American International Group Inc (AIG) used more than US$90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar US government bailouts.
Some of the biggest recipients of the AIG money were Goldman Sachs at US$12.9 billion, and three European banks — France’s Societe Generale at US$11.9 billion, Germany’s Deutsche Bank at US$11.8 billion and Britain’s Barclays PLC at US$8.5 billion. Merrill Lynch, which is also undergoing federal scrutiny of its bonus plans, received US$6.8 billion as of Dec. 31.
The embattled insurer’s disclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.
The company, now about 80 percent owned by US taxpayers, has received roughly US$170 billion from the government, which feared that its collapse could cause widespread damage to banks and consumers around the globe.
“The ability of AIG to meet its obligations is important to the stability of the US financial system and to getting credit flowing to households and businesses,” US Federal Reserve spokeswoman Michelle Smith said.
The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.
Other banks receiving between US$1 billion and US$3 billion from AIG’s securities lending unit include Citigroup Inc, Switzerland’s UBS AG and Morgan Stanley.
Municipalities in certain states, including California, Virginia and Hawaii, received a total of US$12.1 billion under guaranteed investment agreements.
The company said it used billions more to fund its Maiden Lane business, which was set up following the federal bailout to purchase toxic assets, and to repay debt and provide capital for some of its operations.
“I’ve been asking for this information for months. This is a good first step, but I’m concerned by how long it took,” said Democratic Representative Carolyn Maloney, who is chair of Congress’ Joint Economic Committee.
The details from AIG came after administration officials and top Republicans voiced sharp criticism over US$165 million in bonus payments AIG said it must make on Sunday. The contracts are part of a larger total payout which has been reportedly valued at US$450 million.
In a letter to US Treasury Secretary Timothy Geithner dated Saturday, AIG chairman Edward Liddy said outside lawyers informed AIG that it had contractual obligations to make the payments and could face lawsuits if it did not do so.
Liddy said the company entered into the bonus agreements early last year before AIG got into severe financial straits and was forced to obtain a government bailout.
AIG has agreed to the government’s requests to restrain future payments.
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