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AIG bailout having a “poisonous effect”
10 June 2010
The US government rescue of AIG continues to have a poisonous effect on the marketplace, according to a Congressional Oversight Panel report.
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AIG
Congressional Oversight Panel
Troubled Asset Relief Program
Timothy Geithner
The US government rescue of AIG continues to have a poisonous effect on the marketplace, according to a Congressional Oversight Panel report.
By providing a complete rescue that involved no shared sacrifice among American International Group’s (AIG) creditors, the Federal Reserve and Treasury fundamentally changed the relationship between the government and the country’s most sophisticated financial players, details the report.
In 2008, when AIG was unable to acquire enough capital in the face of defaulting subprime mortgages and shaky complex securities, the Federal Reserve Bank of New York (FRBNY) president Timothy Geithner – now Secretary of the Treasury – attempted a privately funded solution in coordination with JP Morgan Chase and Goldman Sachs.
This failed and a day later, on September 16 2008, the FRBNY rescued AIG with an $85bn, taxpayer-backed Revolving Credit Facility (RCF). These funds were later be supplemented by $49.1bn from the Treasury under the Troubled Asset...
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