More investigations into the credit default swap situation at American International Group Inc. (NYSE:AIG) ... and just in time for earnings season too!
The company's unwinding of its derivatives portfolio continues to be a headache for everyone except AIG's counterparties, as the so-called TARP cop Neil Barofsky has launched an investigation into the insurer's tendency to pay a premium to get out of its CDS contracts. Bloomberg
reports that the audit was revealed in a April 3 letter from the special inspector general for the Troubled Asset Relief Program wrote to Rep. Elijah Cummings, D-Md.
Lawmakers were outraged last month when they learned that the money from AIG's trifecta of bailouts were used to pay counterparty collateral calls at 100% of the face value with
$75 billion going directly to Goldman, Sachs & Co. (NYSE:GS), Merrill Lynch & Co., Morgan Stanley (NYSE:MS), Bank of America Corp. (NYSE:BAC), France's Société Générale SA, Germany's Deutsche Bank AG and Britain's Barclays plc.
AIG's rush to dump large positions in the CDS market during the first quarter may also pad the earnings of many Wall Street banks, who may have seen windfall gains of $1 billion to $2 billion as AIG willingly paid a premium to get out. While its unclear what (if anything) Barofsky's investigation will turn up, the last thing that AIG and Wall Street's banks in general need is another situation that even remotely looks like the taxpayers are getting ripped off. -
George White See Bloomberg story See Dealscape post on AIG counterpartiesSee Dealscape post on AIG asset salesSee Deal Pipeline story on AIG bailout funds
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