Govt. officials dodge AIG money questions

March 12, 2009 7:49:09 PM PDT
The big question of how many more billions of bailout money is being spent, made for a contentious confrontation on Capitol Hill Thursday. Once again, the president's treasury secretary dodged questions about where the bank bailout money is going.

President Barack Obama is promising transparency, but when it comes to the massive bailout of insurance giant AIG, the government has been ducking the question of where all the money is going.

AIG got into trouble selling something called a credit default swap. Think of it as insurance policies to investors who were buying up shaky mortgages. When the mortgage market crashed, AIG had to start paying off on those insurance policies. They ran out of money and so far the government's poured $180 billion to keep AIG from collapsing.

On Thursday Kentucky Senator Jim Bunning (R) angrily asked Treasury Secretary Tim Geithner to name those so-called counter parties who hold those credit default swap policies from AIG.

"So tell us why do you keep bailing out AIG? What is the risk and who are counter parties that we're really trying to save?" asked Senator Bunning.
"I agree it's an outrageous thing for our government to be in this position," said Geithner.

Geitner says it's an outrageous situation, but he never reveals whose getting the money. Last week, Federal Reserve Chairmen Ben Bernanke was asked the same question and he too refused to reveal whose getting the money.

"They made legal legitimate financial transactions they have normally, under normal conditions, have a presumption to privacy about their commercial decisions," said Bernanke.

Members of the Senate Finance Committee are frustrated and they say taxpayers are too.

"Essentially taxpayers have been kept in the dark on this AIG issue," said Senator Ron Wyden (D) of Oregon.

"Anybody that doesn't understand the anger of the American people is not paying very close attention," said another Senator.

So far the administration is refusing to answer, but that can't last says ABC7's political analyst, professor Bruce Cain.

"They can't continue to stonewall. That won't work because people will continue to say, 'Well you did promise transparency and how can you not know where this is going and you've had lots of time to figure it out,'" said Cain.

What professor Cain suspects is what the Wall Street Journal has been reporting that billions are being paid out from AIG to foreign banks, which hold those credit default swaps.

Professor Cain says what the president must do is explain why paying a European bank is important to keep the global economy afloat.

"Well that argument is a very sophisticated argument that is going to be hard to make to American public opinion, but it may have to be done," said Cain.

And Cain believes it's likely going to be done very soon. He says the Global Economic Summit scheduled for April offers the Obama Administration its best opportunity to come clean about the AIG money. What better place to try and make the argument that the whole world is in this together.


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