Fraudulent Conveyance In an AIG-Soigné Transaction?

The New York Federal Reserve's attempt to cover-up details of the AIG trading partners that were paid 100 cents on the dollar continues to raise many questions.

Janet Tavakoli emails to point out that the curious transactions surrounding the details go beyond the payouts themselves:

Today’s WSJ reported that the French banks outmaneuvered the Fed to get 100 cents on the dollar in the AIG bailout.

The French banks should be grateful that the Fed didn’t claw back collateral that they had already extracted from AIG as of September 2008. For example, just prior to the September 2008 bailout, Soigné extracted $5.9 billion from AIG that in a “normal” bankruptcy may have been viewed as a fraudulent conveyance. Moreover, these circumstances were far from normal given that the CDS counterparties transactions and suspect underlying Cods precipitated AIG’s crisis. Public money was at stake on September 2008, when negotiations should have been pressed. It is likely that not only would the French not have gotten 100 cents on the dollar, they would have owed a return of billions in collateral. The banks obviously needed the bailout money, but it could have all been re-characterized as a loan that had to be paid back.

A month prior to the first September 2008 bailout, Canyon settled a dispute over a financial guarantee on a portfolio of similar collateral for only ten cents on the dollar with another bond insurer, FGIC UK. Canyon’s dispute was over a financial guarantee, not a credit derivative, but it was for similar underlying assets. If I were negotiating, I would have looked to this previous settlement to tell the French to take the discount or take nothing at all—and have a nice flight back to France.