From the Washington Post: "Metro and 30 other transit agencies across the country may have to pay billions of dollars to large banks as years-old financing deals unravel, potentially hurting service for millions of bus and train riders, transit officials...
From the Washington Post:
"Metro and 30 other transit agencies across the country may have to pay billions of dollars to large banks as years-old financing deals unravel, potentially hurting service for millions of bus and train riders, transit officials said yesterday.
The problems are an unexpected consequence of the credit crisis, triggered indirectly by the collapse of American International Group, the insurance giant that U.S. taxpayers recently rescued from bankruptcy, officials said.
AIG had guaranteed deals between transit agencies and banks under which the banks made upfront payments that the agencies agreed to repay over time. But AIG's financial problems have invalidated the company's guarantees, putting the deals in technical default and allowing the banks to ask for all their money at once."
Ryan Avent:
"One might ask just what the hell was the point of giving AIG government credit worth $122 billion (and counting) if it wasn't going to prevent the deals the firm guaranteed from falling apart. Go read the Post story; it will disgust you seventeen ways fron Sunday."
Yglesias:
"WTF is happening here? Can't we, in exchange for all the money we're giving AIG, force the company to keep guaranteeing deals that are vital to keeping our public services running? Something about the implementation of this bailout is very troubling."
Drum:
"Unfortunately, that doesn't seem to be the issue. AIG is still guaranteeing the deals. The problem is that the contracts with the banks terminate automatically if AIG doesn't maintain a high credit rating. Which, needless to say, they haven't. So now the banks are demanding payment.
Which just goes to show how all this stuff trickles down not just to Main Street, but to the subways underneath Main Street too. However, a Treasury Department spokesman says, 'Treasury is aware of this situation.' That should make us all feel better, right?"
