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In a stunning turn, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials have announced.
The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) up to $85 billion. In return, the federal government will receive a 79.9% stake in the company…
The bailout marks the most dramatic turn yet in an expanding crisis that started more than a year ago in the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry .
The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today’s rates. AIG will sell certain of its businesses with “the least possible disruption to the overall economy.”
Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.
Doesn’t it feel great to be so “protected”?
Safe..? If the assest could be sold off then why not let the creditors take it all or the private sector that the government was going to allow to come up with the bailout.
they don’t have but mabey half the amount in assets.This should not have been done it was the govt interference that caused this melt down because they tried to force banks to make loans to people who economically could not pay them back but were minorities so it was supposedly unfair that they were poor credit risks and the “feeling ” left forced the banks to loan them money in order to get good fed rates
I get the feeling that some time soon I will look in on my 401K and find it has evaporated. It is a good thing that fundamentals of America’s economy are sound or I would be concerned.
2 big to fail
#2 I think this comment from a boingboing thread is especially relevant in this instance:
“#34 posted by vespabelle , September 16, 2008 9:04 AM
Privatize the profits, socialize the risk! American 21st Century Capitalism at it’s best!”
How does the government getting a 79.9% stake in the company work? Does Bush get to put members on the Board? Will the government give it back once the loan is paid back?
For a company that has more than a trillion dollars in assets and 74 million clients in 130 countries, this feels like a “confessions of an economic hitman” type of thing.
Simple, find the people who made the money and take back the money they stole. Right now the American people are facing double jeopardy, it’s for being subservient and passive.
The important thing is that those idiots running well-managed, profitable businesses will learn an important lesson: fiscal responsibility is for suckers.
The same applies to all those deadbeats who keep making their mortgage payments and don’t spend beyond their means.
In the entire history of civilization, has there ever been a system of government that doesn’t work by screwing over the people?
Great. What can possibly go wrong?
OK, let’s start taking bets. I say WAMU needs $45 billion.
Bend over dude, your getting a bailout.
Nothing like wefare for the Corps.
I wish I was to big to fail. My 401 is down 30% and Ike blew my roof off :>( but I am just a reguler working stiff.
Ah, such a nice early Christmas present for AIG. And probably a few more to follow. Somebody recently said this about this situation. “They privatize the profits, and socialize the losses.” Or IOW, our government keeps bailing out these entities when they lose big. But when they get fat with bucks again (if ever), all debts and loans will be called off. So their board members and principle stockholders can reap the rewards, without needing to pay back. We don’t even collect most of the taxes that the major oil companies owe for drilling on public lands, now. How are AIG, Fannie May, Freddie Mac, and the rest, going to be any different?
This is another form of welfare that will kill this country.
We have the “bread” now we just need the “circus”.
Oops, we have that. It’s called televised war…
Hey, I just realized, now we can have universal health care: the U.S. government owns an insurance company. So they can make free/cheap health insurance available to all!!
(Next year’s headline: AIG loses $200 billion in health insurance division)
The real problem is that these companies (FNMA, FHLMC, Lehman, AIG) were allowed to get too big. Government on both sides of the aisle were enablers of the bad business practices and most likely fraudulent accounting. Barney Frank has championed Fannie and Freddie for years, dismissing any thoughts of reform, yet receiving tons of contributions from them. Obama received 85k this year from them. I haven’t seen it yet, but I’m sure McCain has as well. And Bush sure helped matters with his “compassionate” conservatism.
The fact that a company is too big to fail begs the question “Why?” If they are that big, then that hints at monopolistic, doesn’t it? All of these large institutions need to be looked at. If a company fails, the share holders should lose their shirts, and the assets sold off to the highest bidder. The insurance policies, financial products, etc would still be fine for the consumers, just with a new company. But in the case of AIG, if the feds didn’t step in, then the states would be on the hook, which would virtually bankrupt many of them.
Too big to fail just shouldn’t happen. But don’t hold your breath. The change we’re being promised from both sides will never happen. One thing is for sure in this world, politicians are full of shit.
Repukes ROBBED THE BANKS with the “S&L Crisis”, now they are LOOTING WALL STREET with the “Meltdown” !!! REPUKES ARE NOT THROUGH UNTIL THEY HAVE ***ALL THE MONEY*** !!! They WHINED AND WHINED AND SCREAMED AND SHOUTED FOR “DEREGULATION”, which only gave them the KEYS TO THE VAULTS, ENABLING THEM TO ***STEAL IN ALL DIRECTIONS*** !!! The LOOTING OF AMERICA is just about COMPLETE !!!
started a year ago????? lets get some perspective here……
this started with reaganomics…….
what has happed to the industrial midwest in now catching up to the rest of the country……
wait till it hits the rest of the country like it has hit here……
you aint seen nothing yet………….
#22, Actually, the problem started in 1913 when a handful of men, who controlled 1/6 of the world’s wealth, managed to convince the US government they could control the money supply more efficiently.
It grew worse in ’51 when they no longer had to report to the government on monetary matters.
And it hit rock bottom in 2008 when they were given regulatory/oversight powers of the entire banking system.
But I do agree with you. We ain’t seen nothin’ yet.
No wait, leeme see if I get this. Company’s so huge that if it goes under it’ll cause an economic crisis, so in order to avoid that they pass the economic crisis to the American taxpayer, It’s not that AIG doesn’t have assets why don’t they sell their part of one of the most expensive european soccer teams ever – Manchester United. How much ya wana bet that the present CEO of AIG not only keeps his job but is compensated for being so clever?! Looks like if you’re rich and powerful you can be as irresponsible as you like. The government will bail you out. In fact I predict a whole rash of bailouts between now and november. Economically the US is self destructing in slow motion, problem is they’re dragging the rest of the world with it.
#24, What really irks me is the big chunk of taxes they took from my company last year went to bail these guys out.
And people tried to convince me that paying my taxes was the American Way. Now do people see what tax money is really for?
So this is the way of unregulated capitalism, a la Bushco, Inc. Privatize the profits, and socialize the liabilities. Very astute.
More corporate welfare as far as I am concerned.
Unfortunately, it isn’t as unregulated as you think. The Fed has extremely broad powers.
The answer is simple — disband the Fed.
AIG: The Largest Wall Street Swindle of Tax Payer Money in History!
The 85 billion dollar bailout of AIG is not a bailout of AIG, but rather a bailout of insurance policies written by AIG insuring the risky investments made by investment banks, traditional banks, insurance companies and everyone’s favorite, hedge funds. Moreover, the Federal Reserve, which is made up of share holders who are in fact the very same investment banks, traditional banks, and insurance companies who will be paid on these AIG insurance policies, authorized their own escape. So in other words, this 85 billion dollars of tax payer money will be received by AIG and immediately paid out, in the form of checks, to all the players on wall street. Since the U.S. Government now owns 80% of AIG, can we please get a photo copy on the internet of every check written to wall street?