Saturday, March 14, 2009

AIG, Again?

"The federal government is overhauling its $150 billion bailout of [AIG] in a bid to bolster the battered insurer, but its plan will expose US taxpayers to more financial risk. 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. ... AIG's revised deal effectively cuts the interest and dividend payments that the insurer must make to the government. That eases the financial burden on the company, which is expected to report a $60 billion quarterly loss on Monday. ... Government officials are expected to continue assisting AIG as needed in order to help the company shrink and dispose of some of its busineses, according to people familiar with the matter. ... The decision to approve a third revision of the AIG bailout amounts to a calculated bet by [SecTreas] Timothy Geithner and [Fed] Chairman Ben Bernanke--both architects of the original bailout--that there would be even greater risk to letting AIG fail. Fed officials feared that a bankruptcy filing by AIG could be disastrous for the economy, which is in worse shape than it was six months ago. .... Officials at the Fed believe the restructured rescue package gives the US government adequate collateral to protect taxpayers. ... The major credit-rating companies signed off on the latest package, according to people familiar with the matter, clearing the way for the deal to go forward", my emphasis, Liam Pleven, Matthew Karnitschig and Deborah Solomon at the WSJ, 2 March 2009.

This is a dribble. "Demanding lender", horsefeathers. That's a kabuki dance. "Expected to be a short-term loan"? Yves Smith at Naked Capitalism called AIG a "black hole". Indeed. Fed officials are afraid an AIG bankruptcy will expose what really happened there since September and who got the $170 billion. Goldman Sachs, anyone? "Adequate collateral"? How much did Zimbabwe Ben buy for his own account? See also my 21 November 2008 post:


Anonymous said...

Ha ha ha IA...

"Fed officials are afraid an AIG bankruptcy will expose what really happened there since September and who got the $170 billion. Goldman Sachs, anyone?"

The sweetest piece of nonsense was "Mr. Sullivan and Cromwell" Cohen pulling out of the Treasury spot... maybe he has some "nanny" problems?

The Financial Times has called Cohen "one of the biggest players on Wall Street". The Wall Street Journal refers to Cohen as "arguably the country’s leading banking lawyer".[2]

Uhmmm... the fox decided the henhouse was too exposed for raiding... What is going on?

Anonymous said...

It doesn't get richer than this... from the S&C website on Cohen...

“With virtually all of Wall Street as his client, [Cohen] has solidified his role as one of the most influential private-sector players in the financial crisis. Over the past five weeks alone, Mr. Cohen and his team have advised Fannie Mae, Lehman Brothers Holdings Inc., Wachovia, Barclays PLC, American International Group Inc., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. in a blitz of mergers, rescues and cash infusions.” (The Wall Street Journal, October 9, 2008)