June 10th, 2010
10:27 AM ET
11 years ago

AIG bailout saved Wall Street, watchdog says

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2010/images/06/10/art.aig.gi.jpg caption =" The government's $182 billion bailout of the global insurer has left taxpayers holding the bag, while ensuring that all of AIG's creditors and business partners are paid in full, said a Congressional Oversight Panel report."]

New York (CNNMoney.com) - The federal government could have pressed the private sector to help rescue AIG when the company was on the verge of collapse in September 2008, a government watchdog has found. Instead, it let Wall Street off easy.

The government's $182 billion bailout of the global insurer has left taxpayers holding the bag, while ensuring that all of AIG's creditors and business partners are paid in full, said a Congressional Oversight Panel report released Thursday.

The oversight panel, which is charged with monitoring the government's use of Troubled Asset Relief Program funds, criticized the Federal Reserve and Treasury Department for repeatedly saying they had to choose between letting the world's largest insurer fail or
rescuing it.

The government chose not to push major lenders to privately bail out AIG or propose a rescue that combined public and private funds. Nor did it require AIG to negotiate with its business partners, or counterparties, as a condition of its rescue. Since AIG's counterparties emerged unscathed, sophisticated investors who participate in the risky derivatives market now think that taxpayers will come to their rescue as well, the report said.

"The government distorted the marketplace by transforming highly risky derivative bets into fully guaranteed transactions, with the American taxpayer standing as guarantor," the panel wrote.

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Filed under: TARP • Wall Street
soundoff (18 Responses)
  1. Angus McDugan

    No matter what type of branding Obama puts forth and make no mistake about it. Obama is owned by Wall Street.

    To deny this is to admit you know nothing about politics.

    June 10, 2010 10:36 am at 10:36 am |
  2. "The government distorted the marketplace by transforming highly risky derivative bets into fully guaranteed vehicles"

    the people driving the financial car don't know their options, they don't have wisdom, they jump to conclusions and they paniced

    this was a mistake that needs to be fixed, we cannot let wallstreet continue to think they are too big to fail, we cannot let the public think these risks that these fat cats take come with out consequence

    June 10, 2010 10:38 am at 10:38 am |
  3. PalmReader

    Ah, well. We have come full circle of Bush's *no regulations necessary* Wall Street handouts, haven't we? Amazingly, there are those who think these were funds given out by the Obama Administration.

    Same as when Cheney eliminated oil industry restrictions during his back room deal making.

    So many GOP messes . . . so little time.

    June 10, 2010 10:40 am at 10:40 am |
  4. vic of New Yotk

    With all the criticism of the Oil Companies not having a "Doomsday Plan" it seems disingenuous that the Government did not have a doomsday plan for an economic meltdown.

    Oh, that's right... Republicans think we already have too much government. Aren't they the same ones who – even now – are saying we can't go too hard on the Oil Companies because that would stifle competition?

    The source of all that's evil in the world: Conservatism, a decease.

    June 10, 2010 10:51 am at 10:51 am |
  5. Sniffit

    Can't wait to see how many GOPers/conservatives posting here act like the bailout is all Obama's fault. They seem to have some sort of crossed-wires problem with differentiating between the bailouts and the stimulus package. Might be time for the GOP to commission another round of new standard issue tinfoil hats from whichever military industrial comlex buddy of theirs they have make them.

    June 10, 2010 11:00 am at 11:00 am |
  6. Mike in SA

    "AIG bailout saved Wall Street, watchdog says"??? That is absolutely NOT what the report says. It says the exact opposite. The report says that THE PRIVATE SECTOR should have come to AIG's aid INSTEAD of a bailout. Who writes this spin???

    June 10, 2010 11:01 am at 11:01 am |
  7. Henry Miller, Libertarian

    Government strikes again, as it usually does.

    I'll give the government this: their intentions are usually, if not good, then not wholly bad either. But government, like any large organisation, is collectively stupid and, like anything else large, powerful, and stupid, is dangerous. Bulls in china shops don't mean to create all that wreckage, they just don't know any better.

    June 10, 2010 11:05 am at 11:05 am |
  8. mike

    that sounds great but lets get real what makes you think that these
    companies would have step up to the plate look at what has happened
    to this country with government not playing baby sitter to to the toy,
    drug, food,dog food, dry wall,coal,oil,banking,financial companies
    how many people do you think have lost there homes, lives and animals that could have been prevented and that is a fact not some fantasy

    June 10, 2010 11:09 am at 11:09 am |
  9. jp,michigan

    Saved the government assests and people on the Hill their campaign supporters.

    June 10, 2010 11:10 am at 11:10 am |
  10. Keith in Austin

    Taxpayers will voice their discontent in November for sure! Goodbye to Liberal tax-and-spend Democrats!

    June 10, 2010 11:12 am at 11:12 am |
  11. Anonymous

    And why is Robert Paulson not in jail???? he extorted the tax payers out of billions in a back door deal in which they knew it was going to fail years before.

    June 10, 2010 11:18 am at 11:18 am |
  12. Chessnutz of Liverpool NY

    Saved Wall Street and made the American taxpayer (Main Street) a slave to Wall Street!
    Why has nobody at AIG gone to jail yet? Why are the laws not applied to too big to fail business?

    June 10, 2010 11:20 am at 11:20 am |
  13. Four and The Door

    The findings by this panel are exactly correct. These were the first of many misguided decisions about what the role of the federal government is. The other bad decisions of course were the GM and Chrysler bailouts and the propping up of Fannie Mae and Freddy Mac. Both Administrations are guilty, but I do not believe the Bush Administration would have made these bailouts if it was not for the timing. Handing over a condition of even worse financial turmoil to the start a new administration with was not what President Bush wanted to do. Still, in the big picture, the federal government bailing out AIG was a bad idea for reasons well explained by the Congressional Oversight Panel.

    June 10, 2010 11:34 am at 11:34 am |
  14. It was W who destroyed this country

    The TARP and AIG bailouts occured in 2008, BEFORE the election of Barack Obama. But I am sure there will be some tea drinkers here who will still rant "It is Obama's fault". Turn off FoxNews and join the real world please.

    June 10, 2010 11:34 am at 11:34 am |
  15. Jeff

    Note the date. September 2008.

    June 10, 2010 11:36 am at 11:36 am |
  16. Slick William

    So where is the Mainstreet bailout?
    What is that foreclosure rate today, unemployment rate?
    Why do you think Obama wants you to refinance, so if you don't have the 20% equity you can buy some more AIG insurance with that mortgage refinance package maybe??

    June 10, 2010 11:41 am at 11:41 am |
  17. Dan

    read the Creature from Jekyll Island by Ed Griffin or The Secrets of The Federal reserve by Eustace Mullins. It will all make sense

    June 10, 2010 11:54 am at 11:54 am |
  18. William Jefferson

    As distastefull as it was, the other option – the one that conservatives, republicons and tea baggers thought was good - would have us in the worst if not a worse financisl disaster than the Great Depression. There would be no private secotr recovery without finances. there would be no slowing and reversing of the housing ebacle if all the mortgage lenders were out of business. This is one more case that proves beyond a doubt that conservatives have their heads in the rear ends about economics and that Democrats and the President were on the ball and making the call.

    June 10, 2010 12:01 pm at 12:01 pm |