NU Online News Service, Aug. 12, 3:35 p.m. EDT
The U.S. bore all the risk for its rescue of American International Group under the Troubled Asset Relief Program (TARP), but the program largely benefitted overseas institutions, a new Congressional Oversight Panel (COP) report said.
The COP report on international effects of the Temporary Asset Relief Program (TARP) stated, "Banks in France and Germany were among the greatest beneficiaries of AIG's rescue, yet the U.S. government bore the entire $70 billion risk of the AIG capital injection program."
About $61.6 billion of Temporary Asset Relief Program (TARP) and other funds given to AIG went to foreign institutions and governments, COP said.
Payments by AIG to one of its domestic counterparties, Goldman Sachs, may have resulted in more money traveling overseas. With more information about recipients of TARP payments, COP said that "taxpayer aid to AIG became aid to Goldman and aid to Goldman became aid to a number of domestic and foreign investors."
In its report the COP identified 87 entities that wrote credit default swap protection on AIG for Goldman. Each benefited from the government assistance to AIG. Of those, 43 entities are foreign, COP said.
"These foreign entities were not required to make payments on that protection, which they would have been obligated to do in the event of an AIG default," COP said.
The COP said the U.S. could have gathered more evidence so that other countries could "share the pain of the rescue."
The U.S. share of the AIG bailout was more than France's $35 billion capital injection program and about half the size of Germany's, COP said.
In response to the global financial crisis, the U.S. "attempted to stabilize the system by flooding money into as many banks as possible–including those that had significant overseas operations–while most other nations targeted their efforts more narrowly toward institutions that in many cases had no major U.S. operations," the panel said.
The panel said it "strongly urges" the Treasury to report more data on how TARP funds wound up overseas.
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