Black Hole Alert: AIG to Get as Much as $30 Billion More

[girl gone mad]

Black Hole Alert: AIG to Get as Much as $30 Billion More
http://www.nakedcapitalism.com/2009/03/black-hole-alert-aig-to-get-as-much-as.html

Let's see, the credit default swaps market, due to some netting, is now somewhere north of $30 trillion (as opposed to its earlier "north of $60 trillion" level). Investment banks were believed to have hedged most of their exposure via offsetting contracts, but AIG wrote naked protection. And as jAIG itself is at risk of getting downgraded again, the collateral posting requirements keep rising.

Some analysts (including Chris Whalen of Institutional Risk Analytics) have offered theories as to how the government could void a lot of CDS (some have argued for getting rid of them altogether, others argue for eliminating them in cases where the protection buyer does not hold the underlying bond/exposure). Before you say, "they can't do that", recall the effective confiscation of gold in the Great Depression. rationing, wage and price controls, the suspension of habeus corpus. There is a good deal that the Feds could do if they chose to, trust me. But it's easier to bill the poor chump taxpayer than take on the financiers, even after they done so much damage.

From Bloomberg:

American International Group Inc., the insurer deemed too important to fail, may get a commitment for as much as $30 billion

in new government capital after a record quarterly loss, said two people familiar with the matter.

The insurer may also be allowed to make lower payments on government loans, said the people, who declined to be identified because there was no public announcement. New York-based AIG may forfeit part of stakes in its two largest non-U.S. life insurance divisions to lower the firm’s debt, the people said....

AIG may give up stakes in American International Assurance Co. and American Life Insurance Co., two life insurance divisions that operate in countries from China to the U.K. The holdings would go to a so-called special purpose vehicle to eventually position them for sale so AIG doesn’t have to divest them at distressed prices, according to one person familiar with the matter.

http://www.nakedcapitalism.com/2009/03/black-hole-alert-aig-to-get-as-much-as.html">More...

[MercutioATC]

1. ...and you DO realize that AIG, in total, is only worth $1.13B as of last Friday.

Yes, that means we've invested $120 BILLION and are giving another $30 BILLION to a company with a total value of a little over $ONE billion.

[Idealism]

3. The notational amount they are on the hook for is potentially $400 billion

[girl gone mad]

2. Also see: Feds Throwing Another $30 Billion Into AIG Black Hole

Feds Throwing Another $30 Billion Into AIG Black Hole
http://www.businessinsider.com/feds-throwing-another-30-billion-into-black-hole-aig-2009-3


Some details of the latest AIG bailout have emerged:

* We're throwing another $30 billion into the black hole
* AIG is abandoning its plan to pay us back and is instead giving us equity stakes in two businesses it has been unable to sell. No details yet on the imputed value placed on those unsaleable businesses, but safe to assume its astronomical. (Our government being the sucker of last resort).

If a comet smashes into the earth tonight, there will at least be one positive side effect: The end of AIG.



(Who's that a picture of? That's Joseph Cassano. He used to run AIG's financial products business. He's the one who got paid hundreds of millions of dollars for writing the credit default swaps that have swallowed $150 billion of our money and counting).