That AIG bailout just keeps coming back to haunt, well, everybody, but lately it’s taking down the folks who engineered it in the first place.
A government audit released earlier this week shows the NY Fed caved in to demands by AIG creditors that they be paid in full for complex and risky securities they insured with AIG. WSJ has the details:
The audit, which was conducted by the special inspector general for the Troubled Asset Relief Program, faulted the New York Fed for not using its leverage as the regulator of some of these banks to get them to accept lower prices for more than $60 billion in credit-market bets, which were tied to souring mortgage-linked securities that had fallen in value.
The banks that were paid off in full included Goldman Sachs Group Inc., Merrill Lynch and large French banks Société Générale and Calyon, the investment bank unit of Credit Agricole Group, which were represented by the French bank regulator in negotiations with the New York Fed last November, the report said.
Not surprisingly, outrage has followed the report.
“There was absolutely no reason to pay 100%,” on the dollar, Yves Smith writes at naked capitalism.
“It’s simply embarrassing and pathetic,” Barry Ritholtz notes at The Big Picture.