Sunday, March 08, 2009

How Taxpayers Help Banks, Let Me Count the Ways

Treasury and the Federal Reserve Bank pumped money into major financial institutions numerous ways. Here are three of the many:

1. Direct capital injections
2. Equity injections-preferred stock, much of it converted to common stock with no dividends
3. AIG counterparty unwinding

The Wall Street Journal reported on #3:

About $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions.

The newspaper reported that some of the banks paid by AIG since the insurer started getting taxpayer funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.

Morgan Stanley and Goldman Sachs declined to comment when contacted by Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed Wachovia, could not be reached for comment.

Watch to see who lines up for Treasury's public-private infrastructure. Will any get taxpayer money for cheap loans and investment guarantees, on top of the taxpayer booty to date?

Were any sovereign wealth funds, private equity underwriters or hedge funds on the AIG counterparty payment list? They're the other source of private money for Treasury's public-private partnership.

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