Paulson Considers A Conservatorship For AIG

Posted by John Carney, Sep 16, 2008, 1:55pm

Officials at the Treasury Department are considering a government takeover of AIG, possibly placing the company into a 'conservatorship' as occurred with Fannie Mae and Freddie Mac, according to a person familiar with the thinking at the Treasury. There may be considerable legal obstacles to such a takeover, as it is not clear even to Treasury officials what the authority for such a takeover might be.

It is far from certain that this plan will come to fruition, according to the source. The questionable legal authority for the move may make a Fed loan more likely. The discussions at the Federal Reserve and the Treasury are ongoing. In fact, it seems as if many of those involved with the discussions are floating rumors about the discussions, perhaps hoping the market reaction could influence the outcome.

2Recommend this! 19Comments

Comments

1

Posted by guest, Sep 16, 2008 1:58PM

US Gov diversifying into PE -- isnt that too much financial concentration

2

Posted by guest, Sep 16, 2008 2:04PM

Off topic, but I'm surprised there's no financial media coverage of Russia crashing 20% overnight!

http://www.bloomberg.com/apps/quote?ticker=MICEX10:IND

3

Posted by guest, Sep 16, 2008 2:07PM

Feds have no Regulatory authority over insurers...states control it

NY State could own it, if Fed wants to backstop NY State

4

Posted by guest, Sep 16, 2008 2:09PM

Watchout for Bonus clawbacks: Fraudulent tranfer

In the 1990s, however, regulators sued former employees of Drexel Burnham Lambert, an investment bank that declared bankruptcy in the wake of collapse, for $250 million of bonuses that many agreed to repay.

-NYT

5

Posted by guest, Sep 16, 2008 2:19PM

Step 1: Fed makes "loan" to AIG with extremely onerus terms that are likely to be breached within days.
Step 2: AIG breaches terms of loan, Fed has authority to step.
Of course, I'm sure this breaches some sort of law (or ethics), but these are extraordinary times.

6

Posted by guest, Sep 16, 2008 2:21PM

Hugo Chavez is getting schooled by Ole Hank.

7

Posted by guest, Sep 16, 2008 2:22PM

Maybe Britany's dad is available to serve as the conservator - considering what a great job he did straightening out his (slut) daughter

8

Posted by guest, Sep 16, 2008 2:22PM

preposterous

9

Posted by guest, Sep 16, 2008 2:23PM

Hugo Chavez is getting schooled by Ole Hank.

10

Posted by DrederickTatum, Sep 16, 2008 2:24PM

You know what's dangerous about all this?

Even if the Govt is well-intentioned now, a future Treasury might abuse the power to take over private companies... Save BSC, Don't Save LEH, Save FNM, Don't Save AIG...

Even if the isn't an institutional bias (and there isn't one), someday all this government authority could (will?) be manipulated for non-public gain.

Stay out of it. If everything goes to hell, then new banks will rise. Always have, always will.

11

Posted by guest, Sep 16, 2008 2:33PM

no. fucking. way.

12

Posted by guest, Sep 16, 2008 2:37PM

What did this Roubini guy say days ago? Wait...

"United Socialist State Republic of America"

13

Posted by guest, Sep 16, 2008 2:37PM

What did this Roubini guy say days ago? Wait...

"United Socialist State Republic of America"

14

Posted by guest, Sep 16, 2008 2:39PM

What did this Roubini guy say days ago? Wait...

"United Socialist State Republic of America"

15

Posted by guest, Sep 16, 2008 2:40PM

Blah, maybe Paterson is more clever than we thought. All he has to do is tell AIG they need to pay back the $20 billion from yesterday and viola! instant conservatorship.

16

Posted by Rex Bannister, Sep 16, 2008 2:44PM

@2. Ha ha, take that you crazy rooskies!

17

Posted by guest, Sep 16, 2008 2:45PM

you know, I don't like that roubini guy, but I agree with him on this: the fed looks like it's "out of bullets."

great. maybe now free enterprise can take over.

18

Posted by bmwstox, Sep 16, 2008 2:46PM

Good, keep sodomizing the US taxpayer. I don't recall Paulson or Bernake being elected "by the people." This is called stealing, but then again it's how Uncle Scam operates.

19

Posted by guest, Sep 17, 2008 1:39AM

I am an employee under the umbrella of AIG. AIG has 1 trillion Dollars in Assets don't forget. They owe 100 Billion dollars for this mortgage debacle that the Fed has got us into in the first place. At an interest rate of over 11% because of that much money and their current liabilities, the government will make out in this deal. They own over 80 very very profitable companies, any of which could easily pay all of the debt, however the insurance companies are obligated to hold so much in their accounts to cover the losses which has just been increased in the past 2 years which tripled that value. An analogy would be Someone needing to sell a Ferrari for $2500 in order to pay off the Mafia for a gambling debt. Or you can borrow $2500, sell the car for fair market value and then have 247,500 left over. AIG bit off more than they could chew with backing the subprime mortgages and did not plan on insuring that many foreclosures where all of that money has been lost. However, I do not think that the government is obligated to bail out an insurance company who analyzes risks for a living in the mortgage area, unless they know the company is good for it. This so called Bailout leaves little risk to the federal government and the taxpayers. There is a moral dilemna that arises with this because if AIG defaults on the loan, then The US Government will have all of the ASSETS of AIG giving more control over business and THE PEOPLE. This bailout could make or break the American Society as we know it and an AIG failure will result in an American Socialist Society. AIG will prevail with this loan because they are not a SUB-PRIME company meaning very low risk to the Fed and taxpayers. The Fed issued at an 11% interest rate to discourage other companies and this will probably be the very last Government Bailout we see. Through all of this upheivel, America is still the most prosperous country in the World and not in a recession yet. Get ready for High Scale inflation in the near future.

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