Friday, March 20, 2009

Why Are We Bailing Out AIG?

Mostly because it is one of the world's largest insurance companies and it has insured many of the banks around the world that are at the heart of the financial crisis. If AIG goes under, it might be the first domino in a long string of failures. Here's some more interesting stuff on the bailout from Gawker (click the link to read more).

Where are insurance giant AIG's bailout billions really going? The White House doesn't want to tell us. But the Wall Street Journal, bless its Rupert Murdoch-owned heart, found out anyway: Foreign banks, lots of them!

The Federal Reserve began propping up AIG last September; a recent $30 billion infusion has brought the total bill to $173 billion. The government now owns 80 percent of the many-tentacled insurer, meaning that taxpayers are essentially on the hook for its liabilities. And AIG has spent roughly $50 billion fulfilling contracts it issued to banks to guarantee the value of various derivatives. Those complex financial bets went disastrously wrong as first the mortgage business and then the entire stock market imploded. U.S. legislators have been asking administration officials for names all week after the Treasury . They refused. But the WSJ got them:

Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Bank of America
Lloyds Banking Group

Ah yes, Rabobank, that pillar of the American economy.

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