AIG says aid used to pay other banks
18.03.2009
American International Group Inc (AIG) used more than US$90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar US government bailouts.
Some of the biggest recipients of the AIG money were Goldman Sachs at US$12.9 billion, and three European banks — France’s Societe Generale at US$11.9 billion, Germany’s Deutsche Bank at US$11.8 billion and Britain’s Barclays PLC at US$8.5 billion. Merrill Lynch, which is also undergoing federal scrutiny of its bonus plans, received US$6.8 billion as of Dec. 31.
The embattled insurer’s disclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.
The company, now about 80 percent owned by US taxpayers, has received roughly US$170 billion from the government, which feared that its collapse could cause widespread damage to banks and consumers around the globe.
“The ability of AIG to meet its obligations is important to the stability of the US financial system and to getting credit flowing to households and businesses,” US Federal Reserve spokeswoman Michelle Smith said.
The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.
Other banks receiving between US$1 billion and US$3 billion from AIG’s securities lending unit include Citigroup Inc, Switzerland’s UBS AG and Morgan Stanley.
Municipalities in certain states, including California, Virginia and Hawaii, received a total of US$12.1 billion under guaranteed investment agreements.
The company said it used billions more to fund its Maiden Lane business, which was set up following the federal bailout to purchase toxic assets, and to repay debt and provide capital for some of its operations.
“I’ve been asking for this information for months. This is a good first step, but I’m concerned by how long it took,” said Democratic Representative Carolyn Maloney, who is chair of Congress’ Joint Economic Committee.
The details from AIG came after administration officials and top Republicans voiced sharp criticism over US$165 million in bonus payments AIG said it must make on Sunday. The contracts are part of a larger total payout which has been reportedly valued at US$450 million.
In a letter to US Treasury Secretary Timothy Geithner dated Saturday, AIG chairman Edward Liddy said outside lawyers informed AIG that it had contractual obligations to make the payments and could face lawsuits if it did not do so.
Liddy said the company entered into the bonus agreements early last year before AIG got into severe financial straits and was forced to obtain a government bailout.
AIG has agreed to the government’s requests to restrain future payments.
The Tamil Tigers are now defending their jungle bases
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Mullaitivu was not only the last major rebel-held town in the north-east but also acted a crucial military supply base.
"The LTTE's main supply route, especially military equipment and hardware, were supplied through Mullaitivu," Dharmalingam Siddarthan, a former Tamil militant turned politician, told the BBC.
Sri Lanka's government is confident of victory in the war, which began a quarter of a century ago. Some officials have predicted the army will completely recapture the north from the Tamil Tigers in the coming weeks.
So, why are the Sri Lankan forces winning now?
The political leadership is strongly backing the military, which has nearly doubled its numbers in recent years. The government has also increased the firepower of security forces by buying new arms from Pakistan and China.
In addition to this, the army has changed its tactics and become better able to cope with the kind of warfare waged by the guerrillas. It also started to stretch them thin by opening up a number of fronts in the north.
However, many military analysts believe that the army may need thousands of additional soldiers to hold on to the territory it had recaptured from the rebels in the long-run.
The Tigers have shown resilience in the past and with most of their heavy weapons and cadres intact, they may spring a surprise. Even if the rebels lose control of other smaller towns and villages in the remaining areas, they may revert back to guerrilla warfare.
The rebels insist Velupillai Prabhakaran is still leading their fight
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Now, the key question is what has happened to the Tigers' leader Velupillai Prabhakaran.
Sri Lankan officials think he may have fled the country.
But speaking to the BBC Sinhala service, senior rebel leader B Nadesan said it was nothing but malicious propaganda and their leader was very much within the north-east leading the movement.
He also shrugged off recent military setbacks saying "in the past we have withdrawn many times and bounced back to achieve big victories".
Many Tamils here warn that the capture of territory from the rebels alone will not end the ethnic conflict and that they need a political solution for a lasting peace.
"Everything depends on the government. If it fails to devolve powers to the Tamil-dominated north and east after sometime the same problem will come up again," warns Mr Siddharthan.
But the Sri Lankan government says it is working on a political solution and it requires time to evolve a consensus among political parties in the south.
"The political solution is evolving as we watch in Eastern province. We've had elections and had a chief minister, who's a Tamil and a former child solider being elected to office. This is part of the political process," says Sri Lankan Foreign Secretary Palitha Kohonna.
"If anybody were to expect the revelation of a political solution in one morning it is not going to happen like that. It will happen slowly. It will be an evolution rather than a sudden declaration," says Dr Kohonna.
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