« previous | MUCK HOME | next »
In Ironic Twist, Taxpayers May Be On The Hook For Some Madoff Losses, Via AIG
Looks like another victim of the Bernard Madoff mess -- albeit a very minor one -- is the US taxpayer.
In September, as part of its bailout effort, the Treasury Department made an $85 billion loan to insurance giant AIG, and got a 79.9 percent stake in the company.
And AIG appears to be exposed to Madoff's alleged fraud. As part of its homeowners coverage, the company offers a "fraud safeguard" policy, which would seem to cover some Madoff investors.
From the company's website:
AIG Fraud SafeGuard® - Personal financial loss can come in many forms: identity theft, investment schemes, dishonest advisors, forgery, etc. Coverage is available to help protect you and your family. (itals ours)
We're not talking big numbers here. An AIG spokesman told TPMmuckraker that the company had so far received 85 "notices" of claims related to Madoff, which cover up to $100,000. Even if you assume that all those claims will be paid out at the $100,000 maximum (which they almost certainly won't), that only puts the company on the hook for $8.5 million -- pocket change for a firm of AIG's size. The company could yet receive more claims, but the total dollar amount at issue would likely remain relatively small.
Still, Madoff's fall appears to have been precipitated by the spiraling financial crisis -- he was unable, it appears, to meet obligations to the rush of investors spooked by the turmoil and wanting to withdraw their money. So it's ironic that, thanks to that same crisis, we all could technically be on the hook for his alleged crimes.
Josh
Zachary
Some muckraker needs to find out when this policy was added and why. Did AIG know how rampant fraud was likely to affect its clients? Did AIG deliberately pass these known risks to the government, and did the Treasury Dept knowingly use taxpayer money to protect their cronies at AIG?
December 30, 2008 6:43 PM | Reply | Permalink
Are government bailout funds being used to cover claims by all AIG insurance policy holders?
December 31, 2008 10:07 AM | Reply | Permalink
Still, I'm puzzled by the 50B figure. Where does it come from? Bernie's bogus numbers? Is this what Madoff claims his funds were worth?? Is this what he claims is the amount people invested with him? If you talk the amount he ripped off, obviously you're limited to actual inflows. Was Bernie actually given 50B over the years??
And of course, It's not like Bernie skimmed anything like 50B. What he came in surely was split among other investors, to preserve the illusions of the claimed profits, overhead, and a nice profit for Bernie. But other than Bernie's cut, what came in went right back out. Question: Like many modern businesses, did Madoff's rely on borrowing? Just curious.
I mean, I cannot believe Bernie left people on the hook for 50B.
January 4, 2009 11:12 AM | Reply | Permalink