March 2, 2009
New AIG Bailout: A Complex Mess
AIG has lost $61B in the 4th Quarter and the government has responded with another bailout plan. The new plan does two things: First, it corrects a horrible first plan and, second, it dumps in more cash. The new problem is that the new plan is a complex mess. The plan lowers the interest rate AIG must pay on the government's line of credit, offers lines of credit to a variety of AIG subs, and gives up cumulative dividends on the preferred stock the government holds. In exchange the government takes a substantial ownership interest in two of AIGs more profitable subs (and continues to hold a potential 77.9% ownership interest in AIG itself with outstanding warrants). The ownership interest is held in a "trust" with trustees appointed by the Treasury. The government exchanges its Series D Preferred for two new issues of preferred, Series E and Series F and new out of the money warrants ($2.50 strike price). Why the complexity?? To hide the true extent of the bailout (for how much cash are we in??) and to hide the true extent of AIG's problems (will this hold??). In many ways, the AIG bailout is the government's worst of its worst efforts. And it will get worse yet.
March 2, 2009 | Permalink
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I called my financial advisor today and asked that he sell everything that I own that has any AIG stock in it. I don't want to own the stock or any funds that hold the stock.
Hit them in their pockets!!!
Posted by: Brenda | Mar 16, 2009 4:14:27 PM
It's time to start marching in the street people. I support Obama but we need not just some hot air and minor action of change we need a real and serious revolution of change. It seems we need to literally start pulling them out of their million dollar homes, penthouses, planes, private clubs, 2nd/3rd/4th.....homes and shed some blood to drill it in their head. If the government wants to avoid a bloody revolution then we had better see alot more than just Madoff going to prison. I want to hear that hundreds if not thousands of the scumbags are under investigation, are going to prison, are having their assests seized, etc. And, isn't it about time for there to be limits on salaries and bonuses!
Posted by: Derek | Mar 17, 2009 8:07:08 AM
Congress should pass a special law creating a 95% tax on bonus income from executives who receive bonuses from companies who have taken billions in Tax payer money for a bailout. That way let the execs get their bonuses the fed will take it back in the form of a new “executive bailout income tax”
Posted by: Todd Allmand | Mar 17, 2009 9:20:42 AM
AIG should be ashamed of giving bonuses this year to their executives! This is a disgrace that we are paying for bonuses! I hope they understand the consequences of their actions!
Posted by: Andrea | Mar 17, 2009 10:15:27 AM