It’s bad enough that AIG failed, but now 36 transit systems may be at risk for billions of dollars. Apparently, years-old financing deals with banks, backed by AIG, are now subject to default because of AIG’s tenuous status. The problem, which could affect millions of subway and bus riders, was brought to light by the Washington Post.
It seems the transit agencies engaged in a once-common practice of selling railcars and other assets to banks who then leased them back. In the case of 3 dozen agencies, the deals were guaranteed by AIG who, as we know, can’t guarantee anything anymore. Never mind the $122 billion, and growing, taxpayer bailout of AIG, which doesn’t affect the transit financing deal. Apparently, while AIG still guarantees the lease payments by the transit agencies, AIG’s collapse permits the banks to demand immediate payment. The whole arrangement seems not unlike the subprime lending scandal. It’s a financial shell game with inherent risk. That must be why they stopped the practice.
The Treasury Department is looking into whether the $700 billion financial bailout could be used to fend this latest crisis off. And how could we have such a crisis when taxpayers ponyed up $85 billion in loans to AIG and gained a 79.9% stake in the company? Couldn’t that majority shareholder assume the guarantee on the transit leases? Just doesn’t seem like such a big leap to me. This is another of those “pay me now or pay me later” scenarios.
Affected transit systems include:
- Southern California Regional Rail Authority (Metrolink) – Los Angeles
- San Francisco Bay Area Rapid Transit District (BART)
- San Mateo County Transit District (Caltrain) – San Carlos
- San Joaquin Regional Rail Commission (ACE) – Stockton
- Los Angeles County Metropolitan Transportation Authority
- North County Transit District (Coaster)
- San Francisco Municipal Transportation Agency (MUNI)
- Regional Transportation District – Denver
- Connecticut DOT/Shoreline East Commuter Service – New Haven
- Washington Metropolitan Area Transit Authority (WMATA) – D.C.
- South Florida Regional Transportation Authority (Tri-Rail)
- Miami-Dade Transit
- Metropolitan Atlanta Rapid Transit Agency (MARTA)
- Northern Indiana Commuter Transportation District
- METRA – Chicago
- Chicago Transit Authority
- Massachusetts Bay Transportation Authority
- MARC Train Service – Baltimore
- Maryland Transit Administration
- Port Authority Trans-Hudson (PATH)
- Port Authority Transit Corporation (PATCO)
- New Jersey Transit Corporation
- Metropolitan Transportation Authority – New York
- MTA New York City Transit – Brooklyn
- New York City Department of Transportation
- MTA Metro-North Railroad – New York
- MTA Staten Island Railway
- Greater Cleveland Regional Transit Authority
- Tri-County Metropolitan Transportation District of Oregon (Tri-Met)
- Southeastern Pennsylvania Transportation Authority (SEPTA)
- Port Authority of Allegheny County – Pittsburgh
- Trinity Railway Express (DART) – Irving
- Metropolitan Transit Authority of Harris County – Houston
- Virginia Railway Express (VRE)
- Sound Transit – Seattle
- King County Department of Transportation/Metro Transit – Seattle
Hmmm. Maybe AIG execs spent $520 million on lavish retreats to strategize a solution to this latest impending fiasco the financial charlatans have wrought for us. Naw! I think maybe ACNN is right on the mark about why AIG execs are spending taxpayer money on parties.