Sheesh. Here's my questions: AIG owes the FED a ton of money, yes? I'm assuming the FED took collateral when they lent AIG that money, yes? So the FED now may only end up with the collateral (that's probably worth very little or nothing considering AIG resorted to using it as collateral on a loan of last resort)? Or may have to try to get paid in a bankruptcy workout?
And while they are seemingly preparing for bankruptcy, there are reports about AIG wanting more money?
Really...I never saw this coming. You mean our government is willing to sell us the noose and the chair in a bundle with some stationery and a nice pen? No fucking way. We need to fire these guys--all of them.
Thoughts?
Developing bombshell: David Faber reporting that AIG has retained Weil Gotshal ahead of a possible bankruptcy filing this weekend. The reason is that the company will allegedly post a $60 billion loss, which will result in the usual cycle of credit downgrades, collateral postings, more capital needed to survive, and yet another mega systemic if not shock then question mark. Poor Geithner is likely about to follow Stamatis' example and just call it a day.
AIG is in discussions with the government about securing additional funds so it can keep operating after next Monday when it will report the largest loss in U.S. corporate history, sources told CNBC Monday.
CNBC's David Faber said sources close to the company told him the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.
He said that massive loss is likely to spur downgrades in the firm's insurance and credit ratings that will force AIG to raise collateral it does not have. Faber added that if AIG's book value falls below a certain level, it will trigger default in some of its debt instruments, according to people familiar with the situation.
Hmm...now CNBC just reported that AIG says they have no plans to file for bankruptcy protection....sure guys. Guess it's tough to steal money under the pretense of a bailout for continuing operations when you're being rumored to be preparing for bankruptcy...
Over/under on when they go bust? Can't be terribly long.
I've never met a retarded person who wasn't smiling.
Interesting stuff on AIG, from the Market Ticker and also this comment on the Calculated Risk blog:
AIG was founded in China in the 1900s, then kicked out. In the early 90s, AIG wanted back in to China and China wanted to join the WTO. Greenspan make something like 35 trips to China negotiating the deal. China wanted the customary 50 percent ownership of AIG as a foreign company, but they had to give up all ownership to get into the WTO. Now AIG is the only 100 foreign-owned company operating in China. And the largest.
This is where it gets bad.
Basically, the Chinese are savers, so AIG captured almost all of China's private money, setting up a pension fund for the Chinese in the late 90s. They're like the Social Security system. AIG also insures China's own banking investments. When AIG faltered last fall, it almost brought down the Hong Kong Exchange.
We immediately got our marching orders from China on the AIG bailouts.
It amounts to the US paying Chinese pensions, with US pensioners savings.
I'm sure there's hyperbole in there...did AIG really capture nearly all private savings? I doubt it...maybe the majority of pension funds, sure. But still, interesting perspective. I'm inclined to believe at least the premise of our being forced to bailout AIG due to the China factor, regardless. Too much smoke in AIG's past that portends them being all wrapped up in China's mess for there to not be some prodding coming China on these bailouts.
I've never met a retarded person who wasn't smiling.
But, but...this was all contained the last time the company lied about its current state... Looks like US Taxpayer Capital LLC will need some CDS salespeople/traders as it is the unwitting recipient of a $300 billion CDS book.
Feb. 26 (Bloomberg) -- American International Group Inc. may get a backstop from the U.S. to protect against further losses on credit-default swaps, according to a person familiar with the matter.
The federal guarantees may be included in New York-based AIG’s restructured bailout, which the company plans to disclose next week with fourth-quarter results, according to the person, who declined to be identified because the talks are private.
The insurer provided protection on more than $300 billion of assets through credit derivatives as of Sept. 30. Credit- default swaps pay the buyer face value on their debt holdings in exchange for the underlying securities if the borrower fails to meet its obligations.
interestingly enough...i was out and about in the city last night attending a former colleagues 'retirement' party...a high profile AIG guy was there...he's one of the heads of investing and is one of their most prominent portfolio managers....in the hey days, he'd be tough to get in front of because everyone'd be lined up just to get this guy a drink....in the hey days, he'd have every night besides thursday lined up from november to january for dealers like myself to entertain...knick games, yankee games, strip clubs, steakhouses, etc.
so i ask him - "how's it going jer"...tells me no one in his office has been fired or let go, tells me no one's left (because there's no jobs to be had) and tells me he's been out a grand total of 2 times between this past november and january...combination of dealers wanting to curb spending and AIG mandates on their employees to refrain from excessive entertaining...says he's miserable cause his stock is down to .50 cents and says all his colleagues are sitting around and waiting for direction from above...til then, they twiddle their thumbs until they're either severance packaged out or told to try and make money again...frustrating time for him...he kept other things very close to his vest...sounded as if something was going on and he didn't want to let on....we'll see i guess.
Barry Ritholtz flags a very interesting portion of Helicopter Ben's testimony to Congress today. I also was of the assumption that AIG's insurance business was seperated from AIG Financial Products. Apparently, it wasn't and this was an even bigger disaster than previously known. I've also started to hear rumblings that there are state insurance regulators who are accusing AIG of cooking the books on the insurance side of things, so this may turn out to be a massive fraudulent enterprise. I'm going to guess some of these cats are heading for prison.
But don't "scapegoat" AIG. That would be bad and terribly impolite and it would hurt their tender feelings. They're sensitive, y'know.
Actually, I am just upset that we gave them our tax dollars...I didn't think we needed to give it to them in the first place but since I'm not a financial expert, I trusted those that are when they said they are "too big to fail"...I don't care how big you are, if you f up you should fail...there will be someone who will come along and be glad to take their business and run it the right way for a profit. But I have faith in capitalism...and I don't think all rich people are evil.
Everyone knows AIG was a fraud. They sold "insurance policies" but failed to safeguard the premium pools backing their obligations to pay out under those policies.
Whether there is the political will to actually take the time to figure all this shit out--that's the question.
I've never met a retarded person who wasn't smiling.
AIG said last year they would sell their plane leasing unit to raise cash to pay their debts. Now, their plane leasing unit is looking for their own bail out.
Don't scapegoat me, bro!
March 25 (Bloomberg) -- American International Group Inc.’s plane-leasing unit said it may not be able to survive without help from its parent company or new access to credit.
“Without additional support from AIG or obtaining secured financing from a third-party lender, in the future there could exist doubt concerning our ability to continue as a going concern,” Los Angeles-based International Lease Finance Corp. said today in its annual report.
AIG, which received a government bailout valued at $182.5 billion, is trying to find a buyer for ILFC as the unit loses customers because of “financial stress” in the airline industry. Paula Reynolds, AIG’s chief restructuring officer, has said federal financing may be available to the buyer of ILFC, the world’s largest aircraft lessor by value of planes.
AIG said earlier this month ILFC’s operations are inadequate to meet debt obligations for 2009. The filing today says New York-based AIG has committed to support the plane unit’s short-term liquidity needs until a sale or the end of March 2010 after the unit was cut off from its usual sources of funding. ILFC lost access to the U.S. commercial paper program after credit downgrades.
The insurer provided a loan of $800 million to ILFC on March 12 to fund operations at the plane leasing unit through the end of the month, and approved another $900 million to be distributed on March 30 to pay costs through the end of April. The insurer, which the government has deemed too big to fail, was rescued with a federal infusion of capital in September, and the bailout has been restructured three times since.
Hey remember when they said that the insurance side of AIG could survive on its own and be profitable? Well it turns out that the insurance side has big exposure to the toxic derivatives that were sold by the financial products side.
If we are to take Bernanke at face value, he is saying that AIGFP had buried their own firm with junk paper. BB does not define what “substantial derivative exposure” meant — but given the $2.7 trillion dollars in derivatives exposure that FP had, even a tiny percentage might amount to an enormous sum.
That the collapse of AIG Financial Products would have damaged the other Insurance half of the firm is a frightening development.
