Cummings Wants IG to Investigate Counterparty Payments
Elijah Cummings has driven a lot of news about the AIG bonus scandal, but he's got tentacles deep in other controversial aspects of the $180 billion bailout. He's currently circulating (and I have obtained) a letter to colleagues, seeking their support for a TARP inspector general investigation into every aspect of the payments AIG made, with government money, to counterparties whose risky investments it had insured.
Goldman Sachs claimed in September that they had no material exposure to AIG; however, after AIG released the counterparty information on March 15, we found out that Goldman Sachs received almost $13 billion in counterparty payments.
The Special Inspector General for the Troubled Assets Relief Program was created to ensure that transparency and accountability stay firmly rooted in the government's efforts to revive and sustain the American economy. This letter proposes that the Special Inspector General examine the nature of the counterparty payments - including the recipients, the process by which they were made whole, and the justification, if any, for that level of payment.
He's asking members of Congress to cosign a letter to the inspector general asking him to conduct a thorough inquiry. We've been all over the counterparties controversy and we'll follow this campaign as far as it goes.
Full text of the letter below the fold.
Keep AIG accountable for every taxpayer dollar
Join a request for an investigation into AIG's counterparty payments
Dear Colleague:
American International Group, Inc. (AIG) has received roughly $180 billion in taxpayer funds since September 2008. Yet it has continued to pay hundreds of millions in bonuses to the same AIG employees that drove the company into insolvency.
As we continue to address the issue of the bonuses, we cannot lose sight of another potential abuse of taxpayer funds - the counterparty payments.
Under intense pressure, AIG finally released a list of transaction counterparties on March 15. These releases showed that the investment banks around the world received billions in taxpayer dollars without apparently being required to take a discount; further, there is little evidence that a concerted strategy guided the payments.
The American people were told that they had to bail out the financial sector because of the great systemic risk from an AIG collapse, and $180 billion later, the people find themselves "involuntary investors."
Further, Goldman Sachs claimed in September that they had no material exposure to AIG; however, after AIG released the counterparty information on March 15, we found out that Goldman Sachs received almost $13 billion in counterparty payments.
The Special Inspector General for the Troubled Assets Relief Program was created to ensure that transparency and accountability stay firmly rooted in the government's efforts to revive and sustain the American economy. This letter proposes that the Special Inspector General examine the nature of the counterparty payments - including the recipients, the process by which they were made whole, and the justification, if any, for that level of payment.
Investment in AIG may be necessary, but it deserves the utmost scrutiny and attention. For more information or to co-sign the letter requesting an investigation into the counterparty payments from AIG (text can be found below), please contact xxxxx at xxxxx, by 3:00 pm, Tuesday, March 24.
Josh
Elana
Matt
Eric
He's got the right idea. Wall Street is a sewer. A clogged sewer. It needs a big dose of Drano. Its sewer rats need to replace the reefer smokers in prison.
March 24, 2009 4:02 PM | Reply | Permalink
It appeare AIG also insured the the federal and congressional retirment funds. No wonder Congrewss was so willing to give AIG money, as it went directly to prop up Congress members retirement account balances and the retirement balances of all other federal employees.
Very interesting.
Another way to say this that while everyone's 401k balance and IRAs that did not purchase protection from AIG took a 50% value drop over the past few months, the pension accounts of federal employees and Congressional members did not drop because AIG protected it from lost value using bailout funds from the government.
This could get interesting, perhaps even more interesting that the bonus issue because it invloves several self-interested billions.
Will the Congress whores bark as loud as they did about the bonuses when it is their arse getting protected and fluffed with AIG bailout money?
March 24, 2009 4:37 PM | Reply | Permalink
"Further, Goldman Sachs claimed in September that they had no material exposure to AIG; however, after AIG released the counterparty information on March 15, we found out that Goldman Sachs received almost $13 billion in counterparty payments."
How that could work: GS had got some other party/parties to write CDS on AIG. So either AIG pays up or the third parties do. That is, AIG defaulting would not have hurt GS "materially" but would have hurt some other gambler.
It's definitely preferable to my mind to have the third parties pay up rather than have the government launder money through AIG to pay up.
How much more of this junk is out there?
March 24, 2009 5:03 PM | Reply | Permalink
saying cummings "drives the news " about AIG and has "tentacles" in "controversial aspects" of the bailout makes it sound like he's implicated in some nefarious way. many people have no idea of cummings' role (mainly as a whistleblower), and your shorthand, innocuous as it may seem to you, will no doubt mislead some readers.
March 24, 2009 5:58 PM | Reply | Permalink
Good work, Congressman Cummings and TPM. I'll be interested to see who has the brass to respond positively to his letter. At this point, it's reasonable to assume that those who do not respond are complicit.
Hey Congresspeeps & Senators:
#1) Prove you can read.
#2) Prove that you are not part of the problem.
March 24, 2009 6:20 PM | Reply | Permalink