The public wants to know where the money for the AIG bailout went. Several months following the bailout, there is still news about the AIG (American International Group) bonuses and bailout scandal.
It was made clear in March that the funding from the U.S. government to AIG for 173 billions did not come from the taxpayers money. The bailout money came from the purchase of credit default swaps by all the American and European counter party banks to insure their own investments including mortgage backed securities and such. So, in fact, there are more than 20 of the U.S. as well as foreign financial institutions that have received over 50 billions from the Fed to bail out AIG.
In September 2008, the government granted a credit line of 85 billions to AIG to prevent it from filing bankruptcy since other financial institutions were facing investment losses and demanded more collateral from AIG. AIG’s bankruptcy would have had caused more problems and losses across the globe affecting all the financial institutions and their policy-holders. Amongst the financial institutions that have received the rescue package are Goldman Sachs, Deutsche Bank, Merrill Lynch, Morgan Stanley, Bank of America, HSBC, Wachovia, and many other large banks.
Some have argued that the bailout would only create more bailouts. The question as to why American taxpayers including small business owners have to bailout this financial giant, AIG, while it is rewarding employees and CEO’s with bonuses could only be answered by the Fed or the Treasury.
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