Freddie Mac Just Keeps On Losing, And We Just Keep Sending It Cash

Why we do this, OS doesn't begin to understand.

WASHINGTON (AP) -- Government-controlled mortgage buyer Freddie Mac managed a narrower loss of $1.7 billion for the October-December quarter of last year. But it has asked for an additional $500 million in federal aid - up from the $100 million it sought in the previous quarter.

Freddie Mac also posted a $19.8 billion loss for all of 2010.

Meanwhile, back at AIG...


American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity.

“Because of the budget deficits that most states and many municipalities are continuing to incur in the current economic environment, the risks associated with this portfolio have increased,” New York-based AIG said yesterday in its annual report to the Securities and Exchange Commission.

AIG said that “several” issuers of bonds it holds have been downgraded, amid budget pressures. As of Dec. 31, the company had more than $700 million of state general-obligation bonds from California, which has the lowest Standard & Poor’s credit rating of any U.S. state. It also held more than $200 million in the bonds from Illinois.

A Good, If Modest Beginning: AIG Settles With Ohio Pension Funds

From today's New York Times:

American International Group, the troubled insurance giant, has agreed to pay $725 million to settle a long-running securities fraud lawsuit led by three Ohio public pension funds in one of the largest settlements of a class-action case ever in the United States.

Under terms announced Friday, A.I.G. would pay $175 million within 10 days of preliminary court approval of the settlement with a class of shareholders. The company may fund the remaining $550 million through one or more common stock offerings.

The litigation, which began in October 2004, involved allegations that A.I.G. engaged in accounting fraud, bid-rigging and stock price manipulation, said Attorney General Richard Cordray of Ohio, who represented the state’s funds.

The settlement resolves allegations of wide-ranging fraud from October 1999 to April 2005 and brings the expected recovery for A.I.G. shareholders to about $1 billion, Mr. Cordray said.

A.I.G. said it was “pleased to have resolved this matter.”

Well, yes. The settlement figure (which OS refers to as the 'GoAwayNumber'--you cough this up, and we'll get our clients to go away...) was still in the range of 'just the cost of doing business'. The fraud allegations date back to 1999!

1999! Can you say, 'Justice delayed? I knew you could!'

OS suspects that the only cash that will come the way of those pension funds will be from that initial $175 million payout, a great deal of which will go to attorney's fees. AIG will never get around to that stock offering, and the pension funds won't have the muscle, either financial or political, to enforce the remainder of the settlement. It's AIG, after all. They'll pay off the lawyers, and issue an IOU to the pension funds. The State of Ohio will end up having to make the funds whole, somehow.

If we had an honest Justice Department, the perp-walks and plea bargains would have occurred long ago, followed by the civil settlements. That used to be how these things worked. Crooks went to jail, companies paid settlements, and fired the execs who cost the stockholders their wealth. And then sued them.

If we had an honest Justice Department, that is.

They're too busy suing Arizona to give a thought about teacher pensions in Ohio.

Our Situation, Illustrated

 

A big OS Hat-Tip to Jesse, the ever-droll Jesse, who informs us that the Bank of England will be floating a big debt issue. 

No big deal.

In dollars.

Hmmm...

Now, my friends in England's Green and Pleasant Land, if the pound drops significantly against the dollar, the price of that paying off that debt goes up dramatically, out of your pockets. 

Now, of course, they'll be buying credit insurance from AIG, the zombie corporation owned by the US Treasury.  Whatever AIG loses, we pay for.  Sort of like having a cocaine-addicted child and giving him keys to the Ferrari.  What could go wrong?

In the end, all those dollars are carried on the backs of the households of the US. It's up to us, in the end, to make good on them.

Ergo, the BofE, with a Wall Street bank, have figured out a way to lay the ultimate risk of this debt issuance off on us, after they are through with you.

Of course, this behavior always comes with a price. Do you guys really want Bernanke, Geithner, and Obama to grasp your good country by the short hairs?  

These guys will throw you under the bus, just because they can.