AIG'S TENTACLES

AIG'S TENTACLES.... One of the principal rationales for bailing out American International Group (AIG) -- more than once -- is its reach. AIG, the argument goes, is so interconnected in global finance that its demise would cause cascading failures around the world.

Now that AIG has finally released the names of dozens of trading partners that have received bailout money through the company, the argument seems rather plausible.

Amid rising pressure from Congress and taxpayers, the American International Group on Sunday released the names of dozens of financial institutions that benefited from the Federal Reserve's decision last fall to save the giant insurer from collapse with a huge rescue loan.

Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).

Big foreign banks also received large sums from the rescue, including Societe Generale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion).

A.I.G. also named the 20 largest states, starting with California, that stood to lose billions last fall because A.I.G. was holding money they had raised with bond sales.

In total, A.I.G. named nearly 80 companies and municipalities that benefited most from the Fed rescue, though many more that received smaller payments were left out.

AIG has posted a press release and a full list of recipients (pdf) online.

The release, which AIG has resisted for quite a while, comes immediately on the heels of widespread disgust over the generous bonuses the company paid to the AIG Financial Products unit, which was largely responsible for the company's mess in the first place.

Last night, on "60 Minutes," Federal Reserve Chairman Ben Bernanke talked about his own frustrations.

"I understand why the American people are angry," he said. "It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."

If Bernanke thinks that's going to dissipate the public anger, he's likely to be disappointed.
http://www.washingtonmonthly.com/archives/individual/2009_03/017303.php