US Considering AIG "Conservatorship"
Bloomberg:
Excerpt:
The U.S. Treasury is considering taking over American International Group Inc. under a conservatorship as one option to address the insurer's crisis, according to two people briefed on the discussions.
Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company's situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said. The talks are continuing, he said.
Goldman Sachs Group Inc. and JPMorgan Chase & Co., which have been leading efforts to find a private-sector solution, informed the Fed that such an effort would be difficult, the person said. Under another option, the Fed would extend a loan to New York-based AIG, according to a person informed of the matter.
Source:
Treasury Said to Be Considering AIG Conservatorship
Craig Torres and Elizabeth Hester
Bloomberg, Sept. 16 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a11UW1B8w8uM&
Tuesday, September 16, 2008 | 04:47 PM | Permalink
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Comments
Why the fuck not! Sheesh....
Posted by: Rob P | Sep 16, 2008 4:54:21 PM
omg... wtf?!!!
All I can say if that happens is that equity and debt should be wiped to ZERO, and the government should only be there as the counterparty to unwind the derivatives bets.
Can anyone remind me which country I live in? I thought it was the U.S.A. but I'm not 100% sure anymore
Posted by: HCF | Sep 16, 2008 4:54:35 PM
What an outrage ! Hank Greenberg & Co should not be bailed out by the government.
Posted by: Nescio | Sep 16, 2008 4:56:42 PM
Aren't insurance companies regulated by the states where they are operating / doing business and not the Fed or Treasury ? If AIG is insolvent , why aren't the various state insurance commisioners not involved and why wouldn't AIG be placed in run off mode ? Just wondering ....
Posted by: fred | Sep 16, 2008 4:58:10 PM
So what does this do to the CDS that AIG wrote?
Posted by: Dave in Oregon | Sep 16, 2008 4:59:09 PM
They shouldn't get bailed out, although I would support doing ANYTHING that prevents the entire world economy from melting down...
AIG is too big to fail...
Posted by: SINGER | Sep 16, 2008 5:01:12 PM
What would the week be without a major bailout of some sort? Will they bail out the equity and debt holders? I'm guessing no on equity and yes on debt (our Chinese masters probably have something to say about this).
Next!!!
Posted by: Jeff M. | Sep 16, 2008 5:02:35 PM
Bush admin motto "The buck stops over there'
Pondscum Bush admin just wants to run out the clock to Nov 4 and then its somebody else's problem to deal with.
Comrades Bush, Paulson and Bernanke Welcome You to the USSRA (United Socialist State Republic of America)
http://www.rgemonitor.com
Posted by: km4 | Sep 16, 2008 5:04:26 PM
Laughing my ass off.. this is all so predictable. I wonder what the number is going to be from this one... this is why I have been selling out of my Treasuries the last few days.
The Fed looked into the CDS black box at AIG and they did not like what they see (perhaps what Art Cashin calls "a nuclear sized cockroach"). This rescue will be marketed as a "saving the man in the street's insurance policy" kind of thing, but of course that's not why they are doing it. Reminiscent of the Bear Stearns-JPM deal and the Fannie-Freddie save, it's all about saving the counter-parties.
Financials and gold have probably hit bottom for now, it's time to give the SKF a rest for a while, guys and let a good ol' bear market rally take its course.
Shh... what's that sound? I hear the printing presses......
Posted by: leftback | Sep 16, 2008 5:05:18 PM
its up to the government to support AIG because they founded the company in the first pla.... what, they didn't.... wtf? screw them then.
Looks like the Fed is only going to save the companies that can really fark up the economy.
Learn from this lesson LEH, JPM, BAC, MS, etc. You didn't do piss poor enough to get a bailout. But its not too late. There is still a lot of taxpayer money left. Just leverage yourselves up to the hilt and plunge deep into what is left of the CDS market.
Posted by: andrzej | Sep 16, 2008 5:12:48 PM
If AIG is too big to fail, we should crush it into little pieces.
Also, just like back in the LTCM days, everyone is saying "this will kill the markets!!" Well, we have no idea that it actually would. LEH going under only chopped up 200 - 300pts. BFD. This is an absolute outrage.
Posted by: Lloyd | Sep 16, 2008 5:13:01 PM
NOOooooooo! I smelled a bailout coming today and placed a little bet on $5 Sept calls. It sucks when you're (mostly) right but still lose.
Posted by: mappo | Sep 16, 2008 5:14:59 PM
"Reserve's Primary Money-Mkt Fund NAV Set At 97 Cents"
Here we go...
Posted by: Vermont Trader | Sep 16, 2008 5:15:52 PM
Yes, of course this is reprehensible. AIG is a loathsome company and it does indeed deserve to fail. But we have to play what we see and trade in between the bailouts, rate cuts and kick saves.
Unfortunately as with Bear/JPM, there is an appearance of systemic risk, which might well be real, if anyone at the Fed actually understood the web of derivatives, which I am betting they don't fully, at present - who does? This is the same as Fannie - it has to be done so they can get some derivatives guys in to really look under the hood while the car is in the chop shop.
Look out the window, ROTW is still functioning. Time for dinner. More fun tomorrow.
Posted by: leftback | Sep 16, 2008 5:24:21 PM
Privatize the profits, socialize the losses. Bailouts for the rich, pull yourself up by your bootstraps for the poor. Golden parachutes for the connected, personal responsibility for the proles. Anyone wanna bet we double our prison population in the next decade? If we last that long that is.
Posted by: Max Thrax | Sep 16, 2008 5:26:13 PM
GAH!
This is just wrong. They put it in conservatorship for a few years then once it's profitable again re-privatize it, fucking the tax payers twice - once during the bailout and later when it actually might help the balance sheet. The tax payers get screwed but the big boys are the only ones that get an orgasm.
Posted by: BobC | Sep 16, 2008 5:29:24 PM
Isn't it this we Europeans call "Nationalization"?
And depending on your politics, it may not even be a bad word.
Not a particulary capitalistic move, but it may be the least bad one in the long term.
Cassandra (In T) didn't know just how right she'd be, going "We are all Swedish now" the other day...
Welcome to the Stockholm Syndrome people!
Posted by: Upandaway | Sep 16, 2008 5:30:02 PM
"Conservatorship"
is that the new code word for
TOO BIG TO
Fail
Bail
impale
OH Hail
Posted by: MarkTX | Sep 16, 2008 5:30:18 PM
And why is the dollar still holding up? How can there be ANY confidence let in the U.S. financial system?
Posted by: BobC | Sep 16, 2008 5:32:18 PM
maybe now? we'll see this a little more clearly:
Abolition of Property in Land and Application of all Rents of Land to Public Purpose.
A Heavy Progressive or Graduated Income Tax.
Abolition of All Rights of Inheritance.
Confiscation of the Property of All Emigrants and Rebels.
Centralization of Credit in the Hands of the State, by Means of a National Bank with State Capital and an Exclusive Monopoly.
Centralization of the Means of Communication and Transport in the Hands of the State.
Extension of Factories and Instruments of Production Owned by the State, the Bringing Into Cultivation of Waste Lands, and the Improvement of the Soil Generally in Accordance with a Common Plan.
Equal Liability of All to Labor. Establishment of Industrial Armies, Especially for Agriculture.
Combination of Agriculture with Manufacturing Industries; Gradual Abolition of the Distinction Between Town and Country by a More Equable Distribution of the Population over the Country.
Free Education for All Children in Public Schools. Abolition of Children's Factory Labor in it's Present Form. Combination of Education with Industrial Production.
Posted by: Mark E Hoffer | Sep 16, 2008 5:38:18 PM
A conservatorship
let's look at the mechanics (to get to the desired results)
1. protect the policy holders (insurance line)
2. eliminate the shareholders equity position
3. correct the cash positive position
4. release the companies assets to bidders
which would cover government cash provided
5. The excess after the release should go to ___________?
(Lawyers,Deal Makers, etc)
6. The shell corporation would be legally bankrupted - to whip out any shareholder participation.
OK - Who has the authority, by law - to accomidate 1 thru 6?
Posted by: la grande poussee | Sep 16, 2008 5:42:40 PM
Hello all,
This is absolutely ridiculous. No one should bail out anyone let the free market forces flow. The faster we return to what "normal trend" should have been the better..... then we can rebuild or start over at that point. We (my generation and the next) are already screwed (no social security/pension/job exported/insurance/credit/you name it). I'm a finance major and political/international economics double minor student. I am looking at this now as a major waste and expensive waste at that. The only real chance I have if the brainiacks keep playing this sick game is to try and trade the paultry amount of money I have using the understanding I have of the liars and maniuplators to try and gain something that amounts to a medium of exchange. This truly sucks. Stop hurting us further in this sick game.
P.S. sorry about my rant
Econ 101
Posted by: Economics 101 | Sep 16, 2008 5:43:58 PM
Bullshit, my libertarian friend. Yeah, Sweden without the six weeks vacation, one year paternity leave, guaranteed pension, etc. More like Crony Capitalism, socialism for the rich and debt peonage for everyone else.
Posted by: georgia pig | Sep 16, 2008 5:46:34 PM
Gotta love this definition:
Conservator: [Law] One that is responsible for the person and property of an incompetent.
So what happens when the conservator is also incompetent? Guess we'll find out...
Posted by: MensaJD | Sep 16, 2008 5:47:41 PM
Posted by: Economics 101 | Sep 16, 2008 5:43:58 PM
don't apologize, Man.
also, I hope you know, or find out, who Mises and Hayek are..
Posted by: Mark E Hoffer | Sep 16, 2008 5:47:48 PM
