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Lantern | Why is AIG so essential to the fanancial system? |
The federal government has lent a total of $150 billion to AIG, the most ever granted to a private company. They were the first to get bailout money and just got more yesterday. |
 |
 
Chris C
 |
this has nothing to do with votes and polictics. Let's try to leave the tin foil hat theories out of this.
AIG has a liquidity problem, meaning they don't have any accessable cashflow. AIG is also one of the biggest insurers in North America. If something happens and they go under the problems will extend MUCH further than just a few government pensions. Having one of the largest financial companies in the USA collapse would send the markets into a tailspin of panic. With the lent money the worst thing that will happen is they will make the company (as in the US operations part) more attractive to be sold.
And for the record, the Fed is not just giving them this money. They are lending the money to them at 11% for one year. They have only one year to pay this money back. It's not like they are living on easy street and getting handouts. |
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Fauna
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I just hope they are being more watchful of how they use the money they're getting this time! That's a LOT of money!!!! |
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Evin
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Looks like they're not being any more fiscally responsible...New reports today regarding another resort trip for AIG execs and traders. What in the world are they thinking? Are they going to be held accountable, ever? |
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astatine
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Can you believe it, AIG got the equivalent of about a thousand bucks from every single family in the US, and nobody is even breathing harder. We were all upset about $700 billion for the whole crisis, and here comes AIG and lops off more than a fifth of that.
To the insurance guy who said AIG has to pay it back within a year - my questions are "why would they want to do it given the way we're showering them with billions, and what do they pay it with?" If the answer to their "liquidity" problem is that we throw money at them, why wont we be giving them $200B a year from now so that they can pay off the bailouts from this year?
Has AIG or their people had to do any belt tightening? Why havent they been split and sold off like the banks - the executives sure have a hold on the DC crowd - not a squeal from the Dems or the Reps. |
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RAY
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Chris is absolutely spot on, nice to see a post on the subject from someone who knows what they are talking about. I could add some other reasons, but those do just fine to start.
In response to the other answer about ‘why would they pay it back and who do they need to pay it to’
They need the cash now to pay the claims etc that are due now, they can’t pay short term claims with long term assets. So they need a cash loan until they can unwind the assets or raise cash elsewhere.
Indeed as Chris commented parts of AIG may well be sold off, AIG’s CEO has already said this. Selling off an insurer doesn’t happen overnight or even in weeks.
To be honest this kind of asset to liability matching failure was pretty damn poor and isn’t allowed in most countries, now you know why.
As to why would they pay it back, why does anyone pay back a loan, because the agreement says you have to. If they don’t the US govt can seize AIG’s assets (its businesses) and sell them off to get the loan back. It’s no different to having your car repossessed.
This isn’t the first time something like this has happened, the Japanese ‘bailed out’ several banks some years ago and ended up making a profit on the deal. Done properly it can and does work. |
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silverclrk
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They hold a lot of the states and countries retirement funds. Politicians do not want to hear about how they let all the govt workers reti funds decline. They would lose a huge voting contingent. |
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