Does Nobel Prize Laureate Stiglitz understand the word transparency? - Page 3 - Mercedes-Benz Forum

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post #21 of 22 (permalink) Old 03-15-2009, 06:53 PM Thread Starter
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Originally Posted by mcbear View Post
Be careful what you ask for. Much damage can continue to be done to the economy if folks play fast and loose with information.
What damage ?
This is nothing but a previously hidden slush fund.

WASHINGTON/NEW YORK (Reuters) - A large portion of the taxpayer money spent to rescue insurer AIG was passed on to Goldman Sachs and several European banks, who were among the major beneficiaries of more than $90 billion in payments in the first three-and-a-half months of the government bailout, AIG disclosed on Sunday.

The revelation was another public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over American International Group Inc's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets.

AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.

As part of those efforts, Obama will announce steps on Monday to make it easier for small business owners to borrow money, officials said.

But the revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays was likely to stoke further outrage at the entire U.S. bank bailout.

While the payments were not illegal, the fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary.


The payments to AIG counterparties include the provision of collateral to back up credit default swaps, a form of financial insurance that AIG's London office was writing, the purchase of the collateralized default obligations, a type of complex debt security that underlay that insurance, and payments to counterparties of a securities lending program.

AIG payments to banks stoke bailout rage | U.S. | Reuters

Last edited by mlfun; 03-15-2009 at 06:57 PM.
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post #22 of 22 (permalink) Old 03-15-2009, 07:23 PM
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Originally Posted by mlfun View Post
What damage ?
This is nothing but a previously hidden slush fund.
Banks are built on TRUST. It is in many of their names, it is in many of their slogans. If there is a suggestion, whether accurate or not that a bank, let's use Citadel as a quick example has financial problems it weakens the trust. THAT is damage. That is harder to rebuild than reestablishing fiscal liquidity.

So by releasing the names, they make "implications" regarding multiple cross-linked institutions that may or may not be valid. But folks who don't necessarily understand the system draw assumptions and make inferences based on that incomplete information.

Your citing of Citadel is a perfect example.


Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
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