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How Sen. Dodd led me to the Royal Bank of Scotland Group, Lpc

17 April, 2009

If you did not read my post 11 April, you probably did not see this question towards the end: “Why is a bank of Scotland investing in the Chairman of the Senate Banking Committee?  Anyone?”   I asked the question because I had just discovered that the Royal Bank of Scotland (RBS from now on) was number five on the list of top contributors to Dodd since 2003 and because I already knew that employees of (wink, wink) AIG had been contributing heavily to Dodd’s campaigns.

This is what I have learned so far.  AIG is based in Connecticut.  AIG employees help keep Dodd in the Senate where he is Chairman of the Banking Committee.  (In 2008 alone, Dodd received $103,100 from AIG – some of it after the September bailout.  Dodd was the number one recipient last year.)  Between 2003 and 2008, AIG employees gave contributed $223,478 Dodd  and the RBS gave contributed $218,500 to him. (HERE)

And do check out Sen. Dodd’s wife’s connection to AIG at No Quarter.  (HERE)

In September 2008, when the AIG became the bank that was “too big to fail,” AIG got an $85 billion dollar bailout from us. (bold emphasis mine)

Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes…The loan is secured by AIG’s assets, including its profitable insurance businesses, giving the Fed some protection even if markets continue to sink. And if AIG rebounds, taxpayers could reap a big profit through the government’s equity stake.

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That the government would prop up AIG financially offers a stark indication of the breadth of the insurer’s role in the global economy. If it were to have trouble meeting its obligations, the potential domino effect could reach around the world.

For one thing, banks and mutual funds are major holders of AIG’s debt and could take a hit if the insurer were to default. In addition, AIG was a major seller of “credit-default swaps,” essentially insurance against default on assets tied to corporate debt and mortgage securities. Weakness at AIG could force financial institutions in the U.S., Europe and Asia that bought these swaps to take write-downs or losses. (HERE)

The government knew.  They knew about the bonuses, they knew about the foreign banks.  That was what they were worrying about and that is my connection to Dodd.

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