Looks like AIG might not make it...
09-16-2008, 07:10 PM
#1
Looks like AIG might not make it...
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.
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.
09-16-2008, 07:25 PM
#2
I feel the need...
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!
That being said - this has been a
year, so who knows!
09-16-2008, 07:53 PM
#3
I feel the need...
Federal takeover of AIG planned
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... 
NEW YORK (CNNMoney.com) -- The federal government is reportedly on the verge of taking over crumbling insurer American International Group in an $85 billion deal that would leave the company in the Federal Reserve's hands.
According to published reports late Tuesday, officials decided they must act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.
The plan calls for the Federal Reserve to take an 80% stake in AIG, the New York Times reported. The insurer's assets would be used to secure the loan. Investors' holdings would lose much of their value.
A bailout of AIG would mark the most dramatic turn yet in an expanding crisis that started more than a year ago in the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry .
The government had resisted throwing a lifeline to AIG, hoping to entice investment firms to set up a $75 billion rescue fund. Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does.....
According to published reports late Tuesday, officials decided they must act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.
The plan calls for the Federal Reserve to take an 80% stake in AIG, the New York Times reported. The insurer's assets would be used to secure the loan. Investors' holdings would lose much of their value.
A bailout of AIG would mark the most dramatic turn yet in an expanding crisis that started more than a year ago in the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry .
The government had resisted throwing a lifeline to AIG, hoping to entice investment firms to set up a $75 billion rescue fund. Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does.....
there it is, there it is...
09-16-2008, 07:55 PM
#4
Team Owner
I rolled the dice in afterhours and picked up some at $2.09 
Last edited by doopstr; 09-16-2008 at 07:58 PM.
09-16-2008, 10:10 PM
#7
Trending Topics
09-17-2008, 12:04 AM
#8
The sizzle in the Steak
It's only money...and the fed has plenty of it....no worries.
09-17-2008, 01:27 AM
#9
I feel the need...
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
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
09-17-2008, 06:54 AM
#10
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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?
09-17-2008, 10:33 AM
#12
The sizzle in the Steak
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
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
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.
09-17-2008, 11:49 AM
#14
Big White Chocolate
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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?
09-17-2008, 11:55 AM
#15
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Overall I think it was a good thing. The collapse of AIG would have been devastating to the economy. Same with Fannie and Freddie.
09-17-2008, 12:08 PM
#17
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)
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)
09-17-2008, 01:15 PM
#18
What Would Don Draper Do?
09-17-2008, 01:54 PM
#19
The sizzle in the Steak
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.
Overall I think it was a good thing. The collapse of AIG would have been devastating to the economy. Same with Fannie and Freddie.
09-17-2008, 01:55 PM
#20
The sizzle in the Steak
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)
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)
09-17-2008, 02:05 PM
#21
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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?
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.
09-17-2008, 05:01 PM
#22
I feel the need...
AIG Falls on Concern Shareholders Will Be Wiped Out
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
American International Group Inc. fell 44 percent on speculation the government's takeover will ultimately wipe out shareholders.
The U.S. plan to save AIG, the nation's largest insurer by assets, may give the government an 80 percent stake in return for an $85 billion loan, and dividends may be halted to common and preferred stockholders. The U.S. reversed its opposition to a loan after private efforts collapsed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility.
The ``punitive'' interest rate on the two-year loan ``makes it extremely clear that this is not a subsidy extended to keep the company afloat but rather a stranglehold that makes AIG unviable while ensuring that its obligations will be met,'' said Marco Annunziata, an analyst at UniCredit SpA, in a note to clients. ``This is to all extents and purposes a controlled bankruptcy.''
AIG unraveled as the worst housing crisis since the Great Depression led to more than $18 billion of losses in the past year. A meltdown could have cost the financial industry $180 billion, according to RBC Capital Markets, because AIG provided insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions, including $57.8 billion in securities tied to subprime mortgages.....
The U.S. plan to save AIG, the nation's largest insurer by assets, may give the government an 80 percent stake in return for an $85 billion loan, and dividends may be halted to common and preferred stockholders. The U.S. reversed its opposition to a loan after private efforts collapsed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility.
The ``punitive'' interest rate on the two-year loan ``makes it extremely clear that this is not a subsidy extended to keep the company afloat but rather a stranglehold that makes AIG unviable while ensuring that its obligations will be met,'' said Marco Annunziata, an analyst at UniCredit SpA, in a note to clients. ``This is to all extents and purposes a controlled bankruptcy.''
AIG unraveled as the worst housing crisis since the Great Depression led to more than $18 billion of losses in the past year. A meltdown could have cost the financial industry $180 billion, according to RBC Capital Markets, because AIG provided insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions, including $57.8 billion in securities tied to subprime mortgages.....
09-17-2008, 05:04 PM
#23
The sizzle in the Steak
09-17-2008, 05:17 PM
#25
Team Owner
09-17-2008, 05:20 PM
#26
I feel the need...
09-19-2008, 01:57 PM
#29
Team Owner
Man I was kicking myself in the ass this morning watching the premarket. I jumped back in with it dipped under $3 today.
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