http://dealbook.blogs.nytimes.com/20.../index.html?hp

Industry Efforts to Rescue A.I.G. Said to Falter
September 16, 2008, 12:31 pm

The prospects of a private market solution to the deterioration of the American International Group appeared to be faltering on Tuesday, as talks involving the Federal Reserve and several banks turned to the possibility of using government money to shore up the ailing insurance giant, people briefed on the negotiations said Tuesday morning.

Fed officials were still meeting with A.I.G., JPMorgan Chase, Goldman Sachs, Morgan Stanley and others at the Federal Reserve Bank of New York Tuesday morning to discuss possible options. It isn’t clear that any solution, including one involving government money, will emerge, this person said.

If a financing solution is not reached, A.I.G. may file for bankruptcy as soon as Wednesday, a person briefed on the matter said Monday night.

It is possible that the banks are maintaining this argument to prod the Fed into adding money, perhaps in a 50-50 joint effort.

A collapse of A.I.G. might surpass Lehman Brothers’s bankruptcy in terms of its damage to the financial system. In recent years, the company became one of the largest insurers of mortgage-backed securities, intertwining it with major banks around the world. Kenneth Lewis, the chief executive of Bank of America, told CNBC on Monday that virtually every Wall Street giant would be touched by an A.I.G. failure.

Treasury Secretary Henry M. Paulson Jr. has argued that no taxpayer money be used to prop up the insurance giant, a stance he reiterated on Monday. But especially after major ratings agencies downgraded A.I.G.’s debt Monday night, the possibility of a $75 billion credit line financed by the nation’s largest banks appeared dimmer than ever.

Shares in A.I.G. were down 42 percent at $2.79 as of early Tuesday afternoon, and fell more than 60 percent earlier in the day.

Most of A.I.G.’s businesses, including a dizzying array of insurance companies, an aircraft leasing business and an automotive unit, are healthy. But its financial products unit in London, which underwrote derivatives insuring mortgage-linked securities, threatens to drain cash faster than temporary financing can be arranged.

The ratings cuts by Standard & Poor’s and Moody’s now allow counterparties in those derivatives contracts to require A.I.G. to post more collateral. According to a regulatory filing made by the company last month, it may need to post at least $10.5 billion in fresh collateral very soon.

Wouldn't throw in the towel so quickly, it stands to reason that a lot of interested counterparty's have little interest in seeing the worlds largest insurance company by assets go belly up

That being said - this has been a year, so who knows!

Federal officials reportedly may take 80% stake in the nation's largest insurer in an $85 billion rescue plan to prevent financial chaos worldwide

http://money.cnn.com/2008/09/16/news...ex.htm?cnn=yes


there it is, there it is...

I rolled the dice in afterhours and picked up some at $2.09

^^ Nice! My limit order hit earlier this afternoon at 2.76.

Disclosure: (Personal account) I am NOT recommending this trade for teh sheeples.

More debt.

http://online.wsj.com/article/SB1221...gn2008_mostpop



Terry

In this case, looks like Uncle Sam came to the realization that printing more money was a better alternative than a potential E.L.E. for our Capital Markets.


http://www.nytimes.com/2008/09/16/op...prod=permalink

http://www.time.com/time/business/ar...841699,00.html

http://www.nytimes.com/2008/09/17/bu...prod=permalink

Correct me if I'm wrong (which I probably am) but the FED gave AIG a $85B loan and in turn took control of 80% of their assets. Doesn't AIG have a portfolio of like $1 trillion? So not only does AIG have to pay back the $85B plus interest in 2 years the FED basically seized $800 B in assets?

sucks for tons of money markets out there that have holdings in AIG and Lehman Bros. Lots of them have an NAV ofr $.97 to the dollar. At least mine are safe

Sure, but Bears, Fannie, Fred, not Lehman, AIG......where does it end?
Reasons behind why some and not others get the bail-out?
The feds got one heck of a balance sheet now....and we are barely half way through this.

read about this yesterday while in class. I wonder what else will happen by the end of the year.

AIG will have to sell off some of its assets in order to pay back the loan. The $85 billion loan was basically so AIG didn't have to go through a fire sale, which would have been devastating. Since the government now owns 80 percent of the company if AIG takes the full $85 billion, the government will have a say as to how much the assets will be sold for.

It was a stop-gap measure so AIG can sell off some of its assets. The issues was that AIG wouldn't have been able tp put the plan together before the bottom fell out. This merely gives them time to restructure.

Overall I think it was a good thing. The collapse of AIG would have been devastating to the economy. Same with Fannie and Freddie.

what's the word on private and/or foreign parties buying out portions of AIG?

From NPR: Sens. Dodd, Gregg: No More Bailouts On The Horizon

Senator Gregg: “I don’t see any shoes out there that meet the standards of Freddie Mac, Fannie Mae or AIG.

Senator Dodd: “I agree with that.”

NPR: "Meaning there won't be another huge huge bailout of this kind? You don't see one on the horizon?

Gregg: “I don’t see any entities out there that appear to be in trouble that meet this type of standard--that they would melt down the entire system if they went under.”

Dodd: "Some banks. Some banks, some regional banks, but nothing of the size of AIG, Lehman Brothers or Merrill Lynch."

(audio at NPR)

indeed.

..again nobody is saying it is really a "bad" thing...for now....but how many dominos are going to fall, and is the fed going to save them all? At what point does the fed drown in the mess too?

:ibwamu:

As I understand it, AIG may have a trillion in assets, but also a bunch in liabilities, including about a half trillion in insurance on other firms' mortgage-backed securities.

The downgrade of AIG's investment rating meant that it had to put up more of its assets as collateral for the loans it took out/takes out, and AIG could not sell off enough of its assets quickly to post up the collateral- basically a cash-flow problem.

The Fed will put up the $$ to shore up cash flow, but will then do an orderly liquidation of AIG's many entities over the next couple of years. AIG won't be paying back the loans itself, since it won't exist in its current form-- payment may come from the dismantling revenue and asset sales.

BTW, Morgan Stanley and Goldman Sachs are a little shaky right now.

I puked off the open and realized a small loss. Shame on me for being greedy - after the run up to 5 late yesterday, I made the mistake of holding overnight.


http://www.bloomberg.com/apps/news?p...d=a9TjCCCtw5jE

There, there.....don't worry...just ask Uncle Sam to print you some money,

Helicopter Ben has promised me a sack 'o money!

I squeaked out a small gain. Sold at $2.29. Too volatile for me to hold over night.

God bless you. You are a smarter man than me. I have terrible luck bottom fishing the pennies and should have known better.

playin with a couple hundred shares! c'mon 2 years to pay back

I'm thinking about getting some aig while it's cheap. Any thoughts on that?

Man I was kicking myself in the ass this morning watching the premarket. I jumped back in with it dipped under $3 today.

crazy trading today. Maybe some insider stuff, big news Monday?