5 billion while it has always provided to the contrary

Published early in the week, a report by Neil Barofsky, reviewing the use of public funds in the rescue of the banks, drawn to waves. He was extremely critical about the role of the Federal Reserve of New York in the rescue of AIG, and in particular on how the Central Bank has too positively offset the counterparties of the insurer. "There is no doubt that the impact of the decisions of the Fed of New York - the design of its support for AIG - is that tens of billions of dollars of public money are parties directly and counterparties of AIG. inexorably"In total, are 27.1 billion of public money which has been paid to 16 banks.

In the aftermath of the bankruptcy of Lehman Brothers, AIG's note is degraded by the three rating agencies and it can no longer hope to find private funding. However it is in desperate need of money. Since 2007, the insurer is facing requests for collateral because the value of the structured products that it covers (CDOS) with a credit default swaps (CDS) collapses and he no longer has enough cash to cope. Degradation of note is a further disaster, because it allows its counterparties require again of the collateral. Fearing a systemic shock, September 16, the Federal Reserve of New York allows a revolving credit of 85 billion to the insurer. But it is accompanied by a 11 very high interest rates, which will be penalizing.

"A great chance."

The report criticized the Fed for having recovered at the will-soon a bailout plan designed by private parties, without reviewing the conditions, and which will lead to new inflows of funds a few weeks later. Because it appears very quickly that following these events, agencies are preparing again to lower their scores, which will generate a new call for collateral. The Fed decided to buy back CDOS insured by AIG to cancel the CDS and eliminate the risk. However the banks require to be paid to the value of their CDOS (apart from UBS who is willing to accept 2 reduction) while of course, the market value of collapsed. The negotiations are complicated by the fact that the Banking Commission, which defends the interests of Société Générale and Calyon, provides to the New York Fed in the absence of judgment, the French law cannot allow them to accept to be repaid otherwise than without discount.

In addition, the report highlights that Goldman Sachs, who received 5.6 billion dollars of the State and AIG 8.4 billion in collateral, was on two different portfolios of 4.3 to 5.5 billion, while it has always provided to the contrary. Neil Barofsky, Inspector General to review the Troubled Assets Relief Program (TARP), accuses the Fed poorly designed its assistance to the insurer and have not user his bargaining power for that banks be paid on the cheap. The leadership of Tim Geithner, today Secretary of the Treasury, is implicated. It announced Tuesday the creation of a task force on financial fraud, responded. "This is a great opportunity in our country that have all sorts of people who will review each decision at each moment of the crisis, and observe the quality of the judgments made in evaluating them with hindsight..." "You will see a lot of strength and belief in their views... which many will not have the weight of experience", it commented.