Investigation: Southern states receive $15 billion in bailout money passed through AIG

Lawmakers in Southern states have been among the fiercest critics of federal spending in the face of the financial crisis, most recently railing against the Congressional stimulus bill.

But seven Southern states have received at least $100 million each from taxpayer bailout money passed through one of the biggest recipients of federal funds, American International Group.

Yesterday, under intense pressure, AIG released documents revealing what it's done with some of the $170 billion it's received in federal infusions. The records show that between September and December 2008, AIG used $94 billion in bailout money to pay off financial counterparties, largely banks it owed money from its losses in credit default swaps and its securities lending business.

In addition, the documents reveal that AIG used bailout money to pay $12.1 billion in Guaranteed Investment Agreements to municipalities -- usually bonds. Six Southern states received $100 million or more from AIG for this purpose -- including Mississippi and Texas, which are led by governors that have publicly decried federal bailout spending.

In the documents, AIG clearly states that all of the money it used to pay off counterparties came from federal bailout funds. This is especially notable given that many of the counterparties were already recipients of government bailouts.

Among the biggest beneficiaries of AIG's pass-through of federal money:

* Goldman Sachs topped the list -- as many financial insiders has long suspected -- receiving $12.9 billion of bailout funds that passed through AIG.

* Bank of America and Merrill Lynch combined were second, taking in $12 billion. BoA has received $45 billion directly in bank bailout funding.

* Wachovia, the Charlotte-based bank taken over by Wells Fargo, received $1.5 billion from AIG last year. Wells received $25 billion in federal infusions, and soon after bought Wachovia for $12.7 billion.

* Most shocking, two hedge funds -- Citadel and Paloma Securities -- each received $100 million, prompting the Wall Street blog Clusterstock to fume:

Market processes are excellent factors for punishing reckless lendersto financially irresponsible companies. But that process has beenthwarted by the bailout.

Together, Bank of America and Wachovia received $13.5 billion -- meaning that North Carolina-based banks received 35% of the total AIG paid off to U.S. banks. ($50 billion went to foreign banks.)

In addition to the $98 billion AIG spent paying off banks, a smaller share -- $12.1 billion -- was used to pay off obligations to municipalities that were holding their money with AIG. Six Southern states were among the top 20 places getting money from AIG for this purpose, totalling $2.1 billion: Virginia, Georgia, Kentucky, Mississippi, Florida and Texas.

Mississippi and Texas are both headed by Republican governors who have publicly decried federal spending in the midst of the financial crisis, and have stated they will refuse at least a portion of the money in the Congressional stimulus bill slated for their states.

Mississippi received $180 million in federal pass-through money from AIG, and Texas received $100 million.

Perhaps most disturbing of all: the documents suggest that $84 billion of the taxpayer money AIG has received is unaccounted for.