The insurance side of the company is sound, the problems arose from its insurance of mortgage-backed securities and other risky debt. At least now AIG has time to sell off some of its assets and may prevent more dominos from tumbling.
The insurance side of the company is sound, the problems arose from its insurance of mortgage-backed securities and other risky debt. At least now AIG has time to sell off some of its assets and may prevent more dominos from tumbling.
it's $85bn for 79.9% stake.
KIA, AIG needs cash badly for various reasons. They had obligations which are coming due. Secondly the cut in AIG's credit ratings had triggered collateral calls against its insurance contracts.
So without FED's loan, AIG would have defaulted on its obligations and margin calls, and would have triggered some other institutions (both domestic and overseas). I guess this is a horrible chain effect that the FED did not want to materialise.
well, one thing for sure, i won't want to have USD in the next 1/2 years.
just look at the treasury's bailing out bill...
- 40B for bears
- 65B for lehmans to unwind the trades (they lend out the money to JP to help an orderly unwind of Lehman's trades)
- 75B for AIG
that's like some countries five year revenue.
I think the AIG story raises interesting questions about moral hazard, government intervention etc. Is the goal for a company to get so big that they can do what they want without any meaningful regulation then pass the debt on to the gov when things go awry?
those are patriotic cash. they can write it off. hahaa..
anyway HSI again shown the weakness. wasn't a bad decision to short it at open. 8-P