aig bailout
The new bailout was worked out between government officials and AIG executives over the weekend. [1]
It could also spark a political backlash, especially from congressional Democrats, because the Treasury, while adding to its AIG obligations, has thus far refused to extend a hand to the struggling Big Three auto makers. [2]
The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. [3]
NEW YORK (CNNMoney.com) — AIG may have gotten a $150 billion deal Monday, but that’s just a small fraction of the nearly $3 trillion in financial rescue programs the government has created to stabilize the U.S. economy. [4]
Claim: Congress supported a bailout of AIG because that company insures the Congressional pension trust. [5]
The U.S. government reached a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter. [2]
The U.S. government seized control of American International Group Inc. — one of the world’s biggest insurers — in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system. [3]
Origins: As the U.S. government began, in the latter part of 2008, to grapple with growing economic turmoil and the prospect that many large U.S. financial and corporate institutions were on the brink of failure, one of the vexing issues it confronted was which businesses it should attempt to rescue. [5]
AIG’s bailout caps a tumultuous 10 days that have remade the American financial system. [3]
Furthermore, the company’s investors continued to demand that the insurer post collateral to back its credit default swap agreements - essentially insurance contracts that AIG had sold to customers worldwide - forcing AIG to borrow more and more from the government. [1]
That money will be used to acquire the underlying securities with a face value of $70 billion that AIG agreed to insure with the credit default swaps. [2]
It has used about $172 billion of that so far to inject capital into about 49 banks, according to analysts at Keefe, Bruyette & Woods. [4]
The Federal Reserve extended an $85 billion loan to American International Group to be paid back as AIG sells off some business in the biggest government takeover so far in the ongoing credit crisis. [6]
That plan also failed to adequately address the main challenge facing the insurer — how it was hemorrhaging billions on credit default swaps and other financial instruments — as it posted collateral to nervous trading partners. [2]
One of corporate entities “bailed out” by the government was the insurance giant American International Group, commonly known as AIG. [5]
Sources:
[1] AIG gets reworked bailout - Nov. 10, 2008
[2] U.S. Throws New Lifeline to AIG, Scrapping Original Rescue Deal - WSJ.com
[3] U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash …
[4] Where AIG’s new bailout ranks - Nov. 10, 2008
[5] snopes.com: AIG Bailout
[6] AIG: The Biggest Bailout - The Ticker (usnews.com)