A.I.G. to Seek More Government Aid

[Frank Booth]

Source: NY Times

The American International Group, the battered insurance giant that is now effectively majority-owned by the federal government, is in talks to receive more government aid as it prepares to record another giant loss.

A.I.G. could take as much as a $60 billion hit when it reports earnings during the next week. It expects to disclose losses across a wide variety of holdings, from commercial real estate to credit default swaps, the private contracts that helped lead it to the brink last fall.

Among the plans being discussed include swapping some or all of the $40 billion in preferred shares held by the government into a form of capital A.I.G. can use to ward off collateral calls from its trading partners. The government has already lent A.I.G. $150 billion. . . . .

Shoring up the insurer has been one of the government’s biggest headaches since September, when the Federal Reserve propped up the firm with an $85 billion high-interest loan to meet pressing capital demands from its trading partners involved in credit default swaps. That left the government with a 79.9 percent stake in the insurer.

http://dealbook.blogs.nytimes.com/2009/02/23/aig-to-seek-more-government-aid/

Read more: http://dealbook.blogs.nytimes.com/2009/02/23/aig-to-seek-more-government-aid/

---

Kind of puts the GM bailout (and the entire stimulus bill) in perspective.

[Lost in CT]

1. At .50 cents a share the government should just buy it outright and dissolve. nt

[aquart]

2. Is there any reason I should be against that?

[Lost in CT]

3. Do you get a seven figure salary currently from AIG... well then no.

Anything worthwhile in the company will be picked up at auction.

[Renew Deal]

4. Isn't an 80% stake enough power to do that?

I agree. Break them up.

[aquart]

5. Yes. Make them small enough to fail. Seems safer for all of us.

[ozu]

9. The only problem with that...

Is that they've leveraged themselves 100x in making these bad bets on mortgage securities, so nationalizing them would make the government liable for the $500B that they obviously can't cover.

At least with bankruptcy, taxpayers wouldn't be on the hook directly.

[Lost in CT]

11. I'm not saying a strict nationalization.

I'm saying auction of everything and be done with it. Let the chips fall where they may.

[FarCenter]

6. We should disavow responsibility for all debts of AIG Financial Products in Loondon

Sort of like a public notice regarding a spendthrift spouse.

[Belial]

7. I said this before.. and I will say it again..

bailing them out in the first place was a very bad idea.. they were so far gone when the govt stepped in. Now they have stepped in it.. They would have been broken up and sold to whoever wanted what pieces. I think this is going to be true with several items that we are in the process of "bailing out" If we would have let things continue on their normal course, this would have been old news by now..

[depakid]

8. Worked like a charm with Lehman, eh?

It'll be interesting to see what the Obama administration comes up with.

[Frank Booth]

12. Morally, I agree with you -- but I think that the actual results might have been devastating

AIG is huge. If their insurance policies had suddenly become ineffective the whole system probably would have crashed (instead of barely hanging on, as it's doing now). And as far as trying to sell them off, I don't think there's much interest in buying insurance contracts now and there's no credit to buy them even if one wanted to. This doesn't even account for the credit default swaps, which apparently have literally over a trillion dollars in liabilities.

It sucks to see even more taxpayer money going to this "private" company. But at this point, I think the government is just trying to prop up an entire economic system that appears to be disintegrating, and morals and principles don't seem so important anymore. What really pisses me off is a lot of super-wealthy people knew that this whole thing was a fraud, and right now they're relaxing on their yachts instead of rotting in prison.

[OwnedByFerrets]

10. I need more government aid too dammit

If I stomp my foot, will that make it more evident?

[mike_c]

13. let them die and take down the whole rotten mess with them....

We've got to stop throwing gasoline on Wall Street fires. Creating more and more debt will only exacerbate the problem in the long run, and make any real and lasting recovery even more difficult. Nationalize AIG, fire it's executives, fine or imprison them if they've acted illegally or unethically, and write off the loss. Let all the other predators they're connected to go down with them.

[ronnie624]

27. Amen.

It's truly bizarre, listening to people discuss this 'company' as if it offers some sort of legitimate service.


Cooking the Insurance Books
A Decade of Lax Regulation Lays Groundwork for Scandal

In October, New York Attorney General Eliot Spitzer filed suit against the world’s largest insurance broker, Marsh, accusing it of rigging bids and receiving kickbacks in order to defraud clients such as other corporations, city governments, school districts and individuals of billions of dollars through inflated premiums.

“Greedy trial lawyers were the usual excuse for premium increases. Now we know that greedy corporations also have a starring role," Spitzer said, accusing several insurance companies as co-conspirators in making phony or inflated bids and paying kickbacks to the brokerage to get business.

Spitzer also announced that two executives from the insurance conglomerate American International Group (AIG) had already confessed to related criminal charges. But his investigations into AIG may have only scratched the surface. A paper trail stretching back a decade reveals that AIG used offshore shell companies to skirt the law.

The current scam which Spitzer has uncovered works like this: Marsh, an insurance broker, is supposed to find the best insurance policies for its clients from a wide range of companies. Instead it steered the policies to companies such as AIG that agreed to pay kickbacks. It solicited phony competitive bids for insurance contracts to deceive customers into thinking there was real competition for their business. Marsh made $800 million on kickbacks in 2003 alone – over half its $1.5 billion profit. With a 40-percent share of the global insurance brokerage market, its fraud drove up prices for everyone.

<http://www.corpwatch.org/article.php?id=11657aig>


FINANCE-US: AIG's Offshore Strategies Hide a Scam

<http://ipsnews.net/news.asp?idnews=45176>

[thewiseguy]

14. Enough with bailouts. Let them fail.

[Lucky Luciano]

15. You will fail too then and that is guaranteed. nt

[mbperrin]

17. Analysis please.

I live in west Texas and own several dozen rental properties that are fully rented. We invest all profits in more rentals and have for 20 years.

Why should my taxes prop up AIG?

[Lucky Luciano]

18. Let's see...rentals (most likely) imply mortgages implies leverage

implies exposure to tenants who pay rent...but if you note the horrors that have occurred after LEH's bankruptcy, then AIG would be a good bit worse given that it is bigger...LEH caused mass hysteria in the markets for all kinds of debt - short and long term and more notably on the short term debt. This mass hysteria led to many smaller bankruptcies and massive layoffs. I don't know where you are in West Texas, but if your tenants are exposed to the whims of natural gas and oil markets, then...well - those markets have sucked lately.

Ultimately, what I am saying is that if you are not immediately exposed, then your tenants are and so are your real estate values. Tenants who move out or fail to pay rent while your real estate goes down in value will make it harder to pay your mortgages.

Also, W Texas has managed ok YoY, but foreclosures are rising - this will affect your property values...especially if an AIG failure takes us to another leg down 50% on the S&P 500.

http://www.elpasotimes.com/newupdated/ci_11690811

...and if you are actually rich, then you will be much less rich - so much less so that you may even consider it a failure because your standard of living will go down.

[mbperrin]

22. You didn't read carefully enough. We used the profit to pay cash.

Our tenants are all retired folks, mostly teachers.

100% occupancy since 1978. We've been through every oil boom and bust unscathed.

Since I have no plans to sell these units - ever, falling property values will reduce my property taxes.

Haven't borrowed a dime since 78, have no credit cards even. Old fashioned German immigrant grandparents on both sides.

Don't trust bankers or lawyers. Mind your business. Pay cash. Do what's right for you and yours.

AIG isn't worth my tax bucks. Their flush will be instructive for the rest of the casino employees and help steer them back to reality.

[rcrush]

16. Its ok to give them money to throw away but fuck anyone that needs

Unemployment Insurance! Republican Governors have prayers for you instead.

[Hepburn]

19. Let them fail....

...insurance companies SUCK and...insurance defense lawyers SUCK EVEN MORE!!

:hi:

[Frank Booth]

20. But then who will be left to litigate with the plaintiffs' lawyers?

[Hepburn]

25. No one....

....:evilgrin:

[mbperrin]

21. Nope. First law of holes: quit digging.

They've dug deep enough.

These are the partying bastards who continue to spa it down while losing yet more money and paying that nice "retention" money.

Bye.

[Triana]

23. f*ck AIG

They'll only spend the add'l gov't moolah on more fat-cat bonuses and gilded trips. Time for them to swirl down the loo - or take them completely over and fire all management.

[TheWatcher]

24. Translation: AIG wants to throw another Party and they want us to pay for it.

DISMANTLE, LIQUIDATE, INDICT, INCARCERATE.

It's time to take these people down.

[bdamomma]

26. AIG can go to hell.