AIG retires $16 billion in credit-default swaps with government funding
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.
AIG gets expanded bailout to $150 billion and reports $24.5 billion loss
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 borrows $90.3 billion from Federal Reserve
Its good to know that AIG can borrow over a tenth of a trillion dollars to shore up it’s balance sheet. The new CEO is not even sure if $123 billion (amount available from the Fed) will be enough to keep them in business. AIG’s “financial products” division is what created the current problem they are in. This division specialized in derivatives along with other exotic financial products.
I believe with these bank failures and nationalizations that this has triggered much of this corporate debt insurance to become a real liability and now with them people counter-party to this debt, they need to make good or default and that is the problem here that is not being discussed. .02
Press Piece:
American International Group (AIG). the insurer saved from bankruptcy by a federal bailout, has borrowed $90.3 billion from the U.S. Federal Reserve. Figures released by the Fed late on Thursday showed that as of Wednesday, AIG had drawn down $3 billion more than a week earlier.
Credit Suisse sees higher chance of AIG bankruptcy
This looks to be the next shoe to drop in the market. AIG being the largest insurer in the US could spell major trouble for counter-parties of their debt. Estimates have placed a $400 billion dollar loss if AIG fails. New York’s Patterson stated that AIG has not tapped their $20 billion fund to give them extra liquidity. I have read speculations that AIG has 24-48 hours to figure out a deal or they will go under and leave much uncertainty in the markets. To be continued…
Release:
American International Group Inc faces heightened probability of a potential bankruptcy filing by the holding company, a Credit Suisse analyst said Tuesday, a day after the insurer’s credit ratings were cut, jeopardizing efforts to raise cash necessary for its survival.
A.I.G. Seeks $40 Billion Bridge Loan from Federal Reserve Aid to Survive
After this 500+ point Dow Jones Index massacre we are seeing another potential collapse in the making. AIG is now seeking a bridge-loan from The Fed to keep it afloat. AIG is worried that a ratings downgrade could spell disaster for the insurance firm. Paulson has already made statements to the affect of a “no more bailout” policy from the US Treasury. There are even rumors that JPMorgan and Goldman Sachs could need a capital infusion soon as well but I have not read anything solid enough to substantiate that claim at this point.
AIG Article:
The American International Group (AIG) is seeking a $40 billion bridge loan from the Federal Reserve, as it faces a potential downgrade from credit ratings agencies that could spell its doom, a person briefed on the matter said Sunday night.
Ratings agencies threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdraw capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. may survive for only 48 hours to 72 hours.
AIG plans $20 billion asset sell-off to shore up capital
The most interesting piece of this article was the mention at the bottom that stated AIG has lost $18 billion in the last 3 quarters from the next boot to drop, credit-default swaps or CDS.
This is just another sign that the unregulated credit-default swap market is the real lurking dragon on the market and all of these aggressive actions to keep companies from going bust with a lot of these CDS on their balance sheet making them go default and then you would have a situation where many of these CDS dealers could not have the capital to pay the counter-party.
Article:
American International Group (AIG), the world’s biggest insurer, is planning a $20 billion asset sell-off as it fights to correct a slump in its shares and braces for the impact of Hurricane Ike, the Sunday Times said. The newspaper, without citing sources, said details of the plan could come as early as Monday.