This story just gets more disgusting every day. I previously posted how AIG was handing out bonuses to their horrible buffoonish best and brightest employees, but had to scale that back when even Tim Geithner balked, but it turns out to be even more outrageous than that.
It turns out that the undeserving goons receiving the bonuses were from the unit that were selling credit default swaps. For the purposes of this blog, I’ll explain a credit default swap in the most remedial way possible. Basically, when a bank or some other institution takes on risky debt (such as repackaged sub-prime real estate loans), in order to lower their risk they insure that risky debt by going to companies such as AIG to cover any potential losses. For a fee, AIG essentially insured these bad securities by promising to pay if they went bad. For a while AIG was making some real dough from it. We all know what happened next. The market collapsed, with the loans and the derivative securities going bad at the same time. It was time for AIG to pay up. Well, they didn’t have any reserves to cover this bad debt (nor were they required to), and they just didn’t have the money to cover it.
That’s where you the taxpayer comes in. $170 billion dollars later AIG is still on shaky ground, and may need even more money to survive. So guess where billions of dollars of that bailout went? Some went to banks. Yes, the same banks that received their own bailout got AIG bailout money on top of that. Some went to companies like Goldman Sachs. Yes, Hank Paulsen’s alma mater. Go figure.The outrage doesn’t stop there. Some of those credit default swap clients were foreign banks. That’s right, billions of dollars of your money went to cover bad business decisions not only in the United States, but abroad as well.
And AIG seems to think that the salesman who were responsible for collapsing the company in the first place are deserving of a bonus. In fact, they’re afraid of losing the talent! Too big to fail. No wonder China is considering cutting us off. This has become absurd…