009/04/adam-smith-on-current-financial-crisis.html

What happened. What now. - http://twisri.blogspot.com/2009/04/commercial-and-investment-banks-used.html

To REALLY see what went wrong, take a look at page 6: http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf See page 2: http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf

Also see: http://www.ethicalmarkets.com//wp-content/uploads/2008/12/financialbailoutcomment1.pdf

[CaliGrown78]

This whole system is corrupt & broken & the FED needs to be completely shut down. Obama is a complete idiot for keeping Geithner, Bernake, & Rubin around & with each passing day that he keeps them on he just looks stupider. He more than likely will not be recieving my vote next election because he has had so many oppurtunities to do the right thing yet he does nothing. I'm really digging PhillipTaylor's post "birth of A New System: Stages of Removing Corrupt Old System" because there is really nothing left to fix, with a little revolution I think we could put some new deal into place.

[Chubbster]

It really is amazing that such toxic waste is being retained, the three you mentioned plus Larry Summers.

[sonofsamphm1c]

To claim this cost the taxpayer 13 billion is entirely unsupportable. It's essentially a lie. A smear. Just yet another in a long line of Bloomberg/Huffington Post smears of Timothy Geithner.

[InYourWorld]

Could you please produce some evidence of why Geitner deserves a break?

[sonofsamphm1c]

Try addition and subtraction. If a troubled institution gets stiffed by AIG, which the article is suggesting would have saved the taxpayer 13 billion, the the troubled institution is its portion of the 13 billion more troubled. And what that would mean is the troubled would have had to borrow TARP in the amount by which it got stiffed.

Say ACME Bank gets stiffed by AIG for 3 billion. In the puny little minds of the article believers, that saves the taxpayer 3 billion. Wrong, instead of borrowing 10 billion in TARP, ACME's plan before getting stiffed by AIG, they would need to borrow 13 billion, the amount they would need after getting stiffed by AIG.

Net savings to the taxpayer? ZERO.

Even worse, the repercussions of saving AIG and stiffing the AIG counterparties would have been amazingly destabilizing. And that would have cost the American taxpayer dearly.

[yankee222]

Geitherner is another disaster for Main Street brought to you by the change agent.

[PhilipTaylor]

BIRTH OF A NEW SYSTEM: STAGES OF REMOVING CORRUPT 0LD SYSTEM

Natural progression of stages from 0LD to NEW:

*Stage 1: Disillusionment: Realize PROBLEMS are so Severe Reform seems Impossible! Some Chance of Reform exists!

*Stage 2: Erosion: Characterized by a chipping away at 0LD SYSTEM with Facts, Complaints, Evaluation of Inequities +Imbalances. ANG_ER is expressed. Some Chance of Reform still exists but growing uncertainty!

Stage 3: Detachment: All interest and commitment to saving 0LD System is LOST as discussions shut down! Disenchantment with 0LD System increases while intensified conflict decreases as FOCUS moves to defining the NEW SYSTEM! “Dream of a NEW Future” without 0LD Problems!

Stage 4: Dismantling: Building Knowledge and Courage to replace 0LD System with New System brings Enormous Relief of past Disillusionment. Some anxiety, initial confusion, and fe_ar exists but resolves as New System becomes clearer.

Stage 5: Mourning: Removes ghosts of 0ld System as process moves to NEW Concrete Goals and Objectives. Anger at 0ld System is released and removed.

Stage 6: BIRTH of Fully Defined New System: Concentration on Choices, Clear Vision of things to come, Excitement, Evaluation of Alternatives and Risks, and Near Final Definition of Structure of the New System! Detailed Plan of action is developed.

Stage 7: Implementation and Hard Work: Renewed vitality, Pursuit of Goals, Finalize Policy Issues+Management Issues+Laws and Legal Definitions. Goals are Reached and Aspirations Achieved+Realization of New Balance of Power. New Confidence rises in final stage as Hard Work Follows.

[AmazingChicken]

Great stuff in the comment, but what does this have to do with the article? Quite frankly I tried reading it, it hurt my head and I couldn't make sense of the 'how," much less the "why."

[AmazingChicken]

article has a great picture of young Timmy as "dr. 3vi! though.

[RomeoMD25]

Obama Zombies out there, which are a joke to all of us that realize the true nature of what is happening.
You are blinded by reasons that are no longer relevant. Your Democratic? antics are ridiculous just as the counter Republican antics.
Its FAKE. These puppet parties do not run the country, no less the world.

[Chubbster]

Romeo, the fools have got to be teenagers or people who flunked out of a grade D college.

[sonofsamphm1c]

Save AIG and have them save the counterparties by paying them in full? The only logical choice.

[sonofsamphm1c]

Save AIG, stiff the counterparties, and watch them fail anyway????? Talk about dumb. Or...

[sonofsamphm1c]

Let AIG fail and watch several financial institutions fail as a result, or...

[Chubbster]

YES, should have let them fail. We are in deep doo-doo now. $450,000 in National Debt per citizen.

[sonofsamphm1c]

The article is full of logic errors. About 13 billion worth.

[NevadaPatriot]

Hardly Surprising!

Wall St. controls the NYFED and the FED. This will never end until the FED is separated from Wall St. / Banking. I do not see this happening anytime soon.

It is already business as usual. The Derivative market is in excess of 750 Trillion dollars. World GDP is around 50 Trillion Dollars. It does not take a rocket scientist to figure out something is wrong.

Obama has done absolutely nothing to address Wall St / Banking corruption. And I mean nothing!

He seems to support going forward with the exact same policies as Bush...... Bush who destroyed the American financial system.

America needs transparent free markets with accountability. This means are markets are ruled by law. Not ruled by a bunch of gambling bookies like they are right now!

[plages]

Oh Timmy what have you done to US, and you might as well tell Mr. O that you'll be leaving soon, so that you can get your things in order for a trial!! Bye the way, Mr. O, you hired him, and you must have known what he was up to, so . . . 2012 you'll lose!!