George Graham

I Suspect That Crooks Got Some of Those Billions in AIG Bailout

I don’t know how they did it, and I don’t know who masterminded it, but I suspect more strongly every day that crooks are mixed up in the multi-billion-dollar bank bailout. And it seems our new President is powerless to do anything about it. In fact, his administration is continuing the Bush policy of pouring billions of dollars into financial institutions without knowing where the money goes.

American International Group, commonly known as AIG, is a case in point. The Wall Street Journal reported on Friday that AIG has paid about $50 billion to some two dozen U.S. and foreign “financial institutions.” According to the Journal, it obtained a confidential document showing that recipients included Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale,  Calyon, Barclays PLC, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.

The fact that, once again, Goldman Sachs ends up on the receiving end of bailout funds makes me very uneasy. After all, several of the federal officials handling the bailout money used to work at Goldman Sachs. It sure looks like cronyism to me, if not something worse. But I am more curious about AIG’s European connections. It was the insurance company’s London branch that sold risky “derivatives” and triggered AIG’s bankruptcy.

The derivatives were insurance policies on mortgage-based securities. So, in effect, the “counterparties” who bought them stood to cash in handsomely when the securities failed. It was like taking out life insurance on someone you know to be terminally ill and collecting on the policy when the insured person dies. In other words, I smell a scam.

josephBritish police are investigating the former head of that AIG unit, a “super salesman” named Joseph Cassano (left), who was once a colleague of jailed junk-bond scammers Michael Milken and Ivan Boesky. Cassano’s unit sold billions of dollars worth of “derivatives” to “counterparties.” Some of the buyers were prominent banks and pension funds, but others were faceless investors. And those investors are almost certainly among the recipients of AIG’s bailout money.

In defiance of  Congress, the U.S. Federal Reserve has refused to reveal the identities of the “counterparties” and how much they were paid. Federal Reserve Vice Chairman Donald Kohn told a Congressional committee on Thursday that revealing the names would risk jeopardizing AIG’s business. Kohn said there were millions of “counterparties” around the globe, including pension funds and U.S. households.

The Federal Reserve gave AIG $85 billion in September, and upped the ante to $150 billion a few weeks later. Then last week, AIG was back for more, and got an additional $30 billion. In exchange for all of this money, the federal government now owns 80 percent of the tottering insurance giant. You would think that as majority owner of AIG, American taxpayers have a right to know what the company did with their money. But apparently that’s not how it works. If Federal reserve oficials know what AIG did with the bailout funds, they aren’t telling.

This is not Bush’s Federal Reserve; this is Obama’s. It looks as if the more things change the more they stay the same – at least when it comes to bank bailouts.

About the author


I am a Jamaican-born writer who has lived and worked in Canada and the United States. I live in Lakeland, Florida with my wife, Sandra, our three cats and two dogs. I like to play golf and enjoy our garden, even though it's a lot of work. Since retiring from newspaper reporting I've written a few books. I also write a monthly column for