Banks were profitable in January and February… because of AIG

Wow.

AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.

2 thoughts on “Banks were profitable in January and February… because of AIG

  1. now wait a minute, a couple points here:

    1. wasn’t the whole point of this AIG takeover to make these counterparty payments so that we could stop the whole domino effect? And avoid an even worse Lehman type effect?

    2. won’t a bunch of this money be recooped once this plays itself out? What will AIG be worth once this has all passed? won’t it be possible to sell the govt owned shares?

  2. #1: Yes, if you assume that these banks are not already undercapitalized and that this payment will be what prevents the straw from breaking the camel’s back. I personally doubt that.

    #2: That would be true if the banks were officially put into receivership, and AIG would be paying Citibank/others, which are owned by the government (so it would be paying itself, more or less).

    That being said, keep in mind that the bulk of the payments went to Goldman, Barclays, SocGen, other international banks, and a few hedge funds. None of these have any reasonable amount of control by the US government/taxpayer.

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