The Federal Reserve Bank of New York squandered $13 billion of taxpayers' money when it ordered American International Group to pay Goldman Sachs, Merrill Lynch, Deutsche Bank and other major financial institutions the full face value for derivatives contracts in 2008, according to this analysis. Until the instructions came down from the Fed, AIG had been negotiating for discounts of up to 40 cents on the dollar, Bloomberg News reported. Janet Tavakoli, founder of Tavakoli Structured Finance, said paying full price for the contracts was indefensible. "There's no way they should have paid at par. AIG was basically bankrupt," she said.

Related Summaries