Tyler Durden over at Zero Hedge points out a very interesting fact from the House testimony of Edward Liddy, CEO of American International Group Inc. (NYSE:AIG). The unwinding of those pesky $2.7 trillion derivatives has slowed down to a crawl.
He writes:
"
In a very odd twist, Liddy, who in March had disclosed that AIG-FP had unwound over $1.1 trillion in CDS notional (from $2.7 trillion to $1.6 trillion - a ridiculously large amount), today noted that the financial black hole had succeeded in only unwinding an additional $0.1 trillion in the last 2 months, from $1.6 trillion to $1.5 trillion.
"Some potential answers: i) the banks do not need any taxpayers
gifts now as much as they did in January and February; ii) the
financial blogosphere (and to a much smaller extent, the mainstream
media) is now fully aware of the taxpayer thuggery that AIG committed
when it unwound the $1.1 trillion in no time, and iii) Andrew Cuomo is
monitoring every CDS transaction at AIG-FP under a microscope now, so wholesale dumping could be a "tad" more problematic."
Yeah, well, Dealscape
saw this was coming just as we saw back in March that Liddy and the goverment had knowledge about the controversial bonuses in advance. That dwindling CDS unwinding could be due to the fact that financial products employees were
under attack and many resigned (including Mr. I Quit
Jake DeSantis) after the bonus controversy in March. The controversy over paying
counterparties with taxpayer money could have added to the distractions, as Durden suggests.
Now with TARP cop Neil Barofsky
snooping around to find out if Wall Street banks got gains of $1 billion to $2 billion as AIG paid a premium to unwind its CDSs quickly, it's a bit hard for the company to take shortcuts. So
three to five years will due. Of course, the media hasn't helped unwind those derivatives any faster, but we
didn't sell those derivatives either, as The Deal's Michael Rudnick points out. That's not really our expertise, is it?
- Maria Woehr
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"Mr. I Quit Jake DeSantis"
Has DeSantis actually left AIG yet? After all the publicity over his "resignation," he was still there as of about two weeks ago.