Finance

AIG Insurance Bailout - Billions to Banks

Written by Tyler Shears on June 12, 2009 12:32 pm EST

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You knew that the U.S. just gave AIG $160B dollars, but did you know that $90B of it went to the same banks who created the housing bubble?

The same banks that are putting the U.S. further in debt are loaning money to the Treasury in order to pay themselves back.

Here’s how it works…

$700B - Federal Reserve issues $700B in debt to US Treasury for Bailouts (TARP)

$160B - US Treasury Provides AIG with $160B of the $700B Bailout

Why did this happen?

The Fed Causes Housing Bubble
The Federal Reserve lowered the cost of borrowing money to 1%, which made mortgages very available to consumers and a lucrative investment for banks.

Due to bad lending practices, and deregulation of the banking industry in 1992, the housing bubble collapsed in August 2008.

The AIG “Insurance Bailout”
Housing Bubble Burst = Mortgage Investments Go Bad

The bad mortgages that investment banks owned were insured by AIG, who were giving faulty insurance quotes, so when the investment banks wanted to make claims on these bad mortgages, they could not pay up.

The lowering of AIG’s credit rating triggered the payouts to these financial institutions. Oddly enough, these credit agencies are influenced by the same banks that received money from AIG.

$90B - AIG Makes Investment Banks “Whole” - Pay 100 cents on the dollar.

Banks Pay Themselves
The Federal Reserve issues $700B to the US Treasury Congress voted to provide AIG with $160B from the $700B. AIG Paid $90B to the banks.

In an unusual decision, these banks were paid 100 cents on the dollar for their investments. Usually they would be paid pennies on the dollar.

The close relationships between banking executives, the Federal Reserve, the US Treasury, and members of congress - many of whom benefited from this taxpayer funded bailout - gives rise to concerns about the integrity of our financial system.

Banks - Total of $90B from the $160B spent to bailout AIG

Goldman Sachs - $12.9B
Societe Generale - $11.9B
Deutsche Bank - $11.8B
Barclays Capital - $8.5B
Merrill Lynch - $6.8B
Bank of America - $5.2B
UBS Securities - $5B
BNP Paribal Securities - $4.9B
HSBC Securities - $3.5B
Calyon - $2.3
25 Additional Institutions - $17.2B

Banks Invest in Federal Reserve

These banks are Primary Dealers (investors) in the Federal Reserve. This means these banks make interest on the money that the Treasury borrows from them.

Due to this debt obligation from the Treasury ($700B) to the Fed, each taxpaying American will owe an estimated additional $2,295 + compounded interest.

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One Response to “AIG Insurance Bailout - Billions to Banks”

Jason Says:
June 29th, 2009 at 6:06 pm
there are additional details that people may want to read. By far the most inflential and responsible party is Goldman/Sachs. You have to take an hour and read Patrick.net link that was listed Friday 6/26. For a real education paste this site….and read “The Am. Bubble Machine…” about 12 pages http://zerohedge.blogspot.com/2009/06/goldman-sachs-engineering-every-major.html?ref=patrick.net