AIG Spent $61 Billion of Old Bailout Money, Plans to Participate in the New Bailout

by Deb Cupples |  Just over two weeks ago, we taxpayers bailed out the American International Group (AIG) via $85 billion in emergency loans, because AIG was on the verge of collapse.  Apparently, AIG held tons of toxic assets -- not unlike those Wall Street firms that Congress and the Bush Administration recently rushed to help (to the tune of $700 billion).

Already, AIG has spent most of the $85 billion it received in September, yet the company isn't much closer to recovery.  The New York Times reports:

 

"The American International Group said on Friday that it had already drawn down $61 billion of the $85 billion emergency bridge loan it received from the Federal Reserve two weeks ago,  an announcement that startled credit ratings agencies.

"The emergency loan was supposed to buy the company time to sell its troubled assets in an orderly manner. But the sell-off has not yet begun, and now the insurer faces the additional pressure of trying to sell the businesses at a time when potential buyers are having trouble borrowing money....

"A.I.G.’s chief executive, Edward M. Liddy, told securities analysts on Friday that $53 billion to $54 billion of the Fed’s loan had gone to shore up A.I.G.’s troubled structured-finance unit and its securities lending business. Another big block of the Fed’s money has been used to support A.I.G.’s daily operations, Mr. Liddy said in a conference call, because the company’s sources of commercial paper have dried up as a result of the worldwide credit crisis." (NY Times)

That's one jargon-laden statement, and I'm not sure what it means.  I grasp the part about billions going toward "daily operations," but I've no clue what it means that part of $54 billion helped to "shore up" AIG's structure-finance unit.

Where, precisely, did the shoring-up money go -- into whose pockets?  And what does a "shoring up" look like?  That might be useful information.

Yesterday, the U.S. House passed a slightly amended version of the Bush Administration's $700 billion Bailout Plan, which commits us taxpayers to buying toxic "assets" (e.g., mortgages tied to houses that are worth less than the loans) from Wall Street firms that were reckless enough to acquire those assets in the first place (i.e., during the housing bubble). 

AIG's CEO said that AIG can also take part in the newly passed Bailout Plan (i.e., take still more tax dollars).  How nice that AIG's shareholders and executives have the opportunity to take money from us taxpayers twice.

A few weeks ago, Congressman Waxman and his House Oversight Committee launched an investigation into Lehman Brothers' bankruptcy and AIG's bailout.  A week later, Lehman's CEO seemed to be stonewalling the Oversight Committee.

I hope that some day, in the not too distant future, Rep. Waxman will be able to explain to us taxpayers just what went wrong.

Other buck Naked Politics Posts:

*AIG's $85 Billion Bailout: see What Anti-Regulation Ideology can do?

* Lehman Brothers Bankruptcy: What it Might Not Mean

* Bush Signs Bailout Bill: Taxpayers, Say Hail Marys

* VP Debate Success: Palin Avoids Appearing 100% Moronic 

* Wall Street Execs Got Billions While Driving Economy Toward Cliff 

* Is Lehman's CEO Stonewalling Congress?

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Comments

[premium]

Tracking the $700 Billion Bailout: http://projects.nytimes.com/creditcrisis/recipients/table

(All amounts in above table are in millions.)

[Buck Naked Politics]

Premium,

Thanks so much for the link!