Reuters is reporting that a new new bailout for AIG is almost done. This would be the third attempt at rescuing the fallen giant, whose ventures into structured finance and derivatives brought down an otherwise well run, money making insurer.

American International Group Inc is close to a deal with the U.S. government that would ease the terms of its bailout, provide a further equity commitment and help it pay down debt, a person familiar with the matter said on Saturday.

The revision would be the latest sign of how federal regulators are having to tweak bailout packages for financial institutions deemed too big to fail as the economy and markets worsen.

The board of the troubled insurer is due to meet on Sunday to vote on the deal, which could be announced when AIG reports its quarterly results on Monday, the source said.

That would be just days after the government agreed to boost its equity stake in Citigroup Inc to as much as 36 percent in a bid to bolster another financial giant that taxpayers had already poured billions of dollars into.

The revised AIG agreement is expected to include an additional equity commitment of about $30 billion, more lenient terms on an existing preferred investment, and a lower interest rate on a $60 billion government credit line, the source said.

As if that’s not enough, the new commitment gives to the beggers at AIG a fourth bite at the apple — they would get the ability to “issue preferred stock to the government at a later date.”

We find out tomorrow if AIG’s loss is as much as $60 billion for Q4. Its caused by write downs of derivatives, credit default swaps, and mortgage backed securities.

My favorite part of the Reuters story: The AIG loss works out to about $460,000 per minute.

Source:
Exclusive: AIG near deal on new terms of bailout
Paritosh Bansal
Reuters, Sun Mar 1, 2009 8:41am EST

http://www.reuters.com/article/businessNews/idUSTRE51Q61I20090301

Category: Bailouts, Corporate Management, Derivatives, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

31 Responses to “Reuters: AIG Deal Near”

  1. super_trooper says:

    How much longer will this go on? Why aren’t there people on the street protesting these outrageous bailouts? Clearly the negotiator at the treasury department don’t even know how to strike a bad deal, they go for worse. Why keep the management of the financial institutes? How about returning to the merit system? Most of these people should never be allowed close to a financial institute or bank. How about banning them for life from this sector. And no bonus. “Change” in the financial sector looks alot like Bush II

  2. Robertm73 says:

    I am glad to hear we are getting tough with them. oh right we are going to make it easier on them. Great. this should work well since we lowered the bar last time and they lost more money then anyone thought possible. Bankrupty is not a dirty word.

  3. “whose ventures into structured finance and derivatives brought down an otherwise well run, money making insurer.”

    is like remarking, about Jack the Ripper, other than the thing, you know, with the knives, he’s a Sterling Chap…

    Good Gravy~

  4. ericholtman says:

    I’m with AIG honey… so I’m just thinking about butterflies.

  5. constantnormal says:

    Eventually, some number of failed attempts to rescue them down the road, they will be carved up and liquidated, with their CDS portfolio being zeroed out. But only after we have flushed untold billions down the toilet.

    “Americans can always be counted on to do the right thing … after they have exhausted all other possibilities.”

    — Winston Churchill

  6. Marcus Aurelius says:

    The Language of Looting:

    http://counterpunch.org/hudson02232009.html

    We’d better wake up soon – the shackles are being placed on us as we sleep.

  7. b_thunder says:

    At this point, I’m content that i’ll be paying higher taxes FOR LIFE in order to pay off what government is goign to sink into the AIG. The only thing I want to know is who are the counter parties who get paid from AIG’s derivatives. I want to know who they are, and to what extent.
    Hey, Timmy The Treasurer, despite what you may have learned when sitting in your NY Fed office a few blocks from Wall St, and despite what your mentor Bob Rubin, your predecessor Paulson, and your new right-hand nan (the GS lobbyist) may have told you, I promise you that what’s good for Goldman Sachs MAY NOT be good for America.

  8. Myr says:

    I’m giving up on being angry about these never ending, massive, fraudulent bank bailouts because the public doesn’t seem to care and by the time they realize what has happened it will be too late to change course. I’m just trying to figure out when the public will wake up and realize that their future has been taken from them and handed to the bond holders and their failed banks. When will the accounting happen? I’m guessing this will happen just as the S+P breaks 600 sometime in the next year…”Wait! The Fed/Treasury blew how much money? And the bond holders haven’t paid a dime? But now we can’t let the banks fail because we’ve already thrown so much money at them and the Fed is holding all their dud loans via repos? Wait, what’s a repo?” This is true tragic comedy.

  9. km4 says:

    Myr…. well said and I share similar thoughts especially “This is true tragic comedy” so not worth getting outraged anymore and posting comments on blogs like this.

    My game plan is to keep focused on making more $$$ to stay ahead ;)

  10. Stuart says:

    They get another fix of heroin. Will be interesting to see Sunday night and Monday open. BAC vs. AIG.

  11. km4,

    as Rand noted, you faithful hamsters, running, faster, and faster, on the wheel, only prolong your, and everyone else’s, agony at the hands of the Looters..

    try not to tear a Hamstring while you’re at it, the AmeriCaid div. of HHS, susidiary of the DHS, may not think you’re ‘value-able’, evough, to spring for repairing ‘spring’..

  12. “The only thing I want to know is who are the counter parties who get paid from AIG’s derivatives. I want to know who they are, and to what extent.”

    Reply:

    Goldman Sachs, et. al, but particularly Goldman Sachs. It’s the reason that Buffett pinned his hopes of getting the TARP passed on his investment in GS. Without an AIG rescue, Goldman, as counterparty to myriad derivatives exposures AIG insured, goes down the tube.

    Run faster little hamsters!

  13. km4 says:

    Mark E Hoffer you called me out but have no freaking idea of what the hell you’re trying to say

  14. well, past the clerical errors,

    “evough, to spring for repairing ’spring’..

    enough, to spring for repairing your ‘spring’..

    km4,

    are you sure?

  15. usphoenix says:

    @Marcus: Thanks for the counterpunch link. Very strong stuff and dead on. I am reminded of a quote: Those that don’t learn from history are doomed to repeat twelfth grade.

    Duh. Seems pretty obvious Timmy, etal are trying to tiptoe around all those sleeping giant foreign investors. Except they’re not asleep and they’re angry as hell, and suspicious of the Feds. But they have no one to blame but themselves. They foolishly gorged at the trough through the good times.

    And they will continue to be taken care of by our duly elected officials.

    Perhaps the practiced theory is that of the Fifth Disclipline’s Boiling Frog. If we are eased into the whole truth of the mess our neurons will suffer fatigue and tire of the issue. Ah, the final stage: Acceptance. It is going to happen just this way, and we will have to like it.

  16. buckykatt says:

    They should have let AIG go bk long ago, just as they should have let GM, Chrysler, etc.

    Someone would pick up the valuable pieces and act like a capitalist,
    which is what we have gotten away from.

    I don’t like paying for the stupid behavior of others.

  17. krice2001 says:

    I’m left wondering… So many of us hate these bailouts yet they continue through 2 very different administrations. Is part of the reason that the financial industry has so much power and influence that regardless of the political leanings of who is in the White House, they win? Or, is there something deep in the economics here, something so terrible or so frightening to those with the best access to the real data and forecasts, that they feel they must take these incredibly expensive actions to try to “save” the economy? The 3rd option I see, is that the administration feels obligated to try some things just to prop up what little confidence there is, in an attempt to stave off something much worse, they fear? I admit being to torn as to what’s really the underlying rationale.

  18. krice2001,

    see some of this, it’s, only, ~75 years old:

    On May 23, 1933, Congressman, Louis T. McFadden, brought formal charges against the Board of Governors of the Federal Reserve Bank system, The Comptroller of the Currency and the Secretary of United States Treasury for numerous criminal acts…

    and Santelli aside, “Quotations from several speeches made on the Floor of the House of Representatives by the Honorable Louis T. McFadden of Pennsylvania. Mr. McFadden, due to his having served as Chairman of the Banking and Currency Committee for more than 10 years, was the best posted man on these matters in America and was in a position to speak with authority of the vast ramifications of this gigantic private credit monopoly. As Representative of a State which was among the first to declare its freedom from foreign money tyrants it is fitting that Pennsylvania, the cradle of liberty, be again given the credit for producing a son that was not afraid to hurl defiance in the face of the money-bund. Whereas Mr. McFadden was elected to the high office on both the Democratic and Republican tickets, there can be no accusation of partisanship lodged against him. Because these speeches are set out in full in the Congressional Record, they carry weight that no amount of condemnation on the part of private individuals could hope to carry. ”
    http://home.hiwaay.net/~becraft/mcfadden.html

    might help answer some of your Q’s..

  19. starko99 says:

    I’m not sure what’s actually worse for confidence at this stage, continuing the “AIG is a private going concern” charade or keeping up appearances.

    For me the more important question is what would the impact really be of letting the idiots who bought so much CDS from AIG (and other types of stakeholders) actually take the hit. The argument against this is looking at what happened post-Lehman. The argument for it is simply “this can’t go on forever”. I think the arguments were the same for Lehman, and I for one (in retrospect) would’ve rather seen Lehman stay afloat, despite the myriad of reasons not to. It’s simply the lesser of two evils.

    Don’t get me wrong- I’m monumentally PO’d at the lack of risk controls by stupid people who probably should’ve known better on up to those who were elected/paid huge sums to know better. It’s not the first or last time the prudent are punished for the acts of the imprudent.

  20. Greg0658 says:

    usphoenix Says @ 12:35 pm
    “Ah, the final stage: Acceptance. It is going to happen just this way, and we will have to like it.”

    buckykatt Says: @ 12:45 pm
    “…Someone would pick up the valuable pieces and act like a capitalist …”

    heard in here many times don’t fight the Fed (or the tape)
    or
    me @ (so many time your probably sick of the messenger)
    “Resistance is futile – you will be assimilated”

  21. buckykatt says:

    Grego, this ties with that>

    “I do not regard Fannie Mae and Freddie Mac as problems. I regard them as great assets.”
    –Barney Frank
    In response to efforts to reform Freddie Mac and Fannie Mae 2002

  22. buckykatt says:

    “It is hard for us, without being flippant, to even see a scenario … within any kind of realm of reason that would see us losing $1 in any of these [credit default swap] transactions.”

    Joseph Cassano, head of AIG Financial Products, August 2007

  23. buckykatt says:

    Regarding Bear Stearns hedge funds:

    “If we believe the [Bear Stearns internal report is] ANYWHERE CLOSE to accurate, I think we should close the funds now…. If [the report] is correct, then the entire subprime market is toast.” -
    Tannin in internal e-mail to Cioffi on April 22, 2007

    “So from a structural point of view, from an asset point of view, from a surveillance point of view, we’re very comfortable with exactly where we are.” — Tannin to investors on April 25, 2007

    After two funds collapsed, portfolio managers Ralph Cioffi and Matt Tannin were charged by Brooklyn federal prosecutors with securities fraud. They have pleaded not guilty.

  24. AGG says:

    Marcus,
    I read the Hudson article It’s inexcusable that his knowledge of economic history is not common in America. That said, I have less faith in isms of any kind than he does. All systems involve putting someone up there who is always temped to game the system for his pals. Oh, everybody has a different name for it; inefficient administrative costs, inefficient beaurocracy (the only kind according to libertarians) or the evil elite. In every case, somebody is telling someone else what to do. There are people who want to be “policemen” since they are little kids. The never ending question of a viable society is not “should there be someone giving orders” ( you’re ALWAYS going to have that ), but how do you supervise the order givers to ensure justice? The answer, of course, is transparency. But hell, the corporations would then run out and brain wash everyone with the PR that transparency really means secrecy for national security and your own good, heh, heh. So we end up with a society in which the most convincing liars are the most successful. We have law founded on sophistry and call it justice. We all know what transparency is. Most people would welcome it. The problem is (where’s my tin foil hat?) that the most powerful people routinely buy or bop anyone who wants to really bring justice into human affairs.

  25. Pat G. says:

    Like I’ve said before, shoot the mortally wounded and get them the hell off the street so that we can move on with our lives.

  26. Marcus Aurelius says:

    AGG:

    Corruption is human nature, but the point of the article – that we’ve come so far since the days of feudalism because of regulation – is valid, as regulation (enforced regulation, that is) is what stops corruption and the acquisition of undue power over the vast majority of people. Personally, I believe that the greatness of America was its middle class, and that that middle class was allowed to flourish only when the banks, markets, and Robber/industrial Barons were highly regulated.

    As for our laws – and system of “justice” – we really need to simplify and regulate the power these people wield. For starters, we should drop the requirement of membership in any Bar Association as a requisite for practicing law.

  27. usphoenix says:

    @all of you: What is bubbling up to me is “what price do you put on your integrity/convictions/sense of social purpose”. Obviously far too many stopped at the most important personal question: What are my bonus and raises going to be? I was once there. I saw very powerful, important people stretching the law for their own personal gain. OK, they were generous in their bonuses, and sharing. But not that generous. ”

    So, how exactly generous is the House of Representatives? With our money?

    At any rate, this was a better episode.

  28. rktbrkr says:

    We will be paying for these Sunday night deals for the rest of our lives. I hope Bloomberg succeeds in forcing public disclosure of them. The secretive Sunday night deal making continues from administration to administration, we’ll soon see if the Obama administration keeps the promise of openness that the Bush administration lied about. But it’s really not a question of keeping promises, it’s a question of obeying the law.We all feel we’re getting screwed, the least they can do is let us see it on Youtube

  29. Bruce in Tn says:

    http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BE11E544D%2DD871%2D4D17%2DA992%2D4F60B1065ECB%7D

    Trading in HSBC shares suspended in Hong Kong

    ..Don’t worry, we plan to reopen Tuesday, or maybe Wednesday….

  30. usphoenix says:

    @agg: As Adam Smith put it in the single phrase from “Wealth of Nations” that stuck with me, talking about American colonists: they could afford to be generous. Perhaps that continued perhaps not. Perhaps the entire union movement was about a way to share the power and avoid socialism or communism. We’ll never know for sure because the truth has been buried from most of us by the people that are in control.

    I am reminded of the Chicago MBA program where as a requirement I had to take an industrial relations course. There was absolutely nothing in the course about industrial relations. It was completely and totally about how evil, inefficient, and violent labor unions were. I got to endure one quarter of nothing more than a “professor’s” rants, with nothing constructive in it for us “MBA future leaders” other than “Unions are shit”. My enlightened corporate friends like unions under the right circumstances. And their companies do quite well. The Japanese seem to have nice plants here paying quite well, and the employees don’t find unions necessary. Why is that? .

  31. JoWriter says:

    @ Myr: “…the public doesn’t seem to care …”

    I think that’s what the Tea Parties are about. People do care. They are fed up. Public opinion polls have shown consistent majorities opposing ALL bailouts -whether Bush or Obama admin.

    When I was in college, I couldn’t understand why people thought this was a curse: “May you live in interesting times.” Now I understand. Can I have boring times back? Please???