AIG Is Said to Pay $18.7 Billion to Goldman, SocGen for Swaps
By Hugh Son
December 10, 2008
Dec. 10 (Bloomberg) -- American International Group Inc., the insurer rescued by the U.S. government, made $18.7 billion in payments tied to credit-default swaps to banks including Goldman Sachs Group Inc. and Societe Generale SA, according to a person briefed on the situation.
The insurer sent the money to the banks in the three weeks after AIG's Sept. 16 bailout, said the person, who declined to be named because the information is confidential. The banks bought the swaps from AIG as protection on mortgage securities that plunged in value.
"The AIG bailout wasn't meant to help the American taxpayer," said Janet Tavakoli, president of Chicago-based Tavakoli Structured Finance. "What this has ended up doing is helping the investment banks who had AIG as counterparty."
The payments may protect the biggest U.S. and European banks from investment losses tied to the collapse of the subprime mortgage market. AIG's expanded $152.5 billion government rescue included funds to buy the underlying assets of swaps so the contracts could be retired. The insurer has won agreements to terminate $53.5 billion of the swaps.
The largest recipients were Societe Generale, which got $4.83 billion, Goldman Sachs with $2.97 billion, Deutsche Bank AG with $2.92 billion, Calyon Securities with $1.89 billion and Merrill Lynch & Co. with $1.32 billion, the person said.
Nicholas Ashooh, an AIG spokesman, Michael Duvally of Goldman Sachs, Ted Meyer of Deutsche Bank and Danielle Robinson of Merrill Lynch declined to comment. Jolyon Barthorpe of Societe Generale and Bertrand Hugonet of Calyon didn't return calls.
AIG's payout was reported earlier today in the Wall Street Journal.
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