International banks and financial companies in Germany, Spain, Ireland, Britain and Hong Kong were indirect beneficiaries of the US government's 2008 bailout of American International Group Inc., according to newly released documents. The documents released by Sen. Chuck Grassley contain a list of the 27 banks, hedge funds and financial companies that received $4.3 billion from Goldman Sachs Group Inc. The money was to reimburse them for losses on investments called credit default swaps that plunged in value during the financial crisis. The money trail actually began with AIG, which sold the swaps to Goldman. The big investment bank in turn sold them to its customers, including the international banks and financial companies. When AIG received a bailout worth $182.5 billion, it reimbursed Goldman and other banks, which then repaid their customers. Credit default swaps are essentially contracts that insure against the default of bonds and corporate debt. Sellers of swaps, such as AIG, are obligated to repay customers if the value of the underlying bonds or debt declines. Much of the federal rescue money for AIG was used to pay its obligations to its Wall Street trading partners on credit default swaps. The biggest beneficiary of the AIG money was Goldman, which received $12.9 billion. According to Grassley, the documents show that the five banks or companies ultimately receiving the largest amount of taxpayer money were DZ Bank AG in Germany, which received $1.18 billion; Banco Santander Central Hispano SA of Spain, which received $484 million; Ireland's Zulma Finance PLC, which received $416 million; Infinity Finance PLC in Britain, which received $277 million; and Britain's Sierra Finance PLC, which received $223 million. Another $173 million went to Hongkong and Shanghai Banking Corp., which has HSBC operations throughout the US. Goldman had previously disclosed that it had made payments to its customers, but did not say who the recipients were.
