AIG retires $16 billion in credit-default swaps with government funding

December 24, 2008 by · Leave a Comment
Filed under: Industry News 

Here we go, we are now actually using real money to retire insurance contracts.  Isn’t that great that we are going into debt to either by pieces of paper at face value or we are paying off insurance contracts that have already gone bust.  How free market is that?  There is so much profanity that I want use when I think about the evil that is being perpetrated on the American public.

This is basically robbery without the gun.  What happens when an Insurance company issues too many contracts and a bunch come due????  They go bust and for good reason.  In my opinion AIG should have been left to fail like anyone else who did not carry proper loss reserves.  This gives future banks and insurance companies the lesson that is you make mistakes that puts your company at risk then you will pay the prices that everyone else pays, go out of business.  If you want this too stop before we have so much debt that we default on our dollar then you need to educate people and start calling your representatives non-stop until you start hearing them change the tune of 100% bailout.  Here is what one person said that had the guts to say it:

“‘Who are we bailing out here?’ is a broader question,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “We’re using public resources to provide benefits to these counterparties that they wouldn’t have had in a free-market solution.

News:

American International Group Inc. retired another $16 billion in credit-default swaps, the contracts that almost caused the company’s collapse, after buying the underlying securities with help from the Federal Reserve.

The fund created by the Fed and New York-based AIG to protect the insurer’s customers from losses has now purchased collateralized debt obligations with a face value of about $62.1 billion, the firm said today in a statement.

The purchases bring AIG closer to winding down the financial products unit that triggered the worst of AIG’s losses. The business guaranteed more than $70 billion in securities created by pools of different kinds of debt, including subprime mortgages, that plunged in value. The U.S. committed $150 billion to bail out AIG and prevent losses at investment banks that bought protection on fixed-income securites from the insurer.

“‘Who are we bailing out here?’ is a broader question,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “We’re using public resources to provide benefits to these counterparties that they wouldn’t have had in a free-market solution.

The fund, called Maiden Lane III, paid about $6.7 billion to the investors for the securities in the latest purchases. The counterparties were also able to keep more than $9 billion that AIG had posted in collateral, reimbursing them at face value for the assets. AIG “continues to analyze” ways to retire another $12.3 billion in contracts it sold, the company said.

Source: Bloomberg

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