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Treasury Confirms That The Definitive Treasury-AIG-Fed Shell Game Will Proceed As Planned

Tyler Durden's picture




 

This one is sure to get Barofsky's blood boiling. Reuters has just confirmed what even a retarded, diapered, midget money will immediately grasp is nothing but a shell game of massive proportions. Basically the Treasury has announced it will proceed with a plan to give AIG the $22 billion released by various TARP repayments (presumably in the form of a loan), so that... drumroll, AIG can buy back the Fed's preferred stock interests in various layers of the AIG cap structure. In other words: Treasury gives taxpayer money to AIG -> AIG buys back rescue equity from Fed -> both Fed and Treasury trumpet massive success of AIG rescue operation, even as nothing has been changed, and more taxpayer funds are stuck, only this time higher in the cap structure, allowing existing equity interests of other investors to be pushed further in the money.

To be sure this is not news per se, as this was announced previously by AIG on September 30 when it announced the full details of the most recent ponzi-cum-shell game. What is hilarious is the ongoing lie from Tim Geithner: "Based on current market prices and the value of the assets supporting
the FRBNY's loans to and preferred interests in AIG and Maiden Lane II
and III, the USG expects to earn a profit on its loans to and
investments in AIG assuming the restructuring announced on September 30
is completed
." Of course it is the lie at the basis of this statement that forced Barofsky to recently call out Geithner as basically being an outright liar.

Full Treasury press release:

Treasury Update on AIG Investment Valuation

Following the completion of an initial public offering for AIA Group
Limited (AIA) and the sale of American Life Insurance Company (ALICO) to
MetLife, Inc., the U.S. Department of the Treasury is today providing
an update on the previously announced restructuring of the United States
Government's (USG) loans to and investments in American International
Group, Inc. (AIG).

 

The AIA IPO raised $20.5 billion of cash proceeds. The ALICO sale
raised approximately $16.2 billion of total proceeds, approximately
$7.2 billion of which is cash. This approximately $36.7 billion in
aggregate proceeds will be used to fully repay the loan extended to AIG
by the Federal Reserve Bank of New York (FRBNY) and a substantial amount
of the FRBNY's preferred interests in certain AIG subsidiaries.

As part of the restructuring, AIG will draw up to $22 billion in
remaining Troubled Asset Relief Program (TARP) funds from Treasury to
purchase the FRBNY's preferred interests in the special purpose vehicles
holding AIA and ALICO, and Treasury will receive those interests.  The
assets held by these special purpose vehicles, which include, among
others, AIG's remaining shares in AIA and the non-cash proceeds received
from MetLife for ALICO, significantly exceed the amount of the
preferred interests and, as such, no losses are expected on those
preferred interests.

After the restructuring, Treasury will own 92.1 percent of AIG, which
equates to approximately 1.66 billion shares of common stock in the
company. Based on the market closing price of AIG on October 29, 2010,
these shares are worth approximately $69.5 billion.  This amount
significantly exceeds Treasury's current $47.5 billion cash investment
in AIG.   (This is in addition to the Treasury investment in the
preferred interests described above.)  AIG has announced that it expects
to complete the restructuring by the end of the first quarter of 2011.

Based on current market prices and the value of the assets supporting
the FRBNY's loans to and preferred interests in AIG and Maiden Lane II
and III, the USG expects to earn a profit on its loans to and
investments in AIG assuming the restructuring announced on September 30
is completed.  Please see the chart below for further details.

The completion of the restructuring is subject to a number of
conditions. Nevertheless, the AIA IPO and sale of ALICO reflect the
substantial progress that AIG and the USG have made to date in
restructuring the company.


 

Investment

Current Outstanding Investment ($B)

Repayment/Comments

FRBNY Credit Facility

19.2

Will be retired from cash proceeds of AIA IPO and ALICO sale.
Note: Amount does not include all accrued interest and fees payable to
FRBNY (which, when combined with the remaining $19.2 billion Credit
Facility, totals approximately $20 billion). All accrued interest and
fees will also be repaid with the cash proceeds of the AIA IPO and the
ALICO sale.

FRBNY Special Purpose Vehicles
(AIA Aurora LLC and ALICO Holdings LLC)

26.1

As part of the restructuring, AIG will draw up to $22 billion
in remaining TARP funds from Treasury to purchase preferred interests in
the special purpose vehicles holding AIA and ALICO and Treasury will
receive those interests. Including the designated assets detailed in the
Agreement in Principle announced by AIG on September 30, the aggregate
value of the assets supporting the preferred interests in the special
purpose vehicles significantly exceeds the amount of the preferred
interests.  These assets include the remaining shares of AIA, MetLife
equity securities received as part of the ALICO sale, equity interests
in Nan Shan, Star Life Insurance, Edison Life Insurance, and ILFC, and
the Company's equity interests in the Maiden Lane II and Maiden Lane
III.  It is expected that proceeds from the monetization of these assets
will be used to repay the SPV preferred interests in full.

FRBNY Maiden Lane II LLC
(Outstanding Principal on FRBNY Loan)

13.5

The fair value of the assets supporting Maiden Lane II is $16.5
billion.  It is expected that the FRBNY loan to this vehicle will be
repaid in full.

FRBNY Maiden Lane III LLC
(Outstanding Principal on FRBNY Loan)

14.3

The fair value of the assets supporting Maiden Lane III is
$23.5 billion.  It is expected that the FRBNY loan to this vehicle will
be repaid in full.

Treasury Investment to Date

47.5

After the completion of the restructuring of AIG, Treasury will
hold 1.655 billion shares of AIG common stock. Based on the market
closing price of AIG on October 29, 2010, that common stock has a value
of $69.5 billion, which exceeds Treasury's current cash investment of
$47.5 billion.

Total Remaining Investment in AIG
(FRBNY and Treasury)

120.6

 

 

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Mon, 11/01/2010 - 14:12 | 691157 Cognitive Dissonance
Cognitive Dissonance's picture

A circle jerk of the highest order. All hail the mighty Ponzi.

Mon, 11/01/2010 - 14:18 | 691177 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

They call it "ponzi" now on Thursday nights at the Tomb?  Tomatoe tomato.

Mon, 11/01/2010 - 14:32 | 691230 A_MacLaren
A_MacLaren's picture

The circle jerk will continue until private interests achieve climatic release.

Mon, 11/01/2010 - 14:40 | 691266 traderjoe
traderjoe's picture

"Treasury gives taxpayer money to AIG -> AIG buys back rescue equity from Fed"

Nobody has yet mentioned the question of the Treasury (US taxpayer) essentially bailing out the Fed (the private banks) from their investment. So, not just one hand paying the other - another solid data point that the Fed works for its banker owners, and that the Treasury is the taxpayer whipping boy. 

OT: everyone should see the www.buildingwhat.org website. A decent website that professionally raises good questions on 9/11. I have found it to be a good website to send people that are starting to open their eyes to the truths...

Mon, 11/01/2010 - 15:10 | 691330 Cognitive Dissonance
Cognitive Dissonance's picture

Please don't show it to Internet Tough Guy. His blood pressure is already too high after dealing with me. Give the poor guy a break. 

Mon, 11/01/2010 - 15:39 | 691405 traderjoe
traderjoe's picture

Sadly, I missed that conversation/exchange. 

I have to say, all one really needs to do is watch a video of WTC 7 collapsing to understand that some faction(s) of the US government had some involvement in 9/11. You really don't have to go any further (if you don't want to). Once it's determined the government was somehow involved - everything changes. 

Mon, 11/01/2010 - 15:59 | 691463 Cognitive Dissonance
Cognitive Dissonance's picture

Once it's determined the government was somehow involved - everything changes. 

Thus many people will do everything in their power to avoid coming to that conclusion. If one doesn't wish to change their worldview, it's so much easier to ignore this than it is to do the hard work of changing everything. Nothing is self evident or obvious to those who don't wish it to be so.

This is why paid disinformation agents are widely used. People who wish to continue to believe the lie are not that hard to convince to continue to believe the lie. They just need a reason, some plausible deniability, in order to do so.

Tue, 11/02/2010 - 01:46 | 692524 Island_Dweller
Island_Dweller's picture

If one doesn't wish to change their worldview, it's so much easier to ignore this than it is to do the hard work of changing everything.

 

This goes a long way in explaining religion!

Mon, 11/01/2010 - 15:47 | 691429 RockyRacoon
RockyRacoon's picture

Riddle me something:

After the restructuring, Treasury will own 92.1 percent of AIG...

Doesn't that mean that the whole shebang is now on the books of the U. S. Gov't via the Treasury ownership?  Don't they try to stop at 89.9999% to avoid that?

Mon, 11/01/2010 - 15:53 | 691447 Cognitive Dissonance
Cognitive Dissonance's picture

Rules, laws, regulations; they all mean nothing any longer. They really don't. Fannie and Freddie should be "on the books" but they aren't.

They just make this shit up as they go.

Mon, 11/01/2010 - 14:12 | 691158 Hondo
Hondo's picture

What would you expect from a corrupt government that has been captured by fiancial system that is itself corrupted.

Mon, 11/01/2010 - 14:15 | 691164 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

When I use cash it looks to me like monopoly monie.  We are playing games, and they are children's games.

Mon, 11/01/2010 - 14:15 | 691169 SheepDog-One
SheepDog-One's picture

So does Barofsky have any actual POWERS to step in as SIGTARP, or just a figurehead placed there?

Mon, 11/01/2010 - 19:14 | 691867 Rainman
Rainman's picture

He does his business in the windowless basement of the UST building. He keeps screaming but everyone pretends he's not down there.

Mon, 11/01/2010 - 14:16 | 691170 Eduardo
Eduardo's picture

phewww the important thing is that Goldman Sachs got their money back. Man ! tragedy was averted ! 

Mon, 11/01/2010 - 14:17 | 691172 plocequ1
plocequ1's picture

Out fuckingstanding.

Mon, 11/01/2010 - 14:18 | 691176 lizzy36
lizzy36's picture

Tiny Tim proving that his only value added skill set is in hiding the salami.

Mon, 11/01/2010 - 14:19 | 691178 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Wow, he is hiding an ass ton of salami!

Mon, 11/01/2010 - 14:19 | 691179 Bigger Dickus
Bigger Dickus's picture

The circle jerk now involves monkeys, elephants and Michelle Obama on all fours.

Mon, 11/01/2010 - 14:20 | 691185 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Na, they're done with her.

Mon, 11/01/2010 - 14:37 | 691251 knukles
knukles's picture

Hey, cover of "Wookie Wear Daily"!

Mon, 11/01/2010 - 14:20 | 691181 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bonzai, slap Geithner's face on that monkey!

Mon, 11/01/2010 - 14:22 | 691199 JimboJammer
JimboJammer's picture

This  will  all  end  badly .....  Glenn  Beck  ...  Help...!

Mon, 11/01/2010 - 14:22 | 691200 OutLookingIn
OutLookingIn's picture

 

 Yes Sir! Step right up! Everyboby is a winner! Keep your eye on the pea...

Mon, 11/01/2010 - 16:00 | 691472 Milestones
Milestones's picture

The Carnival still in town!! Must have been extended for the biiiiiiiiiig shoeeew Wednesday All Gawd's chillen have dancin shoes.   Milestones

 

Mon, 11/01/2010 - 14:24 | 691207 MeTarzanUjane
MeTarzanUjane's picture

Behold the beloved Rally Monkey.

Mon, 11/01/2010 - 14:24 | 691208 President Palin
President Palin's picture

Say it ain't so!

Mon, 11/01/2010 - 14:26 | 691211 Sudden Debt
Sudden Debt's picture

Nice to see who's the boss in America...

Mon, 11/01/2010 - 14:30 | 691223 tahoebumsmith
tahoebumsmith's picture

HERE...just turn the telescope around and take a look through the other end... What you see is FASCISM...Plain and simple.

http://2.bp.blogspot.com/_sW65ilskOC8/SmCDZwoIDzI/AAAAAAAAYqQ/-dUq595Z2nc/s400/LloydBlankfeinBlackandWhite.jpg

Mon, 11/01/2010 - 14:40 | 691264 NotApplicable
NotApplicable's picture

Hey now!

Halloween was yesterday.

Mon, 11/01/2010 - 14:31 | 691228 Crab Cake
Crab Cake's picture

The rule of law is no more. Now we're back to nature's rules. Stay low, do what you have to, don't get taken prisoner, and if it comes to a fight shoot to kill. God help us all, and may we have the strength to rebirth the Republic.

Mon, 11/01/2010 - 14:31 | 691229 Traianus Augustus
Traianus Augustus's picture

As Karl Denninger likes to rant "Where are the f#(king cops"!!!!!  Oh no, wait that's my favorite saying too. 

Mon, 11/01/2010 - 15:17 | 691348 Cruel Aid
Cruel Aid's picture

Funny, Country of Laws... hilarious! Lots of people are saying that, for years now. LOL

Mon, 11/01/2010 - 15:50 | 691436 RockyRacoon
RockyRacoon's picture

That is KD's only fault.  He actually thinks that somebody can/should actually take action and enforce the laws on the books.   That drags down most of his arguments.  He sees things the way they should be, not the way they are.  That's why he's so off-base on PMs.

Mon, 11/01/2010 - 16:53 | 691608 Miss Expectations
Miss Expectations's picture

I really like Karl.  He is, however, my black swan.  When he starts buying gold, it's all over.  I am watching for this.

Mon, 11/01/2010 - 14:33 | 691232 Eureka Springs
Eureka Springs's picture

Noooooooooooo!

Mon, 11/01/2010 - 14:36 | 691243 knukles
knukles's picture

Mission Accomplished!

Mon, 11/01/2010 - 14:36 | 691244 LostWages
LostWages's picture

Here's the shell game they should play!

http://www.gjk2.com/test/test.swf

 

Mon, 11/01/2010 - 15:52 | 691443 RockyRacoon
RockyRacoon's picture

What ball?

Mon, 11/01/2010 - 14:38 | 691252 NotApplicable
NotApplicable's picture

After the restructuring, Treasury will own 92.1 percent of AIG, which equates to approximately 1.66 billion shares of common stock in the company. Based on the market closing price of AIG on October 29, 2010, these shares are worth approximately $69.5 billion.

I just wanted to highlight and reiterate the absurdity of a market price for a government owned entity. With the presses running full, is there any price level that Ben & Timmy's Inc. cannot achieve?

Mon, 11/01/2010 - 15:01 | 691254 Goldfinger
Goldfinger's picture

Ponzi... The only asset we have is the coins... Gold has been sold to the fed. How can the fed buy all this stuff? With what? An increase to the liability called "federal Reserve notes"... How long before we stop believing in this BS.. Cash in your pocket is 10x more real than your equivalent deposit, and unlimited reserve account, when you run out of real reserves? WTF.

 


Suppose a bank customer cashed a $100 check to obtain currency needed for a weekend holiday. Bank deposits decline $100 because the customer pays for the currency with a check on his or her transaction deposit; and the bank's currency (vault cash reserves) is also reduced $100.


 

See illustration 15

.

Now the bank has less currency. It may replenish its vault cash by ordering currency from its Federal Reserve Bank - making payment by authorizing a charge to its reserve account. On the Reserve Bank's books, the charge against the bank's reserve account is offset by an increase in the liability item "Federal Reserve notes."

 

See illustration 16

. The reserve Bank shipment to the bank might consist, at least in part, of U.S. coins rather than Federal Reserve notes. All coins, as well as a small amount of paper currency still outstanding but no longer issued, are obligations of the Treasury. To the extent that shipments of cash to banks are in the form of coin, the offsetting entry on the Reserve Bank's books is a decline in its asset item "coin."

Mon, 11/01/2010 - 14:39 | 691259 economessed
economessed's picture

Shovel-ready.

Mon, 11/01/2010 - 15:48 | 691431 kaiserhoff
kaiserhoff's picture

shoveling smoke?

Mon, 11/01/2010 - 15:08 | 691274 Goldfinger
Goldfinger's picture

The US has no gold. They appear to have given it away  to the fed for $38.. It appears US can have it back,,, if it wanted to to sell it.

 Gold stock and gold certificates.

Changes inthe U.S. monetary gold stock used to be an important factor affecting bank reserves. However, the gold stock and gold certificates, have not changed significantly since the early 1970s. Prior to August 1971, the Treasury bought and sold gold for a fixed price in terms of U.S. dollars, mainly at the initiative of foreign central banks and governments. Gold purchases by the Treasury were added to U.S. monetary gold stock, and paid for fromit's its account at the Federal Reserve. As the sellers deposited the treasury's checks the banks, reserves increased. To replenish its balance at the Fed, the Treasury issued gold certificates to the Federal Reserve and received a credit to it's deposit balance.  Treasury sales of gold have the opposite effect. Treasury's account and reserves decline. Because the official U.S. gold stock is now fully "monetized", the Treasury currently has to use its deposits to retire gold certificates certificates issued to the Federal Reserve whenever gold is sold.  

 

However, the value of gold certificates retired, as well as the net contraction in bank reserves, is based on the official gold price. Proceeds from a gold sale at the market price to meet demands of domestic buyers likely would be greater.

 

The difference represents the Treasury's profit which, when spent, restores deposits and bank reserves by a like amount. While the Treasury no longer purchases gold and sales of gold have been limited, increases in the official price of gold have added to the value of the gold stock. (The official gold price was last raised from $38.00 to $42.22 per troy ounce, in 1973.)

Mon, 11/01/2010 - 14:47 | 691286 Captain Willard
Captain Willard's picture

Remind me what AIG is worth now that its best assets have been stripped out?

Mon, 11/01/2010 - 14:51 | 691298 Everybodys All ...
Everybodys All American's picture

Could the crooks be more clear America? Geithner and Bernanke are corrupt.

Mon, 11/01/2010 - 15:09 | 691328 orangedrinkandchips
orangedrinkandchips's picture

I love U...U love Me....Were a happy family! hahahh

 

This shit the govt pulls cant even fool Barney! for christ's sake!

Mon, 11/01/2010 - 15:09 | 691331 buzzsaw99
buzzsaw99's picture

The frauderal reserve.

Mon, 11/01/2010 - 15:35 | 691394 Village Idiot
Village Idiot's picture

I spanked the monkey earlier this morning, so I'm doing my part.   youporn.com - right up there with ZH.

Mon, 11/01/2010 - 15:41 | 691413 TheSettler
TheSettler's picture

tube8.com=better

Mon, 11/01/2010 - 16:06 | 691498 Village Idiot
Village Idiot's picture

hat tip - thanks.

Mon, 11/01/2010 - 15:36 | 691395 single digit
Mon, 11/01/2010 - 15:39 | 691406 lamont cranston
lamont cranston's picture

This reminds me of the old Jerry Clower joke about ther two farmers who trade a horse back and forth after each "improves" it. Finally, one farmer sells the horse to an out of town farmer. His friend is incensed and castigates him, saying, "Why did you do that? We were both making a good living off of that horse!"

Mon, 11/01/2010 - 15:41 | 691416 Village Idiot
Village Idiot's picture

Oh, and I'm sure the MSM will be all over this story tonight.

Mon, 11/01/2010 - 16:06 | 691495 anonnn
anonnn's picture

It is not taxpayer's money or even future obligation.

It is the nations' aggregate wealth and health that is being squandered to avoid confronting fairness...or rudimentary justice.

Yes, even global impingement on all sovereign nations and their populations.

"The transparency of corruption" is another manifestation of Buchenwald, The Inquisition, infallibility, etc.

Another Dark Ages beckons as insanity blooms unrecognized.

 

 

Mon, 11/01/2010 - 16:20 | 691527 tahoebumsmith
tahoebumsmith's picture

Check out this headline...Just hit the MSM.

AIG set to repay $37 billion in bailout money

http://news.yahoo.com/s/ap/us_aig_bailout_repayment#mwpphu-container

Kinda reminds of this one...

http://www.youtube.com/watch?v=hhoejIGrvlQ

 

Mon, 11/01/2010 - 16:58 | 691621 LongSoupLine
LongSoupLine's picture

Jefferson just rolled a few more times in his pine box.

Mon, 11/01/2010 - 17:24 | 691654 CitizenPete
CitizenPete's picture

Ok, so were is the Justice and in the phucking Justice department.  This in money laundering of the highest order.  A frigging guy who gets busted for stealing some food for his family goes in from of a judge if he gets caught.  These phukers get bonuses? 

I knew there was a reason I stocked up on buckshot.  When the hell is banker hunting season and where do I buy the license tag?

What the hell will it take for the intellectuals to say: "that's it, I can't put up with this shit anymore!" ?    It is past time for a tax rebellion or something for god's sake.  This election is a farce: out of the socialist fat and into the Neocon fire.    

Nov. 5th, bass turds!  

http://www.youtube.com/watch?v=chqi8m4CEEY

Mon, 11/01/2010 - 21:40 | 692148 Downtoolong
Downtoolong's picture

.. nothing has been changed, and more taxpayer funds are stuck, only this time higher in the cap structure, allowing existing equity interests of other investors to be pushed further in the money.

 The biggest scams on Wall Street are those that transfer and impose more risk on the unsuspecting. Dollar transfers are easy to spot. Risk transfers are much more difficult to see, and they use that to their advantage well.

Mon, 11/01/2010 - 23:05 | 692320 Grand Supercycle
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