AIG Update: Improved bailout deal from US Treasury
Nov 10, 2008 | Comments 1
November 10. Just two months after the US government bailed out American International Group Inc (AIG) with £85 billion, the US treasury announced that they will be buying $40 billion of AIG’s preferred shares, there will also be two new emergency loan units opened by the Federal Reserve to finance the company’s securities.
The original loan was given to prevent extensive default against AIG creditors at the beginning of the Wall Street Crisis when Lehman Brothers Collapsed. The new government assisted loan terms will cost a lot less than the original loan to AIG which was made on September 16.
As the US economy worsened with September seeing the loss of 524,000 jobs and October seeing an increase of 6.5 percent in employment the Treasury and the Feds are restructuring AIG’s bailout deal so the giant insurer can survive.
In a report out today on AIG it is said they lost a record $24.5 billion, which works out to $9.05 a share in the period ending September 30. A year earlier AIG saw profits of $3.9 billion which works out as each share gaining $1.19.
Source: Bloomberg
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The AIG bailout is small change and means nothing to the Fed. The Fed is transparent in that it is subject to the oversight of Congress. Is twice a year not fast enough? The intent of Congress in shaping the Federal Reserve Act was to keep politics out of monetary policy. Legislation requires that the Federal Reserve reports annually on its activities to the Speaker of the House of Representatives.
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