Barclays got £6bn of insurer's bailout cash

Robert Lea
16 Mar 2009

Barclays is one of the single largest beneficiaries of the US government's bailout of AIG, it emerged today. It received about £6 billion, or the equivalent of the whole of the British bank's profits for last year.

AIG has been forced by Congressional pressure to finger the banks to which it has paid out money from the $150 billion (£106 billion) rescue fund it received from the US taxpayer.

Of those, Goldman Sachs, whose former executive Hank Paulson was Treasury Secretary at the time of the bailout, was the single largest recipient of funds from AIG with $12.9 billion.

But, to the consternation of many American politicians, much of the money has crossed the Atlantic to settle AIG's bad bets with European banks.

Deutsche Bank and Société Société Générale were the largest recipients with $12 billion each while Barclays received $8.5 billion.

Barclays refused to comment on when it received funds from AIG, but postings from AIG indicate funds went to Barclays by the end of 2008.

Barclays, headed by chief executive John Varley, is known to have been one of AIG's largest counterparties on credit default swaps - the derivatives used to insure borrowers against losses on bad debts - and to have been a long-time business party of AIG.

The huge size of the funds flowing in from AIG has immediately sparked speculation that the indirect bailout from US taxpayer funds could be responsible for Barclays being able to refuse help from the British taxpayer.

Barclays has been furiously holding on to its independence, even tapping Middle Eastern investors and selling a third of the bank to the sheikhs rather than go the route of Royal Bank of Scotland and Lloyds-Halifax Bank of Scotland, which have ended up being part-nationalised.

Société Générale defended its right to receive the money from AIG, saying the payments were fully consistent with the terms of its arrangements with the insurer.

Deutsche Bank, when asked to comment on its inflow of cash, confirmed that it meant it did not need state aid.

The payments from AIG also include $6.8 billion to Merrill Lynch, which had to be rescued by Bank of America, itself the recipient of $5.2 billion from AIG. Citigroup received $2.3 billion while US bank Wachovia picked up $1.5 billion.

UBS, another big loss-making European bank, has received $5 billion from AIG.

Banking analysts said the widespread nature of the payouts indicate the main reason the US Treasury moved to save AIG: if the US had not bailed it out, a string of the world's biggest banks might have collapsed.