Bankruptcy

Was AIG Bailout Botched Or???

By mcbride

A newly released report is highly critical of the Federal Reserve Bank of NY and its negotiations with insurance giant AIG. At the time of these analyzed negotiations, the Fed had already “invested” 85 billion into AIG and some say that it was too late to back out at that time. There have been some who said that the Fed had negotiating power, but chose not to use it with AIG as a “back door” bailout for large banks/investment houses, like Goldman Sacs, whose businesses were so intertwined with AIG that to allow AIG to fail would irreparably harm them. “There have been suggestions that the Fed chose to negotiate weakly, Mr. Barofsky said, to give a “backdoor bailout” to A.I.G.?s banks. He said Mr. Geithner [then head of the NY Fed, now running Treasury Dept] and the Fed?s lawyers had denied this, but added that “irrespective of their stated intent,” there was no doubt about the result: ?Tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.?s counterparties.?”

Here is a link to the NY Times article: http://www.nytimes.com/2009/11/17/business/17aig.html?_r=2&ref=business

 Michael

Full post as published by Texas Lawyer Blog on November 17, 2009 (boomark / email).