by Frank James
Another day, another massive taxpayer-funded cash infusion into a financial giant.
American International Group or AIG, the large insurance company deemed too big to fail because of its extensive linkages throughout the global financial system, was provided $30 billion by the Federal Reserve and Treasury Department to be used on an "as needed" basis. And there's little doubt it will be needed given that the company just reported a $61.7 billion fourth-quarter loss.
At this point, the company's name should really be changed to U.S.AIG since it has received more federal dollars than even the Agriculture Department gets in a year.
An excerpt from the Associated Press:
WASHINGTON (AP) -- The government on Monday unveiled a revamped rescue package to insurance giant American International Group and will provide the troubled company another $30 billion on an "as needed" basis.
The new package comes as the company has burned through cash and has been unable to find buyers for pieces of its company that it hoped to sell to repay the government on its existing aid package, which totals some $150 billion.Under the new package, the Federal Reserve will take stakes in two international units.
Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.
The Treasury and Fed explained in a statement they had no choice but to make the additional funds available since AIG's financial position had weakened further since late last year and a collapse of the company would shock the international financial system at a time when it could least withstand it.
Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high. AIG provides insurance protection to more than 100,000 entities, including small businesses, municipalities, 401(k) plans, and Fortune 500 companies who together employ over 100 million Americans. AIG has over 30 million policyholders in the U.S. and is a major source of retirement insurance for, among others, teachers and non-profit organizations. The company also is a significant counterparty to a number of major financial institutions.
What the federal government is doing has aspects of a controlled debtor-in-possession bankruptcy proceeding in which the company is given the financial resources to restructure itself in the hope that those changes will allow it to survive going forward.
The difference is that a federal bankruptcy judge isn't yet calling the shots, which would happen in bankruptcy, and the shareholders haven't been totally wiped out, although with AIG shares now trading at less than 50 cents a share, shareholders probably can't tell much of a difference.
Comments
The public has shown the ability to stomach, and even support Obama's stimulus and budget plan. The polls show overwhelming approval of Obama's handling of the economy.
But more bailouts are sort of the nuclear option for Americans. They will not like more money to AIG (especially AIG, poster company for bailout opulence).
http://www.political-buzz.com/
Posted by: matt | March 2, 2009 8:29 AM
Were are all the liberals now? Seems it wasn't the GOP but rather the DEMS that are in bed with AIG.
Posted by: Batboy | March 2, 2009 9:28 AM
It's not just bailout money that AIG needs - it's consumer confidence. Individuals, businesses and corporations need to know that if they take out a policy that AIG will be around 5, 10, 15 years from now. I think the willingness of the Government to bail out AIG should reassure potential customers, but I don't think that's the case. All potential customers hear is "massive losses" and wonder if AIG is a sinking ship - which it's not. So how does the Government give a massive infusion of "consumer confidence" to AIG?
Posted by: Annie Brunson | March 2, 2009 9:56 AM
I said it back in December that AIG was only getting taxpayer money to payback the rich investors and after that they would go bankrupt, owing the taxpayers billions, here we are giving more money to a company that is only going to fail with even more taxpayer dollars. Before June AIG will be in federal court claiming bankruptcy and we will never see our money.
Posted by: Sailingwindward | March 2, 2009 9:57 AM
Right after AIG received the info about the new government cash, yelling was heard at AIG headquarters:
"ROAD TRIP!"
Posted by: crobb | March 2, 2009 10:06 AM
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Posted by: Phil72 | March 2, 2009 10:13 AM
gee, how about paying my outstanding debt so I can start over...I can assure you I will not wrack up debt like the banks and investment companies.
going to eliminate credit...think about making a mattress out of money and buy everything for cash
oh, and I'm going to work to the best of my ability and be wise...I know I'll do debt reduction myself and change my habits because you only fail when you don't learn from your mistakes.
Posted by: pattytricia | March 2, 2009 10:24 AM
Oh ignorant batboy, the Feds are independent of the government and a political party. Someday you'll understand how things work.
Posted by: Xcellentform | March 2, 2009 10:53 AM
Oh Barry...Hurry up and give AIG some more of our money, because all of your bailout ideas are working splendidly......why just look at the market, they seem to go for it "Big Time". You own it now Barry. Next week you'll have the automobile crooks looking for some more dough,
no problem, everybody knows your any easy touch with other peoples' money.
Posted by: Don B. | March 2, 2009 11:04 AM
It's obvious that the administration has certain companies in mind that it wants to keep afloat. Whether there is any favoritism here he don't know. I don't pay it any mind. The more time I spend on thinking about the government's appropriation of money the less I think about my own money's appropriation :)
Ryan
Posted by: Ryan | March 2, 2009 11:30 AM
At least nobody is calling it a loan, as if it will someday be paid back since it's obvious now that it won't.
Posted by: Pete | March 2, 2009 11:49 AM
Is this true: AIG INSURES THE PENSION TRUST FUND FOR MEMBERS OF THE UNITED STATES CONGRESS!
Bear Sterns wanted money but didn't get it so it failed.
AIG later on wanted money and got it.
Is the original quote true. I'm not sure?
Posted by: PG | March 2, 2009 12:25 PM
Good money after bad. Every time the government has made a move like this since October, the stock market has tanked. Know why? Because investors no longer have any confidence that the government knows what it's doing. Remember that one definition of insanity is doing the same thing over and over again while expecting different results.
Posted by: Tom | March 2, 2009 12:56 PM
The auto industry with 1 million + jobs on the line getS ground up by Congress to get a $17 billion LOAN....BUT AIG gets more and more without even a hearing?? Guess who is flying on AIG's private jets?? WAKE UP America...it's OUR $$$$. THROW CONGRESS OUT!!!!
Posted by: buster | March 2, 2009 1:24 PM
This morning, I received an email from my HR Dept telling me that as part of the stimulus package, I would qualify for up to $20.00 per month in TAX FREE reimbursement IF I ride a bike to work during the warm weather months.
Then I read that the government is giving AIG BILLIONS more in assistance.
Now that is change we can believe in......what a joke!! Except the joke is on us.
Posted by: Sue | March 2, 2009 1:27 PM
Should have let it go under the first time. Of course Obama the Unqualified is going to throw good money after bad!
Posted by: Darkwater | March 2, 2009 1:50 PM
Why not just call AIG Europe? The more USA money that Obama gives to AIG the happier Obama makes Europeans and European bankers. Whenever Obama meets with a foreign dignitary, that dignitary has his hand out--and usually leaves with increased American money. Obama wants to be cool and accepted--more with his international "peers" and less with tax paying Americans. The only reason Obama is an international "peer" is because Americans voted for him to be there--for 4 years anyway. US bailouts for other nations--especially European nations who are of first world status like us--are wrong. Obama has an addiction to being used--and by extension allowing Americans to be used. We are used by the US military, the thankless US Repugs who want to perpetuate the top 2%, and by international players who continue to dislike Americans--no matter how much we give.
Posted by: Vivian | March 2, 2009 2:03 PM
"...was provided $30 billion by the Federal Reserve and Treasury Department to be used on an "as needed" basis."
.
The Fed may be independent, but is the Treasury Department?
Posted by: Terry | March 2, 2009 2:47 PM
Look what one of Obama's cheerleader is saying now about the Obama economy. I knew Warren Buffet had a bad year, but I guess backing Obama was just one more mistake:
.
http://www.thelucrativeinvestor.com/warren-buffet-believes-the-economy-will-remain-in-shambles/
Posted by: Terry | March 2, 2009 10:17 PM