Wednesday, April 1, 2009

Further Escalation Of The AIG-Bank Counterparty Scandal

In a letter released by Barney Frank, the Chairman of the Committee of House Financial Services is requesting information from Geithner and Bernanke as to how AIG may have treated its U.S. bank counterparties differently from foreign banks.

Frank is referencing a letter by Spencer Bachus in which the latter raises yet another aspect of the AIG debacle, namely that disproportionate treatment by AIG may have benefited foreign banks by up to 70%.

Bachus claims that "in contrast with [AIG's] treatment of foreign banks [which were not asked to reduce the sum they received from AIG by any amount whatsoever], AIG is now attempting to force many of its creditors that are U.S. banks to accept severe reductions in the debt owed to them. I am told in some cases that these U.S. banks are being asked to accept reductions of over 70% of the total debt owed to them. The disparity in treatment between foreign banks and U.S. banks is troubling, particularly since the U.S. banks now being asked to take such reductions are some of the very taxpayers that have been funding AIG. In addition to the clear inequity involved, this conduct obviously runs counter to our efforts to stimulate credit in the U.S. economy through bank lending."

While not at the core of the problem Zero Hedge discussed previously about improper liquidations from a "stable company" generating abnormal profits at banks, any discovery in this inquiry could potentially raise yet another significant problem, namely how the U.S. is willing to bend over backwards to not displease foreign entities (and potentially purchasers of U.S. treasuries) at the expense of domestic banks. Then again, if ZH is correct in its prior claims, AIG made sure that even its U.S. counterparties would be more than compensated for any losses they may have had to taken on the abovementioned obligation discounts. And all of this would occur, of course, with U.S. taxpayers footing the bill as is standard these days.

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Anonymous said...

Another WGAS article used to push 'stuff' out the backdoor.


Space monkey said...

Tyler stop teasing us and tell us what the project mayhem homework assignment for tomorrow is

Anonymous said...

Jew conspiracy. You can Bank on it.

Anonymous said...

Ben Bernanke, a JEW with ultimate authority on the direction of this country.

That would be equivalent to a Brit running the US during the Revolutionary War (1775–1783)!!

Can anyone wake the fuck up and see this!!!!!??

Thomas said...

Dear Anonymous,
I'm hoping your sentiments are more a function of April Fool's Day rather than something you actually believe. Let's use the power of these forums to enlighten each other and work towards solutions.

Anonymous said...

Yea, thanks Tom Goldstein. I choose not to drink your JEW Kool-aid

Anonymous said...

I think it will be interesting to watch Congress try and grok the intracacies of collateral versus "debt". The cluster continues.

Anonymous said...

Anon @ 8:00 PM: I grok: TANSTAAFL.