Word: strikes
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According to a report produced by a division of bond manager BlackRock in November 2008, AIG would probably have been able to strike settlements that, at least at the time, could have saved the giant troubled insurer, and taxpayers, billions of dollars. Instead, after a few days of harried discussions, the Federal Reserve Bank of New York - which was orchestrating the government's bailout of AIG - instructed the insurer to pay its counterparties, which included Goldman Sachs and a number of European banks, in full. The BlackRock report is one of many documents recently unearthed by a congressional investigation into...
...Timothy Geithner, head of the Federal Reserve Bank of New York in late 2008, as to why he allowed AIG to pay the banks the starting value of the CDS contracts when the bonds had fallen significantly in price. Other mortgage-bond insurers at the time were able to strike deals to tear up similar contracts and pay reduced prices. Some called the AIG payments, funded by the government, a backdoor bailout of Wall Street, in particular Goldman Sachs. Also at issue were the moves the Federal Reserve made to cover up the fact that AIG had paid...
Other banks were willing to strike even more generous deals. UBS initially told AIG that it would take collateral worth 35% less than what the insurer owned on 55% of the $4.3 billion in CDS contracts it had sold to the Swiss bank. For the remaining 45%, UBS was willing to allow AIG to pay 10% less than what it had originally promised. Those deals would have saved AIG about $1 billion. AIG later broke off those negotiations, and as with all of its other counterparties, paid UBS in full. BlackRock, in the report, said Goldman Sachs, French bank Calyon...
...deals, including those with SocGen or UBS, could have been completed. French regulators pressured SocGen and Calyon not to negotiate with AIG. What's more, BlackRock said that investment bank Merrill Lynch, which had recently agreed to be purchased by Bank of America, was not willing to strike a deal. If AIG had then paid off only Merrill's bond insurance in full, the other banks may have balked on their less-than-full deals. (See the top 10 financial collapses...
...Read "Site of IRA Hunger Strike Haunts Northern Ireland...