American International Group Inc. late Sunday was reportedly near a deal for a revised bailout package from the U.S. government that would make borrowing terms easier for the troubled insurer. A proposed $123 billion bailout package would be replaced with a new $150 billion package, according to the Wall Street Journal.
The more the merrier?
I hope they got new, lower interest rates.
And in typical gov’t fashion, $85B grows to $150B and counting. And it’s not even a weapons system. Good money after bad.
It’s such a bullshit, the lame ducks at the treasury and fed lost it. GWB SHOULD FIRE BERNANKE AND PAULSON IMMEDIATELY!!!
I don’t think GWB can fire Bernanke…
And AIG is up 40% in premarket which is ridiculous. Not exactly the news I would be buying on.
Doesn’t AIG have to repay all of this bailout money back to the gov’t at some point?
projectplatnyc Wrote: ------------------------------------------------------- > Doesn’t AIG have to repay all of this bailout > money back to the gov’t at some point? Don’t the underwater homeowners who move out in the middle of the night have to pay back ALL of their borrowed principal at some point ? No. They don’t. They’re supposed to, but how do you force them to if they spend it all and can’t generate enough cash from selling off their units ?
You’ve gotta love the WSJ headline. They make it sound like the orginal deal was bad and the new one is much better… “Government, AIG Near a Pact to Scrap Original Rescue Deal”
Is it too late to get an invite to the next party at St. Regis? err I mean executive retreat. this reminds me of the auto manufacturer thread. The auto execs express a logical understanding that not many people would consider buying a $30k new car from a company that has declared bankruptcy. So what third party would consider entering into an $X0 million transaction with a firm that needs an infusion of 50B every couple weeks?
Oh AIG, geez aren’t these the chumps who…given the rapidly inflating housing bubble…bulked up on sales of credit default swaps on MBS and CDOs without putting a hedge in place. Seriously? Now they get 150B…uhhh.
I don’t think this is so much a bailout of AIG, as a conversion of AIG into TARP II. AIG is just a US government proxy these days.
chrismaths Wrote: ------------------------------------------------------- > I don’t think this is so much a bailout of AIG, as > a conversion of AIG into TARP II. AIG is just a US > government proxy these days. Exactly. Roubini on CNBC this morning had a great quote to the effect of this not being a bailout of AIG, but rather of AIG’s counterparties. AIG the company is done. This money is not getting repaid. It is in all likelihood being used simply to meet AIG’s massive obligations that have arisen from its extensive portfolio of crappy CDS and God knows what else contracts.
Yeah, it is a bailout for the AIG’s counterparties. And the biggest one is GS
Does anybody have numbes on the new deal? The first deal was terrible, bad for AIG, its employees, and America in general. If the new deal is at a reasonable level of interest, AIG may be able to salvage itself. Also, what the hell does it need $150B for? Likely, this deal is not about AIG, but foreign counterparties who would never invest in the United States again if AIG didn’t honor its CDS agreements.
This comes out of TARP right? At least its not an additional $27B
Finally read up on the deal…great for AIG. They will survive now. They will likely still have to sell some units, but they are set up for the long run now. There is nothing wrong with AIG’s businesses. Its investment portfolio sucks right now (just like everybody else’s) but the core business is good…those CDSs are what killed them. The question allways was whether the government was going to allow AIG to be slowly sold to foreigners or it was going to help with those CDS obligations. Even if it let the majority of the obligations go, the government still will have likely had to offer deals to counterparties.
http://www.analystforum.com/phorums/read.php?1,859603 AIG released their “talking points” memo on Monday. They would agree with your analysis. I disagree. FINforLIL Wrote: ------------------------------------------------------- > Finally read up on the deal…great for AIG. > They will survive now. They will likely still > have to sell some units, but they are set up for > the long run now. There is nothing wrong with > AIG’s businesses. Its investment portfolio sucks > right now (just like everybody else’s) but the > core business is good…those CDSs are what > killed them. There is something wrong with AIG. First, unit sales take time and right now I am guessing suitors know they are “motivated” sellers. So AIG shops around and attempts to balance the time sensitive nature with a reasonable price. If I am interested in taking the life companies off their hands, I might consider taking my time. Keep in mind I believe they were previously permitted by Patterson to borrow a bit from their subsidiaries. As this process unfolds, new business passes by. Why risk that recent capital infusions might not be enough to buy them the time needed to sell the magic units, bridge the gap, and save themselves? I could be wrong and people might be lining up to auction off valuable pieces. Assume AIG is successful in that effort and they quickly sell off units at fair prices. Then what is left? The credibility of the remaining brand has to be damaged. Even if they are successful, is AIG going to be high on your list if you need someone to insure you or take the other side of an $X0 million trade? The memory of a mandatory, massive, bailout to meet obligations is not going to fade. Will they be forced to pay a premium to earn back good standing? You can’t just turn the page on this. > The question allways was whether the government > was going to allow AIG to be slowly sold to > foreigners or it was going to help with those CDS > obligations. Even if it let the majority of the > obligations go, the government still will have > likely had to offer deals to counterparties. I think the question is this: What should our involvement be? If we agree that there is a big risk of contagion do we prefer contagion + $0, contagion + $80B or contagion + $150B? Is it better to throw money at it ST hoping some white knight quickly appears and buys these units for their 2006 market value and poof AIG is saved. Or is it more likely that sharks bite off a few pieces and wait for the rest of AIG to thrash itself out?
I’d be suprised if AIG makes a major asset sale in the next 6 month. I think they convinced the government that they are undervalued and that it would be better for them to sell assets in the next few years. The government didn’t give AIG anything…they got a loan (well, actually I think the government may have actually taken over a large chunk of their CDS exposure for about $6B in total from AIG…don’t really know how that works). They should be able to pay it back now. the first deal was going to make it difficult. I think AIG’s primary concern is going to be convincing people that they still have decent products to sell. While AIG is a huge conglomerate where most of its units went through a few corporate structures before they finally linked up with AIG, I think they will have a hard time distancing themselves this time. They are going to have to spend a lot on marketing…kinda like what is being done with WAMU.