A Query Long Past Due – Where Does AIG’s Money Go?
Congress is finally getting around to asking a question it should have asked long ago, before doling out billions of dollars to troubled insurance giant AIG – Where, exactly, is that money going?
A Senate panel pressed the Federal Reserve on that very point Thursday. even threatening to cut off future bailout funds (god forbid AIG comes back yet again) if the Fed doesn’t cough up some answers, The New York Times reports.
Tens of billions of those dollars have merely passed through A.I.G. to its derivatives trading partners, shielding them from losses. The Fed has refused to provide the names of those financial institutions, and senator after senator, Democrat and Republican, said that was an outrage.
“We need to know who benefited, and we’re going to find out,” said Senator Richard C. Shelby, Republican of Alabama and the ranking member of the committee. “The Fed can be secretive for a while but not forever.”
If only that were true. Consider this little nugget, from Bloomberg:
The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won’t make the information public, the central bank said in a reply to a Bloomberg News lawsuit.
The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.
Bloomberg sued the Fed in November, trying to find out who is getting all that bailout money. Now, at least Congress seems to be joining the effort to press the Fed to open up. Federal Reserve officials are digging in, saying it would cause more turmoil in the financial system to release the names of companies getting the money, because they would be reluctant to do business with the Fed.
Well, all that money those companies are gettting comes straight from the taxpayers. And after those repeated bailouts to AIG, taxpayers have a legitimate right to question where their billions are going — and what they are getting in return. The Fed clearly believes the free flow of information is a low priority. It might have gotten away with this back when the crisis started, but that belief has no legitimacy now. The right of the taxpayers to know that their money is being spent wisely — in the face of repeated bailouts of troubled institutions that seem to be little more than utterly insolvent — should probably be a higher government priority than shielding firms that receive federal money from a “stigma.” If Thursday’s hearing is any indicator, that’s not going to change any time soon.