Futher Inquriy into AIG

Cuomo may have been thuggish in bonuses, but I would like to see how what they turn up from various deals that may have been ciminal in nature. There has been a remarkable convergence of the Banks, the Democrats, and AIG across this country. Now theye trying to lift up the stone and see what lies beneath. Just this week we have Jefferson County, Alabama beginning to think the unthinkable and declare bankruptcy. Many of these deals are so opaque by nature that there are several scandals going on here at the same time, so lets see what happens and we can hope information turns up will unravel the whole ball of wax .

The banks and investment firms that ended up with A.I.G.’s bailout money last fall were, in many cases, counterparties to derivatives contracts it had sold, known as credit-default swaps, which guaranteed the value of assets in their investment portfolios. Had A.I.G. not been bailed out, and simply allowed to go bankrupt, they would have suffered investment losses running into the billions of dollars.

A.I.G. released the names of its major counterparties this month, at the urging of the Federal Reserve Board of Governors. They included Wall Street firms, like Goldman Sachs, JPMorgan Chase and Merrill Lynch, that have successfully resisted efforts to regulate credit derivatives in the past, on the argument that such contracts were valuable risk management tools, safe in the hands of the experts.

In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401(k) accounts and other investments.

Some have also been dismayed to learn that taxpayer money had ended up bailing out foreign banks. Some of the biggest beneficiaries of the bailout of A.I.G. were banks in Europe, including Société Générale of France and Deutsche Bank of Germany, each of which received nearly $12 billion, Barclays of Britain, which received $8.5 billion, and UBS of Switzerland, which received $5 billion.

I posted this last week:

One of he real scandals here, in addition to the sub-prime meltdown was the collapse brought about by involvement in various schemes that brought down many of these financial houses. UBS, Soc Gen, JP. Morgan, Chase, all of these banks were involved in the various corruption scandals that stretch from New Mexico to Florida and often involve CDR financial products and the Democratic party. We need to start looking at the root of the losses, and that is where the true outrage will be found, not the whipped up hysteria over bonuses.

From The Economist:

Shocking though the bonuses have been, they pale in comparison with the $49.5 billion of payments that AIG has made to counterparties in its disastrous foray into credit-default swaps—many of them foreign banks (see chart). This was no accident: it was precisely bailing out these trading partners that the government viewed as necessary to avoid a systemic meltdown. Still, the transfers—including almost $13 billion to Goldman Sachs, making it, as one newspaper put it, a “charity case”—are likely to receive more scrutiny as the bonus storm subsides.

A quick look at the companies being investigated over alleged black box deals, (The Highlighted companies merely reflect who received the biggest payouts from AIG, Chase may not be highlighted but they received money) So we have the whole system collapsing and the federal Government pouring money into AIG to provide financial cover for deals that should never have taken place. At the same time various cities and states have filed an anti-trust case against the very companies the Fed is now trying to save. The same companies that the Federal government is connecting to various corruption scandals across the country.

Now Congress is getting into the act:

NEW YORK (Fortune) -- The derivatives traders that hit the jackpot with last fall's AIG bailout are getting more attention from the government.

More than two dozen Democrats in Congress called on Thursday for an investigation of the decision to pay in full the holders of credit default swaps written by AIG (AIG, Fortune 500).

The group of 27 legislators, led by AIG critic Rep. Elijah Cummings of Maryland, sent a letter to Neil Barofsky, the special inspector general for the Troubled Assets Relief Program, demanding the investigation.

The legislators say they want to know why AIG's trading partners - a group that includes some of the biggest and most sophisticated financial institutions in the world - were made whole for risky, unregulated trades with scarce taxpayer funds.