Senate Banking Committee leaders are asking why American International Group Inc. counterparties received payments for mortgage securities that had not defaulted.
Lawmakers at a committee hearing on insurance regulation today urged Troubled Asset Relief Program overseers to investigate allegations that counterparties of AIG, New York, were paid dollar-for-dollar for their troubled investments in securities that were still performing.
Sen. Christopher Dodd, D-Conn., chairman of the panel, said that, while it is a “secondary issue” to the heat generated by disclosure that AIG has been paying bonuses to the people who worked for AIG’s failed AIG Financial Products division, he is interested in determining why the CDS counterparties received 100% of the insurance AIG had provided through the credit default swaps issued by AIG to guarantee the collateralized debt obligations of their counterparties.
In response, Sen. Richard Shelby, R-Ala., the highest ranking Republican member of the committee, asked Dodd to have the TARP inspector general look into “where all this [TARP] money is going.”
The issue was brought up at the hearing after AIG disclosed Sunday that it had paid $52 billion to AIG Financial Products unit CDS counterparties and counterparties to other AIG Financial Products transactions.