AIG reports $61.7 BILLION loss

[Ubiquitous]

BBC NEWS
AIG reports record $61.7bn loss

Insurance giant AIG has reported a loss of $61.7bn (£43bn) in the final three months of 2008 - the largest quarterly loss in corporate history.

And the firm will receive an extra $30bn from the US government as part of a revamped rescue package.

AIG has already received $150bn in financial support - the biggest bail-out by far of any US company.

Stock markets slid sharply as AIG's plight underscored fears about the health of the global financial system.

The Federal Reserve and the Treasury said that AIG posed a "system risk" to the global financial system.

"The potential cost to the economy and the taxpayer of government inaction would be extremely high," they said.

BAIL-OUTS RECEIVED
# AIG - $180bn
# Bank of America - $45bn
# Citigroup - $50bn
# JP Morgan Chase - $25bn
# Wells Fargo - $25bn
# Goldman Sachs - $10bn
# Morgan Stanley - $10bn
# State Street - $3bn
# Bank of New York Mellon - $3bn

"The additional resources will help stabilise the company, and in doing so help to stabilise the financial system."

As well as insuring households, AIG plays a key role in insuring risk for financial institutions around the world.

The news of AIG's historic loss comes as HSBC, Europe's biggest bank, seeks to raise £12.5bn ($17.7bn) to strengthen its finances following a 62% fall in annual profit.

Revamp

The revamped rescue package also involves a restructuring of AIG's operations.

It calls for the Federal Reserve to take stakes in two of AIG's international units in exchange for reducing AIG's debt.

The new measures will also effectively cut the interest payments the insurer must pay to the Federal Reserve.

The AIG financial support is about three times greater than that given to Citigroup, which has received $50bn, and Bank of America, which has received $45bn.

Fear of failure

AIG: QUICK FACTS
# 30 million US policy holders
# Operates in 130 countries
# Provides insurance to 100,000 companies and other entities

US officials fear that a failure of AIG would be disastrous for both the US and the global economy.

Credit rating agencies, such as Moody's, Fitch and Standard & Poor's, had been poised to cut AIG's credit ratings as a result of the record loss.

That could have forced AIG to default on its debt, which would have had a knock-on effect on all of AIG's businesses.

AIG provides insurance protection to individuals, small firms, municipalities, personal pension plans and major US listed companies.

It also insures major financial institutions against complex deals going wrong through derivative contracts such as credit default swaps - the main cause of its problems.

HAVE YOUR SAY Corporations have failed to build value into their firms, taxpayers shouldn't be paying for bad paper. J. Jarvis, Salem, US

The company first received financial assistance from the state in September in the wake of Lehman Brother's collapse.

In the UK, AIG is best known as a sponsor of Manchester United, but the deal is due to come to an end.

It also underwrites insurance sold by a number of High Street names including Boots and Argos.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/b ... 918643.stm

Published: 2009/03/02 13:15:16 GMT

© BBC MMIX

Unbelievable! To lose so much in a year would be an utter disaster, to lose that much in a quarter is just incredible. And guess what Americans? You get to pay $30 billion to bail them out - again!

By the end of this we as a world are going to be in so much fucking debt that we may have to completely rethink the way that we do business from top to bottom. I seriously doubt know that this amount of debt is ever actually going to be paid off. It's almost as if the government is hoping that they will get lucky some day and win the super-lottery so that they can magically write all of this money off.

[ray245]

BBC NEWS
AIG reports record $61.7bn loss

Insurance giant AIG has reported a loss of $61.7bn (£43bn) in the final three months of 2008 - the largest quarterly loss in corporate history.

And the firm will receive an extra $30bn from the US government as part of a revamped rescue package.

AIG has already received $150bn in financial support - the biggest bail-out by far of any US company.

Stock markets slid sharply as AIG's plight underscored fears about the health of the global financial system.

The Federal Reserve and the Treasury said that AIG posed a "system risk" to the global financial system.

"The potential cost to the economy and the taxpayer of government inaction would be extremely high," they said.

BAIL-OUTS RECEIVED
# AIG - $180bn
# Bank of America - $45bn
# Citigroup - $50bn
# JP Morgan Chase - $25bn
# Wells Fargo - $25bn
# Goldman Sachs - $10bn
# Morgan Stanley - $10bn
# State Street - $3bn
# Bank of New York Mellon - $3bn

"The additional resources will help stabilise the company, and in doing so help to stabilise the financial system."

As well as insuring households, AIG plays a key role in insuring risk for financial institutions around the world.

The news of AIG's historic loss comes as HSBC, Europe's biggest bank, seeks to raise £12.5bn ($17.7bn) to strengthen its finances following a 62% fall in annual profit.

Revamp

The revamped rescue package also involves a restructuring of AIG's operations.

It calls for the Federal Reserve to take stakes in two of AIG's international units in exchange for reducing AIG's debt.

The new measures will also effectively cut the interest payments the insurer must pay to the Federal Reserve.

The AIG financial support is about three times greater than that given to Citigroup, which has received $50bn, and Bank of America, which has received $45bn.

Fear of failure

AIG: QUICK FACTS
# 30 million US policy holders
# Operates in 130 countries
# Provides insurance to 100,000 companies and other entities

US officials fear that a failure of AIG would be disastrous for both the US and the global economy.

Credit rating agencies, such as Moody's, Fitch and Standard & Poor's, had been poised to cut AIG's credit ratings as a result of the record loss.

That could have forced AIG to default on its debt, which would have had a knock-on effect on all of AIG's businesses.

AIG provides insurance protection to individuals, small firms, municipalities, personal pension plans and major US listed companies.

It also insures major financial institutions against complex deals going wrong through derivative contracts such as credit default swaps - the main cause of its problems.

HAVE YOUR SAY Corporations have failed to build value into their firms, taxpayers shouldn't be paying for bad paper. J. Jarvis, Salem, US

The company first received financial assistance from the state in September in the wake of Lehman Brother's collapse.

In the UK, AIG is best known as a sponsor of Manchester United, but the deal is due to come to an end.

It also underwrites insurance sold by a number of High Street names including Boots and Argos.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/b ... 918643.stm

Published: 2009/03/02 13:15:16 GMT

© BBC MMIX

Unbelievable! To lose so much in a year would be an utter disaster, to lose that much in a quarter is just incredible. And guess what Americans? You get to pay $30 billion to bail them out - again!

By the end of this we as a world are going to be in so much fucking debt that we may have to completely rethink the way that we do business from top to bottom. I seriously doubt know that this amount of debt is ever actually going to be paid off. It's almost as if the government is hoping that they will get lucky some day and win the super-lottery so that they can magically write all of this money off.

Instead of simply bailing people out( for some weird reason, many people here still equate a bail-out to socialism or nationalisation ) nationalise these failing finical companies.

Stop giving in to the fears of those investors in regards to nationalisation as those investors will not be able to turn the situtation around. You do not need to depend on all those investors to save the economy, as their confidence has been shattered long ago. They can cry for all they want, but I doubt that many of people is confident enough to invest large amount of money in this recession.

[Rogue 9]

Soooo... Why are we pouring money into the black hole that is this company?

[Illuminatus Primus]

How is it the vaunted free market fundamentalism of the righties produced a single company on whose performance rested "systemic risks" to the entire system?

[ray245]

Soooo... Why are we pouring money into the black hole that is this company?

Mainly the Obama administration and the American public is unwillingly to consider nationalisation of the financial industry as an option and if no money is being poured, things will only get worse.

Such action is not going to fix the situation, such action is only there maintain the current situation and prevent things to get even worse.

[Illuminatus Primus]

Soooo... Why are we pouring money into the black hole that is this company?

So we can pretend to ourselves in profoundly wasteful and useless fashion that private industry is helping itself get back on its feet, while we're really providing a welfare lifeline so keep the "open for business" signs lit in front of financial institutions even though they are completely insolvent.

[Count Chocula]

It gets even better, as the BBC article alluded:

U.S. commits further $30 bln to AIG: sources
By Paritosh Bansal and Lilla Zuill

NEW YORK (Reuters) - The U.S. government will commit another $30 billion to prop up American International Group Inc as the embattled insurer prepares to report the biggest loss in history and struggles to sell assets.

AIG's board on Sunday approved a new rescue package that also includes more lenient terms on an existing government investment in its preferred shares and a lower interest rate on a government credit line, two sources familiar with the matter said.

This would be the third time the government has had to step up to save AIG, once the biggest insurer by market value whose global reach may have made it too big to fail.

The rejigged bailout, which changes the terms of an earlier $150 billion rescue, is also the latest example of how federal regulators are having to revamp aid for top financial institutions as the global financial crisis deepens.

Last week, the government agreed to boost its equity stake in Citigroup Inc to as much as 36 percent in a bid to bolster the bank, already the recipient of billions of dollars in taxpayer funds.

"The government really does not have the option of letting AIG totally blow up," said Robert Haines, senior insurance analyst at CreditSights.

"Hopefully, the third bailout will be the charm," he said. "The counterparties on most of the book are (European) banks that would be hammered if the U.S. walked away."

DEBT TO EQUITY

Under the deal, the interest rate on AIG's credit line from the government would be cut to match the three-month London Interbank Offered Rate (Libor), now about 1.26 percent, a source with direct knowledge of the matter said.

This would save AIG about $1 billion a year.

AIG now pays 3 percentage points above three-month Libor on the $60 billion credit line.

The additional equity commitment would give AIG the ability to issue preferred stock to the government later, the sources said.

AIG will also give the U.S. Federal Reserve a preferred interest in its American Life Insurance Co (Alico), which generates more than half of its revenue from Japan, and Hong Kong-based life insurance group American International Assurance Co (AIA) in return for reducing its debt, they said.

The government likely will get a 5 percent cumulative dividend on its ownership stake in Alico and AIA, said one source. AIG had been trying to sell Alico and part of AIA in a bid to raise money to pay back the government.

Sales of these assets are still a possibility, with some bids already received, said one person.

AIG may also securitize some U.S. life insurance policies and give them to the government to further reduce its debt, the source said.

The company may securitize up to $10 billion under that plan, one of the sources said.

The debt-to-equity swap would help AIG repay much of the roughly $38 billion it has drawn from its government credit line, the source said.

Last year, AIG said it planned to sell all assets except its U.S. property and casualty business, foreign general insurance and an ownership interest in some foreign life operations, to pay back the government.

While the company has announced some sales, it has found it difficult to find buyers and get a good price for assets amid the financial crisis. (For more on the status of the asset sales, click on [nN01335633])

The company now plans to spin off up to 20 percent of the property-casualty business in an initial public offering, said a person with direct knowledge of the plans.

The business would be renamed to differentiate it from AIG, and have its own board of directors.

To aid the auction of at least one major asset, the government could help potential buyers of aircraft lessor International Lease Finance Corp with financing, the sources said.

ILFC has some debt coming due in 2009 and, if needed, AIG could use its new equity commitment to help potential buyers with that, one of the sources said.

An AIG spokeswoman did not respond to requests for comment.

MASSIVE LOSS

The deal was reached as AIG prepared to report on Monday a loss of about $60 billion for the fourth-quarter, due largely to write-downs on certain tax assets and commercial mortgage-backed securities, the sources said.

The loss -- which works out to about $460,000 per minute -- is mostly non-cash, the source said.

The revised bailout would allow AIG to avoid a credit ratings downgrade that could have had serious ramifications for the insurer's liquidity and hurt its business.

Customers could, for instance, cancel their insurance policies if a minimum rating was no longer maintained.

Moody's Investors Service and Standard & Poor's both have AIG on review for downgrade from the seventh highest investment grade, and have said that the government's support was keeping the ratings from being cut to "junk" status.

AIG, which had 74 million customers at the end of 2007, has said it has also been losing business and finding it harder to win new clients since it was first rescued in September after bad mortgage bets left it on the verge of collapse.

The government stepped in at the time with an $85 billion bailout, and subsequently offered additional financing, bringing the support up to about $123 billion.

Then in November, the government had to revise its bailout package, raising its total aid to about $150 billion.

(Reporting by Paritosh Bansal, Lilla Zuill, Walden Siew and Kristina Cooke)

(Editing by Ted Kerr)

(For more M&A news and our DealZone blog, go to http://www.reuters.com/deals)

(emphasis added)

The Fed, in other words, is TAKING a direct equity stake in two companies, including one based in Hong Kong! This is against the Federal Reserve's charter, which has these specific powers enumerated:

SUBCHAPTER IX—POWERS AND DUTIES OF FEDERAL RESERVE BANKS
§ 341. General enumeration of powers
§ 342. Deposits; exchange and collection; member and nonmember banks or other depository institutions; charges
§ 343. Discount of obligations arising out of actual commercial transactions
§ 344. Discount or purchase of bills to finance agricultural shipments
§ 345. Rediscount of notes, drafts, and bills for member banks; limitation of amount
§ 346. Discount of acceptances
§ 347. Advances to member banks on their notes
§ 347a. Advances to member bank groups; inadequate amounts of eligible and acceptable assets; liability of individual banks in group; distribution of loans among banks of group; rate of interest; notes accepted for advances as collateral security for Federal reserve notes; foreign obligations as security for advances
§ 347b. Advances to individual member banks on time or demand notes; maturities; time notes secured by mortgage loans covering one-to-four family residences
§ 347c. Advances to individuals, partnerships, and corporations; security; interest rate
§ 347d. Transactions between Federal Reserve banks and branch or agency of foreign bank; matters considered
§ 348. Discount of obligations given for agricultural purposes or based upon livestock; collateral security for Federal reserve notes
§ 348a. Transactions with foreign banks; supervision of Board of Governors of the Federal Reserve System
§ 349. Rediscount for intermediate credit banks of obligations given for agricultural purposes; discount of notes made pursuant to section 1031
§ 350. Purchase and sale of debentures and like obligations of intermediate credit banks and agricultural credit corporations
§ 351. Obligations of cooperative marketing association as issued or drawn for agricultural purposes
§ 352. Limitation on amount of obligations of certain maturities which may be discounted and rediscounted
§ 352a. Repealed.]
§ 353. Purchase and sale of cable transfers, acceptances and bills
§ 354. Transactions involving gold coin, bullion, and certificates
§ 355. Purchase and sale of obligations of National, State, and municipal governments; open market operations; purchases and sales from or to United States; maximum aggregate amount of obligations acquired directly from or loaned directly to United States
§ 356. Purchase of commercial paper from member banks and sale of same
§ 357. Establishment of rates of discount
§ 358. Establishment of accounts for purposes of open-market operations; correspondents and agencies
§ 359. Purchase and sale of acceptances of intermediate credit banks and agricultural credit corporations
§ 359a. Omitted
§ 360. Receiving checks and drafts on deposit at par; charges for collections, exchange, and clearances
§ 361. Bills receivable, bills of exchange, acceptances; regulations by Board of Governors
§§ 362 to 364. Omitted

In other words, the Federal Reserve is violating the law to make this deal, and have already broken it with Citigroup! Why aren't they being called out on this?

[The Duchess of Zeon]

Because their CEO buddies need a kegger fund.

[MarshalPurnell]

The Fed is still operating under the false assumption that bailout funds can and will be recouped. That is a holdover from the Bush administration's first efforts to prop up the banking system, under the assumption that the prospect of being paid back was necessary to find any support for pouring in money to private enterprises. Whereas I thought from the very start that, for example, the TARP program should be treated like an outright expenditure and written off, and used to save as many people from foreclosure as possible so as to avoid more damage to the housing market and to remove bad securities from the hands of the banking system, instead they kept trying any number of plans consistant with the idea of making a profit on the bailout. The failure to find a policy and stick to it, coupled with the half-assed comments about nationalization, and genuine concern about the ballooning national debt and the feasibility of continued borrowing overseas, has turned off investors in droves. A firm, decisive series of steps even if they involved measures (nationalization) that most investors would abhor, would still be better than what we have now. The markets react better to bad news than to prolonged uncertainty, and foreign governments are more likely to keep buying Treasury bonds if they have the sense that the Administration is moving swiftly to correct structural problems in the economy, so that the money being borrowed will eventually lead to a more productive American economy able to pay them back, or at least to pay better interest yields.

[aerius]

The Fed, in other words, is TAKING a direct equity stake in two companies, including one based in Hong Kong! This is against the Federal Reserve's charter

In other words, the Federal Reserve is violating the law to make this deal, and have already broken it with Citigroup! Why aren't they being called out on this?

Remember Bear Stearns last year? That was the test case for the Fed blatantly overstepping its bounds and taking a direct equity stake in a company, which of course is expressly forbidden under its charter. No one gave a fuck about it despite the dangerous precedent it set, and since that went so well for the Fed they're going to keep doing it until we the people get pissed enough to lynch them and string them up from lamp posts.

As for why, nobody cares yet. Things ain't bad enough yet. Dancing with the Stars is on TV and yeah, I gotta go. Hey, isn't NASCAR and baseball about to start up soon too?

[Count Chocula]

As for why, nobody cares yet. Things ain't bad enough yet. Dancing with the Stars is on TV and yeah, I gotta go. Hey, isn't NASCAR and baseball about to start up soon too?

I guess I don't drink enough beer; Bud prices are pretty stable, but my whiskey and vodka keep going up and up and up. I'm getting pissed - and I don't mean drunk. 'Sides, my wife has a monopoly on the TV with her "The Bachelor" addiction.

[Illuminatus Primus]

How come no one on TV even talks about the fact this is contrary to the Fed's charter? If some jokers in a forum can figure it out, where is the media?

[aerius]

How come no one on TV even talks about the fact this is contrary to the Fed's charter? If some jokers in a forum can figure it out, where is the media?

Cause it doesn't sell, and too many people are still in denial.

Besides, anyone remember this from last year? Even on this board, most people were poo-pooing it and dismissing it as "business as usual".

[PainRack]

Remember Bear Stearns last year? That was the test case for the Fed blatantly overstepping its bounds and taking a direct equity stake in a company, which of course is expressly forbidden under its charter. No one gave a fuck about it despite the dangerous precedent it set, and since that went so well for the Fed they're going to keep doing it until we the people get pissed enough to lynch them and string them up from lamp posts.

As for why, nobody cares yet. Things ain't bad enough yet. Dancing with the Stars is on TV and yeah, I gotta go. Hey, isn't NASCAR and baseball about to start up soon too?

Isn't temporary nationalisation a valid way to solve the problem? You know, recapitalise the bank, write off the losses and then resell it ten years down the road?

[ray245]

Remember Bear Stearns last year? That was the test case for the Fed blatantly overstepping its bounds and taking a direct equity stake in a company, which of course is expressly forbidden under its charter. No one gave a fuck about it despite the dangerous precedent it set, and since that went so well for the Fed they're going to keep doing it until we the people get pissed enough to lynch them and string them up from lamp posts.

As for why, nobody cares yet. Things ain't bad enough yet. Dancing with the Stars is on TV and yeah, I gotta go. Hey, isn't NASCAR and baseball about to start up soon too?

Isn't temporary nationalisation a valid way to solve the problem? You know, recapitalise the bank, write off the losses and then resell it ten years down the road?

Good luck convicing the American public that nationalisation does not mean your nation is going to end up as a 'oppressive Communist state!' .

[J]

I think this about says it all.

[Minischoles]

Stocks plunge on financial fears

Stock markets have fallen worldwide, rattled by fears that turmoil in the financial sector is far from over.

On Wall Street, the US Dow Jones index fell below 7,000 points for the first time since 1997.

In the UK, the FTSE 100 index briefly hit a six-year low. Markets elsewhere in Europe also fell sharply.

Confidence was hit by a fresh $30bn bail-out of US insurance giant AIG following a record $62bn loss, and by HSBC's plans to raise £12.5bn.

Looks like its having a knock on effect even while being bailed out. Really how can no-one see that they can't prop this place up forever without dragging themselves down with it? Nationalising it might hold some fears for Americans, but its about time Obama had some balls and just ordered it, and let the results speak for themselves instead of immediately being a complete politican about it almost as bad as Bush in that he refuses to do what needs to be done because of how poorly the voters will look on it.

[ray245]

Stocks plunge on financial fears

Stock markets have fallen worldwide, rattled by fears that turmoil in the financial sector is far from over.

On Wall Street, the US Dow Jones index fell below 7,000 points for the first time since 1997.

In the UK, the FTSE 100 index briefly hit a six-year low. Markets elsewhere in Europe also fell sharply.

Confidence was hit by a fresh $30bn bail-out of US insurance giant AIG following a record $62bn loss, and by HSBC's plans to raise £12.5bn.

Looks like its having a knock on effect even while being bailed out. Really how can no-one see that they can't prop this place up forever without dragging themselves down with it? Nationalising it might hold some fears for Americans, but its about time Obama had some balls and just ordered it, and let the results speak for themselves instead of immediately being a complete politican about it almost as bad as Bush in that he refuses to do what needs to be done because of how poorly the voters will look on it.

Too bad Obama will never get the 90% approval rating Bush got at a time. When you have a high approval rating like Bush just after 9-11, you can do ANYTHING and people will blindly support you.

US needs to be flexible with ideologies, and be willingly to know when should it nationalise its industry, and when to privatise them.