Does Anyone feel like Bailing

[classicman]

Watchdog: Gov't may have overpaid to bail out AIG

Officials handling the multibillion dollar bailout of insurance giant American International Group Inc. mismanaged an initial rescue attempt and may have overpaid other banks to wind down AIG's business relationships, a government watchdog says.
lationships, a government watchdog says.

The Federal Reserve Bank of New York — headed at the time by now-Treasury Secretary Timothy Geithner — paid AIG's business partners full face value for securities so they would cancel insurance contracts AIG had written in order to ease the firm's liquidity crunch. But at least one of those partner banks offered to canceled the contracts for less, according to a report Monday from Neil Barofsky, the Special Inspector General for the $700 billion financial bailout Congress approved last October.

That means officials may have spent billions more than necessary to cancel debt insurance contracts with banks including Goldman Sachs Group Inc. and others, the report says.

The New York Fed also weakened its bargaining position by refusing to threaten that AIG would go bankrupt after an initial $85 billion bailout proved too small to save the firm, the report says. Furthermore, negotiators led by Geithner told the banks that any concessions would be purely voluntary, the report says.

The result, the report says, was a weak negotiating strategy with little chance of success in obtaining concessions from the banks. It says the initial bailout "was done with almost no independent consideration of the terms of the transaction or the impact that those terms might have on the future of AIG."

As president of the New York Fed, Geithner signed off on many key decisions concerning AIG's bailouts — including the move to pay in full for securities held by other banks, the report says. Also involved were officials from Treasury and the Federal Reserve.

The report says Geithner denied that officials intended to give other banks a "backdoor bailout." Yet it says decisions Geithner approved — "indeed, the very design" of AIG's rescue — meant that billions of taxpayer dollars were "funneled inexorably and directly" to other banks.

It acknowledges that officials had good reasons to save AIG, and were appropriately reluctant to break contracts the company had with other companies. But it says those decisions "came with a cost — they led directly to a negotiating strategy that even ... Geithner acknowledged had little likelihood of success."

How easy is it to hide a few million bucks in a transaction this large. I wonder where all this money actually went.
Oh, and good job there Timmy. . . Not.