sanerdudette

On the heels of another story about executive compensation at AIG, there was a story about AIG paying billions of dollars in TARP funds to Goldman Sachs, Deutsche Bank and other investment banks. All the press I have read on this is way too vague and imply that there was some wrongdoing involved.

Simply stated, AIG paid this money to other banks because it represented collateral it owed on credit derivatives. AIG paid the collateral and terminated the contracts, thus reducing the risk both counterparties had on their books, and limiting losses for both. In the event of a downgrade by one of the rating agencies, AIG’s collateral requirements would increase, and failure to meet margin calls would trigger a calamity for all of its counterparties.

This was not a misuse of taxpayer money, but appropriate of use of bailout money