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The aid to AIG ultimately mounted to $182 billion. Much of the rescue money went to meet the company's obligations to its Wall Street trading partners on credit default swaps. The bailout "distorted the marketplace by transforming highly risky ... bets into fully guaranteed payment obligations," the report says. Some of the biggest beneficiaries of the AIG rescue money also received federal bailout infusions themselves: Goldman Sachs Group Inc., which got $12.9 billion in AIG money; Bank of America Corp., $5.2 billion; Merrill Lynch, $6.8 billion; and Citigroup Inc., $2.3 billion. Other big beneficiaries included French banks Societe Generale, $11.9 billion, and BNP Paribas, $4.9 billion; Germany's Deutsche Bank, $11.8 billion; and Britain's Barclays, $7.9 billion, and HSBC, $3.5 billion. "U.S. taxpayers were called on to bear the full cost of the rescue, including repayment of some of the most sophisticated companies in the world," Warren said. If the New York Fed had tried to force concessions from AIG's trading partners, that could have brought a further downgrade of the insurer's credit ratings
-- a negative development the government was aiming to avoid, Treasury's Williams said in his response. A downgrade of AIG's ratings could have stoked its collapse and endangered the government's efforts to restore confidence in the financial system, costing taxpayers much more in the long run, he said. At the time of the bailout, the New York Fed was led by Timothy Geithner, now the Treasury secretary. After the recent collapse of an AIG deal to sell off a subsidiary, Geithner said the company has other options for repaying the bailout money. British company Prudential PLC backed out of a deal to buy AIG's American International Assurance, after Prudential shareholders balked at the $35.5 billion price. AIG refused to accept less. Private analysts questioned whether AIG did the right thing. But Geithner praised the company's decision, saying AIG "is now free to pursue a bunch of other options to help maximize the return, reduce any risk of loss to the taxpayer." Geithner didn't address how much taxpayers may ultimately recoup.
[Associated
Press;
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