Where are insurance giant AIG's bailout billions really going? The White House doesn't want to tell us. But the Wall Street Journal, bless its Rupert Murdoch-owned heart, found out anyway: Foreign banks, lots of them!
The Federal Reserve began propping up AIG last September; a recent $30 billion infusion has brought the total bill to $173 billion. The government now owns 80 percent of the many-tentacled insurer, meaning that taxpayers are essentially on the hook for its liabilities. And AIG has spent roughly $50 billion fulfilling contracts it issued to banks to guarantee the value of various derivatives. Those complex financial bets went disastrously wrong as first the mortgage business and then the entire stock market imploded. U.S. legislators have been asking administration officials for names all week after the Treasury . They refused. But the WSJ got them:
Royal Bank of Scotland
Bank of America
Lloyds Banking Group
Ah yes, Rabobank, that pillar of the American economy.
Doomsaying economists like Nouriel Roubini have been saying that the global banking system is essentially insolvent. AIG's guarantees have allowed banks to avoid losses on otherwise worthless securities. To what extent is the protection issued through the government-backed AIG been masking their insolvency? Government officials have been saying since September that we must support AIG, lest its failure ripple through the banking system. But could we be just prolonging the inevitable?