AIG Discloses Recipients of Emergency Funds

Troubled American International Group Inc. (AIG) on Sunday disclosed names of dozens of trading partners and financial institutions that received billions of dollars in an effort to pay down the company’s debts. AIG, the recipient of more than $170 billion in taxpayer money through the Treasury Department and Federal Reserve, is now 80 percent government-owned. AIG reported that, of its initial $85 billion in emergency funds, it distributed $22.4 billion to financial counterparties relating to CDS transactions from AIG Financial Products in the last months of 2008. Maiden Lane III, a financing entity established Nov. 10 to purchase securities underlying certain CDS contracts from the counterparties, paid out $27.1 billion to large firms like Deutsche Bank (DB), Wachovia, Goldman Sachs Group Inc. (GS), Societe Generale, Merrill Lynch, Bank of America Corp. (BAC), UBS (UBS) and Barclays. The entity also paid out $2.5 billion to AIG Financial Products. Municipalities received a combined $12.1 billion from AIG Financial Products on guaranteed investment agreements they hold; California alone received $1.02 billion, while Texas received $100 million. AIG also used $43.7 billion to “satisfy obligations” to financial counterparites related to its securities lending operations; Barclays received $7 billion, Citigroup Inc. (C) received $2.3 billion and Credit Suisse Group (CS) received $400 million, to name a few. “AIG has used the balance of the public aid it received during that time period for other purposes, including the funding of Maiden Lane II and III, debt repayment and capital support for some of its businesses,” company officials said in a media statement Sunday. See AIG’s breakdown of which firms received money. AIG was slated to distribute on Sunday $165 million in bonuses in a move defended by various company sources. AIG could lose much, much more if employees that went without bonuses and with contracts broken decided to leave (or even sue) the struggling company. Many such employees at AIG Financial Products have for years helped create the complex products critics say led to the company’s undoing; AIG would be in a crisis if these employees left, taking their years of experience and their knowledge of the company’s workings along with them, AIG sources told the Los Angeles Times. “We cannot attract and retain the best and the brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” AIG chairman Edward Liddy told Treasury secretary Tim Geithner in a letter dated from Saturday, according to the New York Times. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.