Our children and our children's children will be payinf for AIG.
The new deal, the government's fourth for AIG, represents a nearly complete reversal from the one first laid out in mid-September. Back then, federal officials acted as a demanding lender, forcing the insurer to pay a steep interest rate for what was expected to be a short-term loan. Now the government is relaxing loan terms by wiping out interest in hopes of preserving AIG's value over a longer period.
With the latest move, AIG will have the benefit of up to $70 billion from the TARP program; it got a $40 billion TARP investment in November. The total amounts to 10% of the $700 billion financial-sector rescue fund, money that most lawmakers did not expect would go toward propping up a troubled insurer. Officials believed they had little choice but to use the TARP money, particularly because they lack the authority to unwind a troubled firm such as AIG the way the government can do now with failing banks.
Am I the only one annoyed that the AIG board had to approve this crap, as if they had other options or any leverage at all?
The problem, as I understand it, is how invested AIG is in covering bets made by the banking industry. So all those writedowns on mortgage-backed securities and the rest affect their bottom line. That's the only way I can understand a $62 billion dollar quarterly loss, the biggest corporate loss in US history.