This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed Caved to Bank Demands in AIG Bailout

NEW YORK ( TheStreet) -- The Federal Reserve Bank of New York, headed then by now-Treasury Secretary Timothy Geithner, caved into demands by trading partners of AIG (AIG - Get Report) that they be paid in full for complex securities they had insured with the company, the Wall Street Journal reports.

The actions saved some of the world's biggest banks from potentially large losses, a government audit finds, the Journal reports.

The audit, conducted by the special inspector general for the Troubled Asset Relief Program, faulted the New York Fed for not using its leverage as the regulator of some of these banks to get them to accept lower prices for more than $60 billion in credit-market bets, the Journal notes. These bets were tied to souring mortgage-linked securities that had fallen in value.

The Associated Press reports that at least one of those partner banks offered to canceled the contracts for less, according to the special inspector general report, meaning officials may have spent billions more than necessary to cancel debt insurance contracts with the banks.

The banks that were paid off in full included Goldman Sachs (GS - Get Report), Merrill Lynch, now a unit of Bank of America (BAC - Get Report), and large French banks Societe Generale and Calyon, the report said. The French banks were represented by the French bank regulator in negotiations with the New York Fed last November, the report said.

"The refusal of the FRBNY and the Federal Reserve to use their considerable leverage as the primary regulators for several of the counterparties, including the emphasis that their participation in the negotiations was purely 'voluntary' made the possibility of obtaining concessions from those counterparties extremely remote," Neil Barofsky, the special inspector general, said in the report.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AIG $63.58 0.00%
BAC $17.50 0.40%
GS $190.02 0.00%
AAPL $118.30 0.00%
FB $104.72 0.46%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs