Posted on 09/16/2008 4:49:39 PM PDT by BGHater
In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan.
The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.
Without the help, AIG was expected to be forced to file for bankruptcy protection.
The need for the loans became necessary after the major credit ratings agencies downgraded AIG late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.
Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and AIG's request for help from the Fed of just a few days ago was rebuffed.
(Excerpt) Read more at iht.com ...
I'm old enough to remember when Margaret Thatcher undertook to sell UK owned businesses. It took awhile, but she did it before being given the boot by her own party.
Will be interesting to see how long it takes the next pres to unload Fred and Fran and the Fed to unload AIG.
yitbos
I know naughts mean naught these days, but the number is $85,000,000,000, with nine naughts, not six.
The underlying structure of the deal is a good move. Long run impact is a net positive. However, I do understand why others may disagree...it’s an intelligence thing.
ALWAYS, ALWAYS. I Guarantee you. AIG has UNDERSTATED how much they are in. We are talking Hundreds of Billions for the Taxpayers.
It will not stop at $85 billion. Lord only knows what this will cost.
This means that YOU almost certainly have a stake in AIG, taxpayers are the ones who own it.
“Yes, but with a $85,000,000 infusion, the stock will go back up, right? So haven’t we bailed them out as well? I always suffered the loss of my bad investments, so should they.”
I guess the answer will be in the details. The release I read said they would buy 80% for a loan. The loan would have to be repaid but the 80% is still the taxpayers. Not sure until we see more but the shareholders are out 80% even if the stock gets back to $70 per share.
Yeah Hoover, lets live the next 20 years in a Depression until a World War pulls us out. That'll show um.
How much money did the lobbyist from Freddie and Fannie pay BHO ?
Valued at what date? Probably as of their last Congressional disclosure, months ago.
What's it worth at $2.00 a share? Common stock holders are wiped out. Preferred share holders are diluted to practically nothing.
yitbos
Exactly, let's shut down the FDIC and then when banks fail we can tell people that it's THEIR FAULT for depositing money there.
“this may not be the usual ‘costing the taxpayers’ mantra we are used to”
“Of course this’ll cost the taxpayers. Where does the Fed get its money? Inflation, i.e. counterfeiting.”
If AIG fails then yes the taxpayers will be on the hook. If AIG succeeds as I expect them to, then the taxpayers get their 80B back plus interest plus an 80% equity stake in AIG. On the other hand we don’t know the details.
:<(
Good night!! lol
So the answer is to turn AIG into a government-controlled company like Fannie and Freddie? No, thanks.
If we’re to maintain some semblance of a free market in this country, a company, big or small, that mismanages itself into insolvency must be allowed to fail. If we allow our government to socialize investment loss or take over entire businesses or industries, our nation will devolve into a water-treading socialized democracy characterized by economic stagnation, declining birth rates and, ultimately, the loss of all freedom — like most of Western Europe.
Taxpayers were on the hook no matter what, just about anyone with money in a retirement account, IRA or 401K owns a chuck of AIG anyway.
What’s going on here? Isn’t this a free market economy? I thought we are supposed to see creative destruction.
No one voted for it, but our government has nationalized some of our largest financial institutions, including much of the mortgage market. This used to be called socialism. Whatever you call it, we sure as hell can’t afford it. We’re a much poorer country than most of us think.
No kidding.
Anybody think that a grass roots campaign similar to the succesful one on immigration would work here? I just fired off some correspondence to my representatives urging them to reject the nationalizing of industry and bring back the concept of personal responsibility.
Let’s hear that one about the free market again.
Throw the BUMS out. It’s the message that keeps on giving.
Conservatism usually believe the Gov’t handling things will only screw it up worse. However, when it comes to the Fed it's okay? Lol.
That is one of the contradictions I'll never understand.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.