The news that the government was discussing a possible bailout of American International Group was closely followed by a rise in the major averages, with rises of almost a quarter of a percentage point in the Dow, the S&P and the Nasdaq. Shares of AIG jumped on the report, rising two dollars. But this burst of buying was short lived, and shares have now dropped down below where they stood moments before the report. a financial lifeline, AIG’s survival might come into question as the credit squeeze weighs on the company.
There seems to be widespread agreement that there will be no financial lifeline for AIG coming from the private market. This has some believing that the government will step in as a last resort backstop. Others, including nearly two-thirds of DealBreaker readers responding to our reader survey, believe that AIG will file for bankruptcy.
One rumor that we’re hearing is that the possibility of a bailout was floated as a test to see the market’s reaction. We’d like to dismiss the idea right now. The reaction to a government bailout was completely predictable. No such craftiness was necessary, and we don’t believe the Fed engaged in this underhandedness just for fun.
Although we already have one survey on AIG running, we’re going to run another on this government bailout story now that it’s out there. After the jump, tell us whether you think the government will step in.
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
-Hi, I am Billy and I work in Finance.
Oh, yeah? What do you do Billy?
-I am an Analyst, for the fed.
Oh wow! Take me home, you’re my hero!
Gasparino should be kicked in his greasy head for going on air with that garbage.
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=STRK:MESELX:IT&item=320299692197
AIG can just grab Lehman’s form and use it as a template.
AIG can just grab Lehman’s BK form and use it as a template.
The Fed can’t risk bailing them out then watch another downgrade or drop in the value of AIG assets recreate this situation a month from now.
If the fed bails out AIG, why not GM why not ford. AIG has a 100,000 emplyoees. GM has 200,000.
Paulson has his ass to the fire on this one. He either toes the line on this one or opens the flood gates. AIG is the first of about 6 instituitons that will stand in line in the next 2-3 weeks for a paulson handout.
He cannot give in on this one or we will have a run on the fed/treasury instead of the financial instituions.
AIG had 6 months to get its house in order and it didn’t why should it be rewarded with fed money.
AIG has 3 operations centers here in Wilmington with 3,000 employees total. Lehman has a building here too. I don’t know how many employees with LEH, but most of them cleaned out their desks yesterday.
I think the govt will step in on AIG with a bridge loan, so AIG can sell off some of their assets. As I understand it, only AIG’s massive financial services unit is rotten. The rest of the AIG subsidiaries aren’t.
The Guy from Delaware
p.s. I hope AIG doesn’t go bust. 3,000 jobs is a lot for Wilmington, Delaware.
If the fed bails out AIG, why not GM why not ford. AIG has a 100,000 emplyoees. GM has 200,000.
Paulson has his ass to the fire on this one. He either toes the line on this one or opens the flood gates. AIG is the first of about 6 instituitons that will stand in line in the next 2-3 weeks for a paulson handout.
He cannot give in on this one or we will have a run on the fed/treasury instead of the financial instituions.
AIG had 6 months to get its house in order and it didn’t why should it be rewarded with fed money.
@5/6… LOL, if it wasn’t so sad.
AIG = huge buy under 3 dollars
@ 8/10, it’s not just a question of employees, it’s a question of the interconnectedness of AIG. If GM goes under, that sucks hard for the employees, but the rest of us will just buy Hondas. If AIG goes under, it fucks up shit for who knows how many CDS counterparties.
NY regulators and politicians violating the law in a desperate and ill-fated attempt to save AIG.
File the Paperwork
While Sunday’s announcement that Bank of America would “merge” with Merrill Lynch helped contain some of the contagion from Lehman Brothers unprecedented bankruptcy filing, the market is crying foul. With BAC trading at $28.18 minutes ago and a 0.8595 conversion factor, MER shares should be priced at $24.22 but were trading at $20.28, a $3.94 discount. Assuming the transaction closes at the end of 1Q09, the return on holding MER is a stunning 38.9%.
who is this douche in the glasses on cnbc? not gasbag, the other one
fuck AIG is all i have to say.
here is cramer starting his analysis on all this:
“Let’s take AIG (NYSE: AIG) (Cramer’s Take). Here’s a company that has lots of liabilities but also lots of assets.”
if this is not funny i dont know what is
I think the gov needs to save up for the citis and wachovias. the regular insurance businesses of AIG will be safe. the parts that would be saved would only be saved temporarily.
How much would a GM going broke trickle down into the average economy of many communties across the USA. It would be castrophic. Think about 3 jobs in some area being lost for every one GM employee.
And no i an not argueing for a GM Bail out.
But what i am argueing is that if the fed opens for AIG it is opening a huge can of worms. And the nobody learned shit from the BSC bailout. It just got worse despite rhetoric suggesting otherwise.
If the stuff about the private sector not wanting to put up the loans because AIG doesn’t have the collateral to support them is true, why the hell should the government?
Did PE offer funding to AIG?
Is John Thain the least egotistical?
and how bout pimco bailout? news today that Gross has guaranteed $760m of debt issued by AIG. need a bailout soon pls.
AIG will get a bridge. If they fail the various states and the Feds will need to get involved. Hence NY letting the subs move out cash.
Are the people discussing GM not in finance? It seems they are missing the point completely … just my humble opinion.
As much as this has already hurt me, and mostly my portfolio, I really think that the government should stay away from this one. Other insurance companies can pick up the policy businesses, and let the banks kill themselves over their overleveraged CDS plays.
If the government steps in, a long line will form over at the treasury in DC: the airlines, car manufacturers, other banks, and so forth.
Just like we touted the free markets as a way to unlimited riches, we have to stand up and take the pain as well.
25 I guess your point is that, while the job losses in both industries are comparable, the interconnectedness of financial institutions makes AIG a much bigger problem. Maybe so, but tell that to the voters in MI, a swing state, who are looking at potential job losses.
AIG WM WB WFC GS C
What about the pool that all the security firms (that are left) were throwing $ 7 bill into that was supposed to be used to protect themselves?
Willumstad should get on his hands and knees and beg Blankfein and Mack for money like the homeless man he is about to become.
No need to bailout AIG. They knew the risks. It’s enough that Paulson had the audacity to bailout Fannie & Freddie to the tune of $200 Billion, with trillions more in liabilities. Are they trying to kill the US dollar? The Fed loves inflation and they love wars, that’s how they make their money & sodomize the US taxpayer. This time Uncle Scam is running out levers to pull. It would be good to see AIG, GM, WM, Ford all go under — it’s called a free market, remember?
AIG bailout would be another step towards socialization. Better to endure the short term pain then live in a non free market society. Let AIG and all their soon to be screwed counter parties fail. Economy will be stronger for it in the end regardless of the great depression we will likely have to survive for the next few years.
Jim Cramer is a no talent ass-clown
the bailout exchange
aig – a’int gotit
leh- lehvus alone
bs-bs
ml-monkeylane
bac-bailout associates and
jpm-just pumped money
c-cockeyed
No need to bailout AIG. They knew the risks. It’s enough that Paulson had the audacity to bailout Fannie & Freddie to the tune of $200 Billion, with trillions more in liabilities. Are they trying to kill the US dollar? The Fed loves inflation and they love wars, that’s how they make their money & sodomize the US taxpayer. This time Uncle Scam is running out levers to pull. It would be good to see AIG, GM, WM, Ford all go under — it’s called a free market, remember?
No need to bailout AIG. They knew the risks. It’s enough that Paulson had the audacity to bailout Fannie & Freddie to the tune of $200 Billion, with trillions more in liabilities. Are they trying to kill the US dollar? The Fed loves inflation and they love wars, that’s how they make their money & sodomize the US taxpayer. This time Uncle Scam is running out levers to pull. It would be good to see AIG, GM, WM, Ford all go under — it’s called a free market, remember?
no one should be bailed out-for years the financial sector at large has been raking in the cash and flippin’ the bird to all that have been mowed over in the process. Well, its time to pay the piper. I feel for the folks that will be out of work, and i may be one of them. But, I will get through this, just as I did in 88, just as i did in 02. No more Merrill, no more Lehman, its a shame but, there’s no more Soly and no more DLJ either. What emerges will be better and stronger in the long run, and in a few years, this will be another blip
@20 You are an idiot
26/8/10 – AIG has nearly $450Bn in derivatives exposure and insures huge amounts of corporate debt against default. It can’t be compared to airlines or GM.
Saying that it is short term pain to let AIG fail is once again missing all the connections and long term effects. Think about the budget crisis that many states are already facing, the employment crisis already happening in finance, and then their huge book of assets that would flood the market. Not sure a government bailout is a great solution, but their failure would create a lot of pressure in areas that are already hurt.
Also, with their failure I assume home insurance would be safe, but what about all the hurrican victims in TX … not sure about this as I have not looked into it … but just another issue to face.
“Will the government or the Fed bailout AIG?” ?
what the fuck is wrong with my country
@30
Paulson had no choice on FNM/FRE, they were for all intents and purposes Government entities from the get go. The cost to the FDIC to bail out all the community banks that own FNM/FRE senior debt would have caused a lot more pain/tax payer dollars than making them what they should have been in the first place – Government Entities
Gasparino should be put in jail for fueling the rumors.
39…free market capitalismm is a bitch. Roll with the risks and know your exposure or get burned.
If PE offer infusion – they should take it.
@43 – sure you’re mad but take a step back, that’s a pretty fucked up thing to say against free speech
Not missing the connections or long term effects here. In the short, there will be a systemic failure of the financial markets and capital will be difficult if not impossible to get, and depression will be inevitable. However in the long term, the people and the assets will still exist and the economy will eventually be recapitalized.
AIG has assets which can be sold in chapter 11 and cover policy holders. Let financial counterparties be the bagholders this time.
@45…market manipulation is a crime.
Oliver Wendell Holmes: 1st Amendment does not give a person the right to yell fire in a crowded theater.
Just a counterpoint.
@45…market manipulation is a crime.
Oliver Wendell Holmes: 1st Amendment does not give a person the right to yell fire in a crowded theater.
Just a counterpoint.
@46 hits the nail on the head
$$$
What was AIG thinking when they turned down capital from JC Flowers, KKR and TPG? They knew they were going to get downgraded, and would need more money. They needed a fraction of the funds that they need now. If the Fed helps out, aren’t they pretty much going to lose control anyway?
AIG’s Fate:
http://newyork.craigslist.org/mnh/bfs/841206401.html
Palin wants to give AIG a bridge loan to nowhere
@47 What about the right to yell theatre in a crowded fire?
I pity all the suckers in Texas waiting on AIG to send them insurance checks for hurricane damage. Paterson just let AIG spend their money to keep the lights on.
46-
But do we really want to go into a depression?
@53…poor attempt at humor.
If AIG turned down PE why in the world would the Fed/Tres step in and help now…
@54 – we brought it on ourselves. depressions aren’t bad for everybody – they are just a redistribution of assets
@54
At this point, I see a depression as the best of all possible outcomes. Dollar collapse and subsequent hyperinflation would be far worse.
-46
What are the chances of a FoFs management company making money, not by charging high fees, but by listing the fund on an exchange…and owning a % of the shares (say 500,000 for ex)..(still with us) and then doing what people possibly w/o consciences people try to do in an illiquid market? Is this serious, hm, you have to ask yourself.
Posted by Rex Bannister, Sep 16, 2008 12:09PM
fuck AIG is all i have to say. \\\
Yeah… fuck AIG, fuck Lechman, fuck Merill Linch, fuck Fannie May, fuck General Motors, fuck Wall Street, fuck Dow Jones, fuck Ben Bernanke, fuck George Bush and fuck the United States of America !!!
@53 Not my area but I think Paterson is only able to loosen the regulatory hurdles in NY state so he just put everyone in NY at risk.
I suppose we shall just have to wait and see. Right now some really cheap stuff out in the market to keep your money safe if you know where to look so not insanely worried. Great time for our (my?) generation to learn as well.
@40 – we’ve already established here that Fed != taxpayer if thats what you’re insinuating.
59- breathe
Why do we need investment bankers anyway? They just create temporary bubbles (leveraged buyouts in the 80′s, Asian currency crashes and dot coms in the 90′s, securitized mortgages in 00′s) to enrich themselves while the taxpayers and the pension funds (i.e. the retirement savings of America’s workers) are left paying for it all. Investment bankers = douches. The world can live without their bottles of patron, their Armani suits and their ferraris. Give the American people a coke and a hamburger for lunch and PBR and a shot of old crow for dinner and they’ll be content.
@60 sounds like the type of thing they’ll be arguing about down at the old Custom’s house when AIG files for BK. I’m sure the hiurricane victims have plenty of money for lawyers…
wait what? they bought insurance so they wouldn’t need lawyers? Silly bastards, looks like they needed to buy insurance insurance.
yeah chill 59…the dude abides…
Smokey’s a pacificst…
Counterparty risk is philosophically no different than any other type of risk one bears when making an investment (interest rate risk, credit risk, directional risk, etc.) Why should the government guarantee counterparty risk when they clearly do not (and cannot) guarantee any other type. If I open a hedge fund, buy all the natural gas futures I can buy (levered up 20 to 1) and the market moves against me, no one would argue that I should be bailed out by the taxpayer. Esentially, why should different types of risk be treated differently? Risk is risk.
@53 – Thats an old Steve Martin bit, so 55 is wrong, it is funny
No more bailouts for anyone. Everyone wanted to go to the party and now the Fed has to clean up? No way.
So JC Flowers, KKR and TPG come back to the table with an offer that is 20% less and the Fed gives AIG the middle finger and says “fuck you or fuck you harder take the offer.” Why is that not realistic?
SPODE
Munishe, your stocks are not cheap… They are terribly expensive for existing environment. So… Stock will be cheaper… cheaper… cheaper… I wonder, why this guys who buy stocks right now on NYSE, making it +0,5 %, completely do not understand that.
@59 – come back when you’re sober. Or get some help with your anger issues.
Peace
Who said anything about stocks?
No more bailouts for anyone. Everyone wanted to go to the party and now the Fed has to clean up? No way.
all writing on @59, suggesting to calm down. U all just dont understand humour.
Is Spode right? Well, is he? Is he right? ‘Cause I know that’s the *popular* version of what went on there. And a lot of people like to believe that. I wish I could, but I was *there*. I wasn’t here in a class room, hoping I was right, thinking about it.
I was up to my knees in rice paddies, with guns that didn’t work! Going in there, looking for Charlie, slugging it out with him; While pussies like you were back here partying, putting headbands on, doing drugs, and listening to the goddamn Beatle albums!
This is a political hot potato. NY Gov is putting Paulson in a bind. Enough said.
Oh one more thing. Bring some popcorn.
I believe that David Paterson needs to pull out the big guns. The old:
“even a blind man can see that the Fed needs to save AIG”
joke
BULL SHIT No way. Whose CDOs are these? I’m not paying for them no way not now not once not never.
http://www.youtube.com/watch?v=skCV2L0c6K0&feature=related
How about we all meet up at the Ketch after work tonigh?
Maurice, whom they hated, they now appear to be willing to love.
@80 the governor is in WAY over his head.
#32: I am going to go out on a limb and say that you did not go along with his suggestion, as I did, to buy a boatload of C puts (Sep 15, Sep 17.5) on Friday. Am I right? Am I right?
Here’s a solution, a radical one, but also one that might work. It would be politically very popular as well.
Since all the IB’s and ins cos are intertwined with all that bullshit counterparty risk, try the following:
Make any govt loan to AIG contingent upon each of the involved conterparties divulging the names of any current and former employees, you know, the ballers and the rainmakers who were actually personally involved over the past 5 years in creating this f’n mess, and who amassed fortunes in the process.
Hunt them down, regardless of where they work now, retired or not, and immediately proceed to sieze all their personal f’n assets. Strip them of whatever they have, and then prosecute them, put their rotten asses in prison with no bail, and fine them treble damages on top of it. I’m sure the gov’t can come up with charges that will stick, and you can also bet your ass that the IB’s, counterparties, etc will give the govt plenty of ammunition, since their own futures are at stake. Just see how fast they’d roll over on one another, just like UBS did with their 14,000 Swiss accounts when Sen. Levin and Uncle Sam came knocking not long ago. How long did UBS last? 4 hours, was it?
All that baller money would go a long way to restoring public confidence, it would put the fear of God in future ballers, and it would definitely clean up the open, stinking sewer that goes by the name Wall Street.
This could work. Uncle Sam can do damn near anything if he wants to.
The Guy from Delaware
Lets stop feeding on the corpse of AIG, who can we move onto now….I have the hankering to contribute to the collapse of GS/MS or maybe Lazard as a snack.
While I have a distaste for a government or taxpayer bailout, what burns me up is that there are CEOs from all of these devastated firms (AIG, LEH, BSC, etc.) that are pocketing GINORMOUS pay packages after leaving these companies in disarray.
Any *regular* employee would be fired for lesser infractions and a “don’t let the door hit you on your way out”
For starters, (at very least), these douche bags should have to return every penny of unearned compensation for their lack of financial stewardship.
45 – I understand freedom of speech however this equates to yelling fire in a crowded theater.
45 – I understand freedom of speech however this equates to yelling fire in a crowded theater.
45 – I understand freedom of speech however this equates to yelling fire in a crowded theater.
If AIG doesn’t come up with the cash to bail out the hurricane victims, what is the official policy on cutting up AIG executives and selling their organs on the black market?
89, 90, & 91,
You can yell fire in a crowded theater if it’s on fire.
@#88…
“For starters, (at very least), these douche bags should have to return every penny of unearned compensation for their lack of financial stewardship.”
We should start with one Stanley “Affirmative Action” O’Neal, and proceed from there.
The Guy from Delaware
In what world does David Patterson pressure Hank Paulson? I am going to bet that the only two guys from NY/NJ that Hank actually listens to are Bloomberg and Corzine
When freddie and fannie went down everyone said there was one guy in the room – the ultimate puppet master: Hank Paulson.
Lets coin a new phrase…Moron Hazard
Fuck all the rich cocksuckers. You can not take your money with you. You are still going to die and turn to dust. Fuck you and your children.
iwaT7B I think this is a real great blog article.Really thank you! Keep writing.