Monday, March 16, 2009

Black Hole A.I.G. Meets Continental UBS

Risky credit betting A.I.G pushed $5 billion in U.S. taxpayer funds to chronic tax cheater UBS. This is on top of $59 billion in capital injections via the Federal Reserve and the European Central Bank. How did UBS respond to taxpayer largess? They helped 17,000 clients illegally avoid taxes via offshore accounts.

Because of the financial crisis, UBS will pay a $780 million fine over time, much less than the anticipated $1 billion or greater. They had to reveal a paltry 250-300 names. What about the other 16,750?

How does the UBS punishment compare with other bad corporate behavior? In 2006 Tenet Healthcare paid $900 million for unlawful billing practices. HCA was fined $1.7 billion for the same sin. It seems the giant Swiss bank got off light. UBS contributed $513,919 to the Obama campaign and was #3 on Rahm Emanuel's lifetime donor list.

UBS isn't the only financial firm riding the Uncle Sam gravy train. Between September and December 31, Goldman Sachs got $12.9 billion, while Bank of America/Merrill Lynch received $12 billion. A.I.G. paid out $93 billion to reduce counterparty risk. In December 2007 A.I.G. estimated their credit derivative exposure at $50 million. That's a $92.95 billion margin of error. Management must be proud of their performance.

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