Where Has All The Money Gone?

The Troubled Asset Relief Program, TARP, signed into law in October 2008 at the urging of President Bush and with the help of Democrats who by then controlled the House of Representatives, had hardly any limits on how the money was to be used by banks once they obtained their share. The bailout of AIG had no limits on it either. As we now know, AIG has paid over $160 million in retention bonuses to employees, including the same employees who were responsible for the derivatives debacle that is bringing the company down, along with global banks.

Finally we can see where the TARP money is going. ProPublica.org has posted a list of recipients of TARP funds. As of March 11th, almost $302 billion has been invested in saving the financial institutions of the United States. AIG has gotten the most: $170 billion. Next comes Citibank and Bank of America, including Merrill Lynch, with $45 billion each.

AIG in turn paid out $50 billion of that taxpayer bailout money to US and European banks for their losses under credit default swaps, here, I've got the definition, where without regulation, reserves, or using the word "insurance," AIG secured these institutions against loss of principal and interest when they purchased all of these bundled mortgage securities.

The Wall Street Journal and Fortune's lists were slightly different. Fortune's is available on the web, although the WSJ is only available to subscribers. Notice the names: Bank of America, CitiBank, Wachovia. These are the same names of the banks receiving TARP funds although AIG also paid out taxpayer money to many European banks, too. No wonder CitiBank is claiming it's about to turn a profit again.

Is there double-dipping? And more importantly, since these bonuses paid to AIG employees were allegedly contracted for in 2007 and only paid in 2009, I have some questions to ask. Was this money intended to keep folks quiet about the soon to unravel financial debacle? Or was Edward Liddy, the CEO brought in to run AIG, serious when he said that they agreed to the bonuses because these employees were the only ones "who could understand the exotic financial instruments on AIG's books."

This morning I heard on NPR that some of the employees are no longer working for AIG and many are in the London office, which won't even help the US economy, if they want to use the bonus to buy a new Chevrolet or Cadillac!

Remember what Bethany McLean said: If it's too difficult to understand, it probably isn't making any money. McLean revealed the ENRON scandal. Maybe McLean will investigate and tell us what happened to our financial services industry. there will be no newspapers by then, and anyway, what good were newspapers or the media in informing us about these financial shenanigans.

I wish someone would pay me a bonus for screwing up the entire world.