AIG Was Responsible For The Banks' January & February Profitability

Quote from Renegen:

This is really disgusting. Say one bank or AIG sells some of their assets at a loss to another bank. One bank books it as a profit, the other bank books it at a loss and then receives more bailout money.

So really all that's happening is assets are being shifted from bank to bank, no real transactions, but since one bank always shows losses, the public pays up. This could go on to such scales that the public is bleeded of much more money than what was really needed to save the system.

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No, you are wrong.
These are ALL transactions based on contracts. There was literally a "naked" seller, and a buyer. AIG was the seller and is the loser. The counterparties are the winners.

And yes, it does appear on the surface that this is a way of channeling money into the major investment and commercial banks.

But the bottom line is that it is simply the FED's way of guaranteeing that the CDS contracts are honored and that the counter-parties to these contracts don't go under and get screwed.

If you really want to "point a finger" in regards to the creation of the CDS market, simply look up wikipedia and the "commodity futures modernization act of 200" in which Texas senator Phil Gramm was able to spearhead legislation without a committee hearing or a recorded vote that wound up getting put into the "FY-2001 Appropriations Bill".

http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000
 
Quote from Martinghoul:

What's interesting is that some banks may have profited twice from this...

Apparently, GS has stated that they hedged their cpty exposure to AIG. If they have done this through shorting AIG stock, they made a tidy profit both sides. A nice Texas hedge, that!

http://www.ritholtz.com/blog/2009/04/taxpayer-funded-gs-profits/
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I had a chuckle when I heard the GS comment that they didnt need the AIG bailout "we are too good of traders to not hedge our counterparty exposure", they lay off the risk in a too big to fail company then claim had they failed it would be no big deal.
Thats like buying life insurance from a insurance firm in Iceland then claim if Iceland goes bust its no big deal :D
They are also the same great traders who have more level 3 assets than common equity
 
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