AIG Used Bailout Cash to Pay Wall Street Debt

$75B went to banks, municipalities
By Matt Cantor,  Newser User
Posted Mar 16, 2009 6:39 AM CDT
An American International Group office building is shown in this Tuesday, Sept. 16, 2008 file photo taken in New York.   (AP Photo/Mark Lennihan, File)
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(Newser) – More details are emerging after AIG unexpectedly revealed where it channeled bailout funds, the Washington Post reports. More than $34 billion went to AIG Financial Products, whose toxic derivatives brought the parent organization to near collapse last year. The subsidiary used part of that money to pay banks that started demanding collateral as the housing boom waned.

AIG spent another $44 billion to pay debts incurred when mortgage-backed asset values plummeted. The insurer and the Federal Reserve had until yesterday refused to dish out who got the cash, saying the disclosure could hurt the beneficiaries' business. Explaining the firm’s surprise decision, a rep for AIG cited “extraordinary times.” “We and our partners at the Fed thought this was right thing to do,” she said.