Dems Question AIG Transactions

The lawmakers say they want Barofsky to find out “what kind of assessments (if any) were made of the health and total exposure risks of the counterparties, as well as whether or not AIG made any attempts to renegotiate the contracts,” the lawmakers write.

The lawmakers note that one AIG counterparty listed, Goldman Sachs Group Inc., New York, has claimed that it had no material exposure to AIG.

“Congress and the American people were told that the AIG bailout was necessary to limit systemic risk across the global economy,” but AIG used the federal support to pay all claims to counterparties, including swap-related claims, at 100% of face value, the lawmakers write.

If risk assessments of specific counterparties were made, “were made, by whom were they made and what were the criteria guiding the assessments?,” the lawmakers ask. “What was the benefit of the decision to pay 100% of face value to the American taxpayers who provided the bailout funds and how did it support the goal of ensuring the stability of the economic system?”

In related news, New York Attorney General Andrew Cuomo expanded his investigation of AIG counterparties. His office issued a subpoena Thursday asking for data on whether the payments to counterparties reduced the need to retain AIG derivatives unit employees.

The subpoena sought data on the derivatives portfolio, how it is managed, the names of those overseeing the wind-down of the portfolio, and a list of the individuals delegated to negotiate with counterparties.