The AIG counter-party enrichment issue isn’t going away anytime soon. As we learned, much of the money that the government handed over to AIG was then sent out the window to its counterparties. Perhaps most controversially, many of AIG’s counterparties seem to have been made whole–getting 100% of the face value of their claims–rather than suffering some kind of penalty for irresponsibly ramping up business with a financial catastrophe.
Now the chief watchdog of the financial rescue program has opened an audit into the payments, Bloomberg is reporting. Neil Barofsky, the inspector general for the TARP, wrote a letter to Maryland Congressman Elijah Cummings about his probe.
“To what extent did AIG pay counterparty claims at 100 per cent of face value and was any attempt made to renegotiate and close out these claims with ‘haircuts?'” Barofsky wrote. “Questions concerning whether AIG paid more than necessary to counterparties and whether Treasury adequately monitored such payments are clearly relevant.”