Delaware municipalities appear to have been at serious risk of losing millions without the initial bailout of AIG, according to a press release from AIG itself. In somewhat of a surprise, AIG listed institutions that essentially were remunerated with the rescue funds, and it appears that Delaware institutions could have lost $260 million without Federal assistance. From the release:
NEW YORK, March 15, 2009 – American International Group, Inc. (AIG) recognizes the importance of upholding a high degree of transparency with respect to the use of public funds. As a result, after close consultation with the Federal Reserve, AIG is disclosing information identifying certain credit default swap counterparties, municipal counterparties and securities lending counterparties. Before disclosing this information, AIG consulted with the Federal Reserve about the potential public benefit of counterparty disclosure and the potential that such disclosure would cause competitive harm to AIG or its counterparties.
Severe valuation losses on the super senior multi-sector credit default swap portfolio of AIG Financial Products Corp. (AIGFP) triggered collateral provisions in the swap contracts, creating a liquidity crisis for AIG in September 2008. The Federal Reserve Bank of New York (FRBNY) provided an emergency $85 billion loan to AIG to meet short-term cash needs. The aid received by AIG helped avoid severe financial disruptions by providing liquidity to important financial institutions and municipalities.
As one goes through the report (in PDF format here), one discovers on a state-by-state basis how much in municipal bonds were at risk. And here’s where the First State comes in…eleventh:
State Amt. in Billions
California $1.02 Virginia 1.01 Hawaii 0.77 Ohio 0.49 Georgia 0.41 Colorado 0.36 Illinois 0.35 Massachusetts 0.34 Kentucky 0.29 Oregon 0.27 Delaware 0.26 New York 0.21 New Jersey 0.21 Mississippi 0.18 Washington 0.17 Pennsylvania 0.15 Florida 0.15 Rhode Island 0.14 Arizona 0.12 Texas 0.10 Top 20 Total $7.00 Other 5.10 Total GIAs $12.10
If El Somnambulo’s math is correct, (And Mrs. ‘Bulo does the checkbook, ‘El and Ella’, if you must know), that’s $260 million in Guaranteed Investment Agreements which AIG was only able to pay back due to government subsidies made to AIG between September and December, 2008.
That’s scary stuff. ‘Bulo encourages anyone with a more sophisticated financial mind (that’s basically everybody who reads this blog) to read the release in detail and report back on what they find.
Oh, and to any News-Journal staffers lurking here,would you please be so kind as to give Delaware Liberal credit when and if you decide to cover this story? Muchas gracias.