Bloomberg has an important story today on the bailout of the banks through AIG.

Estimating that an essentially bankrupt company like AIG could have shaved 40 percent off what it owed big banks like Societe Generale and Goldman Sachs (an Audit funder), Bloomberg says the New York Fed’s decision to make its buddies whole (its then-chairman was a former Goldman chairman who would soon start re-loading up on its stock) cost taxpayers more than $13 billion.

In fact, Bloomberg reports that before it flopped into the government’s arms, one of AIG’s divisional chief financial officers had for months been negotiating with its counterparties to take huge haircuts on their credit-default swaps, insurance they bought on their junk assets called collateralized debt obligations.

So why’d the government not do the same—with its much greater leverage having rescued AIG from complete collapse?

One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.

Which is why Dean Starkman called this a backdoor bailout a year ago

Bloomberg says the decision gave Goldman at least $14 billion. But what’s perhaps worse, it gave Societe General, a French bank, $16 billion and Deutsche Bank, a, well, Deutsche bank, $8.5 billion. What were American taxpayers doing bailing out French and German ones? Has anyone done a story on that? Remember, as reporters Richard Teitelbaum and Hugh Son are excellent to point out, this was all done top secret. The Fed wouldn’t release the names of who it had paid until Congress got hacked off nearly six months later.

Edward Grebeck, CEO of Stamford, Connecticut-based debt consulting firm Tempus Advisors, says the most serious breach by the government was to keep the process of approving the bank payments secret.

“It’s inexcusable,” says Grebeck, who teaches a course on CDSs at New York University. “Everybody should be privy to the negotiations that went on. We can’t have bailouts like this happening behind closed doors.”

But that’s the Fed’s modus operandi. Remember that as the debate over regulatory restructuring goes forward. Some folks want to broadly increase its power.

Also interesting here is that the CDO’s AIG purchased in the deal have declined about $7 billion from the $30 billion it paid last year. It’s unclear from Bloomberg’s story whether that adds to the $13 billion loss figure it touts or if it’s included in it. It should have spelled that out.

And Bloomberg is great to push this into the story in noting it’s suing the Fed (emphasis mine):

The Federal Reserve has been reluctant to publish information on its efforts to stabilize the financial system since the crisis began. The Fed has loaned more than $2 trillion, yet it refuses to name the recipients of the loans, or cite the amount they borrowed, saying that doing so may set off a run by depositors and unsettle shareholders.

With some interesting reporting on that:

Still, officials at AIG object to the secrecy that surrounded the transactions. One top AIG executive who asked not to be identified says he was pressured by New York Fed officials not to file documents with the U.S. Securities and Exchange Commission that would divulge details.

“They’d tell us that they don’t think that this or that should be disclosed,” the executive says. “They’d say, ‘Don’t you think your counterparties will be concerned?’ It was much more about protecting the Fed.”

If I have a quibble with the story it’s that it doesn’t explicitly weave in the spectacle of the huge paydays set for the end of the year, especially at Goldman, which are in large part due to the spectrum of bailouts, including this one.

And remember, AIG had to take a huge haircut. The government bought some 80 percent of it, wildly diluting existing shareholders—as it should have. But AIG only insured the toxic waste, these banks created them—and they get made whole.

Still, this is excellent work.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.