- The Washington Times - Monday, March 16, 2009

BAILOUT

AIG outlines spending of funds

NEW YORK | American International Group Inc. on Sunday detailed how it used some of its $170 billion in federal bailout money, after the troubled insurer provoked outrage on Capitol Hill over its payment of tens of millions in executive bonuses.

Lawmakers on Capitol Hill have demanded that the identities of banks and other so-called “counterparties” that do business with bailed-out institutions be made public.

AIG said it used its $85 billion emergency loan from the Federal Reserve Bank of New York in September and other rescue funds primarily to put up collateral for big foreign and domestic banks, including those which have received billions in government bailout money themselves, and to help meet securities lending obligations to banks.

AIG said that between the time it received the loan on Sept. 18 and the end of the year, the company’s securities lending arm used $43.7 billion in public aid to meet obligations to banks, including $7 billion paid out to Britain’s Barclays PLC, $6.4 billion to Germany’s Deutsche Bank and $4.5 billion to Bank of America.

Other banks receiving between $1 billion and $3 billion from AIG’s securities lending unit include Citigroup Inc., Merrill Lynch, UBS AG and Morgan Stanley.

AIG said it also put up about $22.4 billion in collateral for banks to meet obligations related to risky credit default swaps, including $4.1 billion put up for Societe General, $2.6 billion for Deutsche Bank, $2.5 billion for Goldman Sachs and $1.8 billion for Merrill Lynch, among others.

And $27.1 billion in payments were made by Maiden Lane III, the unit AIG formed to buy securities underlying risky credit default swap contracts, included $6.9 billion to Societe Generale, $5.6 billion to Goldman Sachs and $3.1 billion to Merrill Lynch.

Municipalities in certain states - including California, Virginia and Hawaii - received $12.1 billion under guaranteed investment agreements. The company said it used the rest of the federal aid to fund its Maiden Lane business, repay debt and provide capital for some of its operations.

Federal Reserve spokeswoman Michelle Smith said in a statement Sunday that aid to AIG has helped all the counterparties, including individual policyholders, municipalities and pension funds, small businesses with insurance coverage, and domestic and international companies and banks.

“We commend AIG for finding a balance between its concerns with confidentiality and the concerns of the public interest that may be served through the release of this information,” she said. “The ability of AIG to meet its obligations is important to the stability of the U.S. financial system and to getting credit flowing to households and businesses.”

The details from AIG come after the Obama administration and top Republicans voiced sharp criticism over $165 million in bonus payments AIG said it must make Sunday even as it accepts billions in federal aid. The contracts are part of a larger payout, which has been reportedly valued at $450 million.

OIL

OPEC pleases energy secretary

Energy Secretary Steven Chu said Sunday that he was “pleased” that the Organization of the Petroleum Exporting Countries (OPEC) had decided against further cuts in oil production but thought the United States should keep trying to become energy independent.

“While OPEC’s actions are just one factor among many that go into the market price of oil, I’m pleased that there won’t be further production cuts,” Mr. Chu said in a statement released by the Energy Department.

OPEC ministers meeting in Vienna, Austria, agreed Sunday to leave existing output targets unchanged, but promised to enforce those curbs more strictly.

SMOKING

Cigarette tax rise likely to cut use

A big increase in the federal tax on cigarettes taking effect April 1 may prompt 1 million U.S. smokers to quit, according to public health specialists.

Expansion of a public health insurance program for children from low-income families is being financed by an increase in the federal excise tax on cigarettes of $1.01 per pack, up from the current 39 cents on a $4.35 pack.

Smoking kills about 440,000 Americans annually and costs the nation $193 billion in medical expenses and lost productivity, said Dr. Terry Pechacek of the U.S. Centers for Disease Control and Prevention’s Office on Smoking and Health.

“There is almost unanimous agreement across the scientific community and policymakers that raising the price of cigarettes in whatever fashion has a consistent effect on reducing smoking rates, increasing the quit rate among adult smokers and preventing the initiation of regular smoking by children and young adults,” Dr. Pechacek said in a telephone interview.

CLIMATE

Study predicts East Coast sea rise

The northeastern U.S. coast is likely to see the world’s biggest sea-level rise from man-made global warming, a new study predicts.

However much the oceans rise by the end of the century, add about 8 inches for New York, Boston and other spots along the coast from the Mid-Atlantic to New England.

That’s because of predicted changes in ocean currents, according to a study based on computer models published online Sunday in the journal Nature Geoscience.

An extra 8 inches - on top of a possible 2 or 3 feet of sea rise globally by 2100 - is a big deal, especially when nor’easters and hurricanes hit, specialists said.

“It’s not just waterfront homes and wetlands that are at stake here,” said Donald Boesch, president of the University of Maryland Center for Environmental Science, who wasn’t part of the study. “Those kind of rises in sea level when placed on top of the storm surges we see today, put in jeopardy lots of infrastructure, including the New York subway system.”

From wire dispatches and staff reports

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