Late Sunday, American International Group Inc. (AIG:NYSE), better known as AIG or those people who spent $440,000 on a posh spa retreat after receiving an $85 billion bailout from the U.S. government, spilled the beans.

AIG disclosed who got what of the $170 billion the company received from the government. Congress had been asking since last fall, but AIG had been fairly tight-lipped about where taxpayers’ money went.

Now we’ve got a list:

Goldman Sachs (GS:NYSE): $12.9 billion
Societe Generale (SCGLY:OTC): $11.9 billion
Deutsche Bank (DB:NYSE): $11.8 billion
Barclays (BCS:NYSE): $8.5 billion
Merrill Lynch: $6.8 billion
Citigroup (C:NYSE), UBS (UBS:NYSE), and Morgan Stanley (MS:NYSE): between $1 billion and $3 billion each

Bloomberg reports that banks that bought credit-default swaps or those that traded securities with AIG received a total of “$22.4 billion in collateral, $27.1 billion in payments, and $43.7 tied to the securities-lending program, AIG said yesterday in a statement. States lead by California and Virginia got $12.1 billion tied to guaranteed investment contracts.”

Why would AIG be unwilling at first to name names?

Bank Bailout: The Little Black Book

First, nobody likes a rat. AIG’s releasing its little black book, so to speak, and companies on the “pimp” list that received bailout money could be smeared, tainted as bad banks or worse, failing banks.

That’s not good for business.

Here’s what happened…

The U.S. government gave AIG money because it was being bled dry by unwinding its credit default swap and securities lending businesses. Back in September AIG’s credit rating was downgraded, which triggered payments to banks that bought AIG’s credit default swaps.

AIG nearly collapsed.

So the government lent AIG $52.5 billion to start two companies that would purchase those debts, thereby providing funds to pay the swaps, AIG’s debt.

Bank Bailout: Debt Obligations

Those debts are called collateralized debt obligations (CDOs). And that means that AIG had promised to reimburse banks that bought these debts in the case of any losses from selling those credit swaps.

The government stepped in to buy those CDOs when it was apparent that AIG couldn’t “make whole” the banks that were forced to sell those credit swaps at a loss.

Not only does this action make banks look bad for buying a bad investment, it makes them look like they took a chunk of the government’s bank bailout.

For months AIG sidestepped the issue, which is interesting because AIG is about 80% government-owned now. Shouldn’t AIG have asked, “How high?” at the government’s first prodding?

And AIG still isn’t being entirely cooperative.

Yes, we now have a full list of companies that received chunks of cash, but we don’t know what exactly was exchanged. AIG refused to provide a detailed, itemized bill, and some officials are concerned that certain companies got a better deal than they deserved.

Bank Bailout: Bank Outlook

What does this mean for the companies who took AIG cash?

Well, it means stocks (like Citigroup) get to shore up their books. Remember the massive pop in financial stocks after Citigroup announced it had been profitable for the first two months of 2009?

The companies don’t look so good when you take away that bailout money.

Zachary Scheidt, editor of Taipan’s New Growth Investor, took a cynical view, noting, “If you take out all those nasty write-downs and regrettable bailout issues, [Citigroup] made money in January and February. Excuse the comment, but other than that Mrs. Lincoln, how was the play?”

So if government bailout money helped make Citigroup look profitable, what happens the rest of the year when the company will be expected to make money on its own?

In other words, the situation is far from rosy, and investors need to look past the headlines to get to the meat and potatoes of a company’s bottom line… If there’s any meat left.

Other Related Topics: Bank Bailout , Banks , Sara Nunnally , Taipan Insider

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