The Federal Reserve Bank of New York said Tuesday that it had no choice but to instruct American International Group
last November to reimburse the full amount of what it owed to big banks
on derivatives contracts, a move that ended months of effort by the
insurance giant to negotiate lower payments.
Lawmakers and financial analysts critical of the payouts say it
amounted to a back-door bailout for big banks. AIG, the recipient of a
$180 billion federal rescue package, ended up paying $14 billion to Goldman Sachs over months and $8.5 billion to Deutsche Bank, among others. Before the New York Fed intervened, AIG had been trying to persuade the firms to take discounts.
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