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

Tyler Durden's picture Submitted by Tyler Durden on 11/01/2010 13:09 -0500

AIGAmerican International GroupBank of New YorkDepartment of the TreasuryFederal ReserveFederal Reserve BankFederal Reserve Bank of New YorkMaiden Lane IIIReutersTARPTim Geithner

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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by Cognitive Dissonance
on Mon, 11/01/2010 – 13:12
#691157

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

Login or register to post comments by Mr Lennon Hendrix
on Mon, 11/01/2010 – 13:18
#691177

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

Login or register to post comments by hedgeless_horseman
on Mon, 11/01/2010 – 13:20
#691187

At least GM paid us back! Right?

http://www.businessweek.com/autos/autobeat/archives/2010/04/gm_pays_back_its_loans_and_whitacre_stirs_up_some_controversy.html

 

Login or register to post comments by A_MacLaren
on Mon, 11/01/2010 – 13:32
#691230

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

Login or register to post comments by traderjoe
on Mon, 11/01/2010 – 13:40
#691266

“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 http://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…

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 14:10
#691330

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. 

Login or register to post comments by traderjoe
on Mon, 11/01/2010 – 14:39
#691405

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. 

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 14:59
#691463

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.

Login or register to post comments by RockyRacoon
on Mon, 11/01/2010 – 14:47
#691429

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?

Login or register to post comments by Cognitive Dissonance
on Mon, 11/01/2010 – 14:53
#691447

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.

Login or register to post comments by Hondo
on Mon, 11/01/2010 – 13:12
#691158

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

Login or register to post comments by Mr Lennon Hendrix
on Mon, 11/01/2010 – 13:15
#691164

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

Login or register to post comments by SheepDog-One
on Mon, 11/01/2010 – 13:15
#691169

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

Login or register to post comments by Eduardo
on Mon, 11/01/2010 – 13:16
#691170

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

Login or register to post comments by plocequ1
on Mon, 11/01/2010 – 13:17
#691172

Out fuckingstanding.

Login or register to post comments by lizzy36
on Mon, 11/01/2010 – 13:18
#691176

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

Login or register to post comments by Mr Lennon Hendrix
on Mon, 11/01/2010 – 13:19
#691178

Wow, he is hiding an ass ton of salami!

Login or register to post comments by Bigger Dickus
on Mon, 11/01/2010 – 13:19
#691179

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

Login or register to post comments by Mr Lennon Hendrix
on Mon, 11/01/2010 – 13:20
#691185

Na, they’re done with her.

Login or register to post comments by knukles
on Mon, 11/01/2010 – 13:37
#691251

Hey, cover of “Wookie Wear Daily”!

Login or register to post comments by Mr Lennon Hendrix
on Mon, 11/01/2010 – 13:20
#691181

Bonzai, slap Geithner’s face on that monkey!

Login or register to post comments by JimboJammer
on Mon, 11/01/2010 – 13:22
#691199

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

Login or register to post comments by OutLookingIn
on Mon, 11/01/2010 – 13:22
#691200

 

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

Login or register to post comments by Milestones
on Mon, 11/01/2010 – 15:00
#691472

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

 

Login or register to post comments by MeTarzanUjane
on Mon, 11/01/2010 – 13:24
#691207

Behold the beloved Rally Monkey.

Login or register to post comments by President Palin
on Mon, 11/01/2010 – 13:24
#691208

Say it ain’t so!

Login or register to post comments by Sudden Debt
on Mon, 11/01/2010 – 13:26
#691211

Nice to see who’s the boss in America…

Login or register to post comments by tahoebumsmith
on Mon, 11/01/2010 – 13:30
#691223

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

Login or register to post comments by NotApplicable
on Mon, 11/01/2010 – 13:40
#691264

Hey now!

Halloween was yesterday.

Login or register to post comments by Crab Cake
on Mon, 11/01/2010 – 13:31
#691228

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.

Login or register to post comments by Traianus Augustus
on Mon, 11/01/2010 – 13:31
#691229

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

Login or register to post comments by Cruel Aid
on Mon, 11/01/2010 – 14:17
#691348

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

Login or register to post comments by RockyRacoon
on Mon, 11/01/2010 – 14:50
#691436

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.

Login or register to post comments by Miss Expectations
on Mon, 11/01/2010 – 15:53
#691608

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

Login or register to post comments by Eureka Springs
on Mon, 11/01/2010 – 13:33
#691232

Noooooooooooo!

Login or register to post comments by knukles
on Mon, 11/01/2010 – 13:36
#691243

Mission Accomplished!

Login or register to post comments by LostWages
on Mon, 11/01/2010 – 13:36
#691244

Here’s the shell game they should play!

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

 

Login or register to post comments by RockyRacoon
on Mon, 11/01/2010 – 14:52
#691443

What ball?

Login or register to post comments by NotApplicable
on Mon, 11/01/2010 – 13:38
#691252

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?

Login or register to post comments by Goldfinger
on Mon, 11/01/2010 – 14:01
#691254

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.”

Login or register to post comments by economessed
on Mon, 11/01/2010 – 13:39
#691259

Shovel-ready.

Login or register to post comments by kaiserhoff
on Mon, 11/01/2010 – 14:48
#691431

shoveling smoke?

Login or register to post comments by Goldfinger
on Mon, 11/01/2010 – 14:08
#691274

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.)

Login or register to post comments by Captain Willard
on Mon, 11/01/2010 – 13:47
#691286

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

Login or register to post comments by Everybodys All …
on Mon, 11/01/2010 – 13:51
#691298

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

Login or register to post comments by orangedrinkandchips
on Mon, 11/01/2010 – 14:09
#691328

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

 

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

Login or register to post comments by buzzsaw99
on Mon, 11/01/2010 – 14:09
#691331

The frauderal reserve.

Login or register to post comments by Village Idiot
on Mon, 11/01/2010 – 14:35
#691394

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

Login or register to post comments by TheSettler
on Mon, 11/01/2010 – 14:41
#691413

tube8.com=better

Login or register to post comments by Village Idiot
on Mon, 11/01/2010 – 15:06
#691498

hat tip – thanks.

Login or register to post comments by single digit
on Mon, 11/01/2010 – 14:36
#691395

speaking of monkeys!

Login or register to post comments by lamont cranston
on Mon, 11/01/2010 – 14:39
#691406

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!”

Login or register to post comments by Village Idiot
on Mon, 11/01/2010 – 14:41
#691416

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

Login or register to post comments by anonnn
on Mon, 11/01/2010 – 15:06
#691495

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.

 

 

Login or register to post comments by tahoebumsmith
on Mon, 11/01/2010 – 15:20
#691527

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…

 

Login or register to post comments by LongSoupLine
on Mon, 11/01/2010 – 15:58
#691621

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

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