AIG GETS ANOTHER $30 BILLION FROM THE GOVERNMENT…

Posted on March 2, 2009. Filed under: News And Politics... |

 
Evidently, "three’s the charm" doesn’t apply here since this will be the fourth bailout for AIG (or as I like to call them, "PIG").  The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.  People are outraged, and Wall Street doesn’t like it either as evidenced by the sharp drop in the Dow again this morning.  When are people going to say "ENOUGH ALREADY WITH THE BAILOUTS, OBAMA" and take away his shovel?  He’s been digging us deeper into a hole since he got in office.  He cannot say that this is Bush’ fault.  It is his fault!  Wake up, people!  He’s giving money away that we don’t even have!  Am I the only one who thinks this is insane behavior?  We’re told that "AIG is too big to fail", yet they have failed miserably.  With failure comes rewards in this country.  The way Obama is "spreading the wealth around", we’re all going to suffer the consequences even though us taxpayers the only ones who are living within our means.  This is Obama’s change.
 
AIG reported a $61.7 billion loss, the biggest quarterly loss in history, yet Obama sees fit to bail them out again with another $30 billion.  As I posted in a previous blog, last October AIG rewarded 70 of the company’s top performers with a week-long stay at the luxury St. Regis Resort in Monarch Beach, CA where they ran up a tab of close to $444,000.  This was right after they received an $85 billion bailout.  Remember the whole "no more golden parachutes" promise from Obama?  His words are just as empty as my savings account.  What about what he said during his recent address, "This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over."  I guess insurance companies like AIG are immune to this outrage.  Republicans blamed the Treasury, Democrats blamed Bush, and AIG fired its CEO.  Congressional hearings were mandated to determine where AIG went wrong.  Instead of holding AIG accountable for their bad actions and poor judgment, everyone played the blame game.  Not enough to rattle your cage?  How about the fact that AIG is not taking responsibility for their downfall?  They, too, are playing the blame game:
 
During a debate in October of last year, Obama stated with ‘disgust’ that, “AIG’s executives should be fired and the $440,000 repaid to the Treasury”.  Oh, really?  Well, they haven’t paid in back.  As a matter of fact, Obama is rewarding them again with $30 billion more!  Ask yourself:  Who are the recipients of Obama’s bailouts?  Let’s look at some recent history…
Obama received $30,800 from John M. Noel, head of Travel Guard, part of insurance giant AIG, which received a federal bailout.  Another instance where Obama is rewarding those who helped get him in the White House.  AIG is just one of a handful of corporate bailout recipients, or bailout candidates, who donated significant funds to offset the parties, lighting and staging of the nominations of Obama in Denver and Republican rival John McCain in Minneapolis-St. Paul.  It seems like they greased both parties’ palms for “insurance”.  No matter who won the presidency, they’d be “paid back”.  Trouble is, the only ones who are paying are us, the taxpayer…
QueenBee
 
 
March 2, 2009

A.I.G. Reports Loss of $61.7 Billion as U.S. Gives More Aid

 
 
 

The federal government agreed Monday morning to provide an additional $30 billion in taxpayer money to the American International Group and loosen the terms of its huge loan to the insurer, even as the insurance giant reported a$61.7 billion loss, the biggest quarterly loss in history.

The loss of $22.95 a share compared with a fourth-quarter loss in the period a year ago of $5.3 billion or $2.08 a share. For the year, A.I.G. lost $99.3 billion or $37.84 a share, compared with a profit of $6.2 billion or $2.39 a share for 2007.

In the quarter, A.I.G. took a $21 billion charge related to taxes and wrote down $25.9 billion in assets, including mortgage-back securities and credit-default swaps.

The company’s general insurance business lost $2.8 billion compared with a profit of $2.1 billion in the quarter a year ago. Premiums dropped 16.3 percent to $9.2 billion and earnings from premiums fell 5.9 percent to $10.98 billion.

The government intervention would be the fourth time that the United States has had to step in to help A.I.G., the giant insurer, avert bankruptcy. The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

In a conference call Monday, the chief executive, Edward Liddy who joined A.I.G. in September, said the insurer had drawn down about $38 billion of the $60 billion credit line it received from the government last year.

Earlier, in an interview on the NBC “Today” show, Mr. Liddy said A.I.G. “was in much worse condition than I thought.” In addition, he said: “The economy is worse. The financial markets are worse.”

Although he avoided offering a forecast on the first quarter, Mr. Liddy said A.I.G’s outlook was “very much going to be influenced by what happens to the condition of the economy and the financial marketplace around the globe.”

But he tried to reassure policyholders, saying that insurance portion of the company was in good shape. “It’s all of the other ancillary businesses that are causing this,” Mr. Liddy said. “And it’s the decline in asset values around the globe.”

Federal officials, who worked feverishly over the weekend to complete the restructuring, said they thought they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system.

But the deal also presents more financial risks to taxpayers at a time when the public and Congress have been sharply questioning the wisdom of risking federal money to bail out private enterprises.

The government’s commitment to A.I.G. far eclipses its rescue of other financial companies, including Citigroup, which has received $50 billion in rescue financing, and Bank of America, with $45 billion.

Credit rating agencies like Moody’s, Fitch Ratings and Standard & Poor’s had been preparing to sharply downgrade A.I.G.’s credit ratings on Monday because of the record quarterly loss. That would have forced A.I.G. to default on its debt, threatening to set off shock waves throughout the financial system as banks holding A.I.G. derivatives contracts would probably demand cash collateral and other payments from A.I.G. during a time when it has little to spare.

The major credit-rating agencies were briefed on the pending deal between A.I.G. and the government, the people involved in the talks said, and they have committed not to downgrade the company’s debt as a result.

“The steps announced today provide tangible evidence of the U.S. government’s commitment to the orderly restructuring of AIG over time in the face of continuing market dislocations and economic deterioration, the Treasury said in a statement.

Shortly after the announcement of the additional government assistance, the rating agency, Fitch, affirmed some A.I.G. ratings.

Under the deal, the government will commit $30 billion in cash to A.I.G. from the Troubled Asset Relief Program, should the company need it, the Treasury Department said in a statement. A.I.G. is not expected to draw down the money immediately, but the government’s commitment was enough to satisfy the rating agencies.

Another part of the deal would allow A.I.G. to exchange

$40 billion in preferred nonvoting shares, which paid a 10 percent dividend, for new preferred shares that do not require a dividend. That would save A.I.G. $4 billion annually.

To further ease A.I.G.’s debt burden, instead of paying back $38 billion in cash with interest that it has used from a federal credit line, government will convert that into equity in two of the insurer’s subsidiaries in Asia — American International Assurance and the American Life Insurance Company.

Both units are performing well. This would give the government direct ownership in those subsidiaries and provide saleable assets to American taxpayers even if the A.I.G. holding company were to default on its loans.

The government stake in American International Assurance is likely to be controversial. The unit had been put up for sale recently, without success. That suggests that the government is giving A.I.G. better terms than private investors were willing to give, exposing the government to further accusations that it is providing a handout to A.I.G.

Also as part of the deal, the government would agree to lower the interest rate on all remaining A.I.G. debt to match the London Interbank Offered Rate, or Libor. That would replace the previous rate, which was three percentage points higher than Libor. That move would save A.I.G. $1 billion in interest payments.

The new cash commitment reached on Sunday represented the fourth time since September that the federal government has taken steps to keep A.I.G. from collapsing. The previous rescues were intended to stabilize A.I.G. and buy it time to restructure. But the rescues were insufficient, in part because A.I.G. has either invested in or insured so many assets that keep losing value as the economy sours.

In September, the Federal Reserve lent A.I.G. $85 billion when the company suddenly found itself unable to meet a round of cash calls. To secure the emergency loan, A.I.G. issued the Fed warrants for slightly less than 80 percent of the company’s shares.

Officials said at the time that they thought the loan would provide A.I.G. all the cash it could possibly need. The government brought in a Mr. Liddy to sell off some of A.I.G.’s operating units to raise money, since the rescue loan had to be paid back within two years. Mr. Liddy drew up a plan, saying he expected a smaller, well-capitalized version of A.I.G. to remain after the restructuring.

But in just weeks it became clear that A.I.G.’s problems were so grave the $85 billion would not be enough. It was using up that money alarmingly fast, thus burdening itself with higher than expected debt-servicing costs, because it had to pay the Fed a higher rate of interest on the part of the loan that it drew down.

In October, the government cut A.I.G. some slack by creating a new $38 billion facility to shore up its securities lending business, and gave the company access to a new commercial paper program, which had a much lower interest rate than the rescue loan.

But that was not enough either. In mid-November, the government restructured its loans to A.I.G., raising its total commitment to $150 billion. The new arrangement reduced the rescue loan to $60 billion and stretched out its term to five years instead of two.

At the same time, it injected $40 billion into A.I.G. in exchange for preferred shares. And it created two special-purpose entities to take the most toxic assets then plaguing A.I.G. out of play.

Those arrangements kept the government’s stake in A.I.G. at 77.9 percent. The government has not wanted to go above 80 percent, because it would then have to consolidate all of A.I.G.’s assets and liabilities into its own finances, putting taxpayers on the hook for the claims of roughly 76 million insurance policyholders around the world.

While November’s restructuring did buy A.I.G. more time, it was not able to sell the operating units that Mr. Liddy put up for sale — or, when assets were sold, the prices were shockingly low.

 
 
 
Advertisements

Make a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Liked it here?
Why not try sites on the blogroll...

%d bloggers like this: