Thanks Hank: AIG Wants A Third Loan While Ten Percent Of $700 Billion Bailout Could Go To Bonuses
When the Treasury Department’s bailout czar provided an update this week on the government’s $700 billion plan to rescue troubled financial institutions, he vowed that it would be an “open and transparent program with appropriate oversight.”
The next day, the Treasury Department put out an announcement about a major bailout-related contract with Bank of New York Mellon Corp. that fell short in the transparency department.
The copy of the agreement that was made public had blacked-out paragraphs in the section covering Bank of New York Mellon’s compensation. If the Treasury Department is unwilling to disclose the particulars of that contract — or even the general outline of the compensation scheme — that raises questions about how it will treat disclosure of other bailout transactions.
Follow that link and read the rest and take a look at the copies of the paperwork that is referred to.
When done there, turn your attention to the fact that AIG is looking for their third injection of cash:
American International Group Inc., the insurer bailed out by the U.S., may seek a third source of government cash by tapping a Federal Reserve program that buys commercial paper, according to a person familiar with the matter.
AIG probably will borrow less than $10 billion through the new commercial paper program, said the person, who declined to be identified because no agreement had been reached. AIG has already used two-thirds of its $122.8 billion credit line in the past month to cover bad bets made on the U.S. housing market.
A third loan would add to evidence that an emergency $85 billion lifeline from the Fed on Sept. 16 and a $37.8 billion facility last week weren’t enough to satisfy the New York-based insurer’s need for cash. Chief Executive Officer Edward Liddy is trying to sell units including U.S. life insurance, plane leasing and consumer finance to repay the debt.
“We’ve got a plan that will allow us to repay the Fed loan and emerge as a strong international property-casualty insurer with a presence in international life insurance,” said AIG spokesman Nicholas Ashooh.
The Fed said last week it will create a special fund to buy commercial paper, seeking to unblock the financing that drives everyday commerce for American businesses. The program will start on Oct. 27, the Fed said this week. A spokesman for the New York Fed declined to comment.
I saved the best for last:
No matter how badly the economy is doing and what shareholders in American financial firms have lost, it would be a shame to see investment bankers go without their bonuses.
According to The London Observer, “Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year – despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned. Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bailout from the US government that has already prompted criticism.”
The news for Morgan Stanley workers is even better.
“At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.”
H/T to MM for the links
October 20, 2008 - 04:16 PM on October 20th, 2008
[...] Mellon Corp. that fell short in the transparency department. The copy of the agreement that was mad Source Blogs about [...]
October 22, 2008 - 09:21 AM on October 22nd, 2008
[...] AIG wants more money for Executive bonuses. [...]