AIG gets expanded bailout to $150 billion and reports $24.5 billion loss

November 10, 2008 by · Leave a Comment
Filed under: Policy News 

Well here go, NPR and Bloomberg reported this morning that AIG’s bailout is going to ballon to $150 billion dollars.  These loans might be paid back over time but at this point this is a lifeline to AIG.  What they are failing to say, is that these losses they are posting is because they were on the wrong end of credit-default swaps (CDS).  Most likely these losses are tied to Lehman Brothers and Fannie/Freddie.  

They might be paying out on some of the many foreign firms that have failed or were nationalized, being the largest insurer in the world makes me tend to think they were a big player in the CDS market.  They need to report their CDS position so we can know if this is a black-hole that the U.S. taxpayer is just literally throwing money into.  In the end, mainstreet is going to pay for this mess just to get into another mess.  Enjoy.

News:

American International Group Inc. got a $150 billion government rescue package, almost doubling the initial bailout of less than two months ago as the insurer burns through cash at a record rate.

AIG will get lower interest rates and $40 billion of new capital from the government to help ease the impact of four straight quarterly deficits, including a $24.5 billion third- quarter loss posted today by the New York-based company.

Taxpayers will take on the extra risk to give Chief Executive Officer Edward Liddy more time to salvage AIG. The insurer, which needed U.S. help to escape bankruptcy in September, has posted about $43 billion in quarterly losses tied to home mortgages. Liddy’s plan to repay the original $85 billion loan by selling units stalled as plunging financial markets cut into their value and hobbled potential buyers.

“It was obvious to me from Day One that the terms of that arrangement were really quite punitive in terms of the interest rate and the commitment fee and the shortness of it,” Liddy said today in a Bloomberg Television interview. “I started really about a week after I got here trying to renegotiate.”

Source: Bloomberg

 

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