AIG Bailout Shrouded in Secrecy, But Still Playing PR Games


I think that Fed chairman Ben Bernanke spoke for all Americans when he testified yesterday that the one thing that has angered him the most during our current economic crisis is the ongoing bailout of A.I.G. So far, A.I.G. has received approximately $186 billion from the U.S. government in a bailout to protect the insurance giant’s huge losses. But, as Josh Marshall noted over the weekend, the bailout of A.I.G. isn’t really a bailout of A.I.G., but a bailout of the counterparties that had insurance policies to back up their mortgage-backed securities (now known as toxic assets).

Despite the knowledge that the bailout of A.I.G. is, in fact, a bailout of counterparties, A.I.G. and the Federal Reserve refuse to disclose the identities of the counterparties. In a Senate Budget Committee hearing yesterday, Sen. Ron Wyden berated Fed Chairman Ben Bernanke about the failure to release the names of the counterparties, the actual bailout recipients. Bernanke stated that “under normal conditions” the counterparties would “have a presumption of privacy”. As the New York Times’ Joe Nocera put it two days ago,

“Gobs of tax money is going to bail out unnamed companies — and yet we aren’t allowed to know who they are, and are supposed to take it all on faith. You know those awful cases you read about every once in a while where a child dies in a troubled home — and then the state health department won’t divulge any information out of “privacy concerns”? This strikes me as the financial equivalent of those cases. As excuses go, it sure is convenient.”

It truly does not make sense that the taxpayers need to be left in the dark about whom we are bailing out. Representative government requires that our representatives and us little people know what we are spending our money on, particularly if that money is meant to prop up the bad decisions of private enterprise.

In conjunction with this transparency problem comes word that A.I.G. is paying two Washington spin machines, Hill & Knowlton and Burston Marsteller, to do positive PR for the belly-up company.

A.I.G. probably needs a spin army after the way they operated outside of regulations and oversight, essentially running a scam insurance business that could collapse numerous foreign banks. I’m just curious as to how a company that is nearly wholly owned by the U.S. government can pay for expensive PR firms.

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  • Don’t blame the corporate executives for taking money from politicians. Blame the politicians for stealing money from the American people, devaluing their currency through inflation, and giving it to the corporations in the FIRST PLACE!

    Yeha, right. Ben Bernanke was angry at AIG; so angry he bailed them out! He probably has financial interests in all this; the Federal Reserve has complete control of the money supply; Congress refuses to even have it AUDITED! OF course Congress created this problem by threatening Americans with imprisonment if they create legal contracts with non-Federal Reserve issued bank notes! You’ll find that these problems stem from the confiscation of property and freedom that the Government systematically carries out on us; and that you approve of and sanction with your vote.

  • It’s all just the world’s biggest Ponzi scheme! Of course there’s no transparency. The people who claim to be fixing it were all in positions to have had something to do (or look the other way) with the making of the Wall Street debacle.

    I was opposed to the bailout from the very start. While I knew there would be consequences with AIG’s failure, I figured at least the executives would have to take their lumps, too. And I figured my share would be less. Instead, we’re all paying and the executives are pocketing it. With no end in sight.

  • In fact the issue is not as much as who the counterparties are but what percentage of the counterparties are pure *speculators* which have no actual losses but a lottery gains on the CDS derivatives. Such contracts should be simply annuled and lucky winners should be compensated for the premium piad but in case should they be allowed to strangle the US taxpayers for billions of their gambling win claims.
    This seems to be THE DIRTY SECRET behind the A.I.G bailout, and the public and media outrage and CALL FOR ACTION should be directed towards our government and should demand from it to annul all the CDS liabilities in which the other side of the contract is pure lucky speculator, with no actual losses beyond the premium payed (which is far far less then the amount of their “CDS lottery win” claim). Tax payers have no business in paying lottery tickets to these happy speculators when there are real losses to be covered elsewhere.

  • teamclark

    I went looking for more to read on the counterparties of AIG’s contracts after watching an interesting article on the News Hour on March 2, 2009. I think the counterparties’ identities should be revealed and a great big park or library or campus or something should be named after them in their honor for their shrew business acumen. Recognize their achievement. However, their contracts should be declared null and void in the interest of national security and most of the $186B or there about paid to them needs to be recovered and put back into the mainstream economy.