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March 02, 2009

AIG Bailout No. 4

Hold on to your butts. Tomorrow (that is, Monday), AIG is expected to announce the single largest value loss of suffered by a company in a single quarter. The announcement will be made concurrently with the announcement of AIG's latest bailout from Treasury. This will be the fourth AIG bailout.

Previously, we the taxpayer had given the ailing insurer an $85 billion line of credit for two years plus interest at LIBOR + 8.5 percentage points (AIG Bailout No. 1). That was reduced to $60 billion to be repaid over five years at LIBOR + 3 percentage points (AIG Bailout No. 3). Now it gets reduced to $25 billion credit for a term of five years plus interest at LIBOR.

We had also offered $40 billion in TARP funds (AIG Bailout No. 3) and are going to offer another $30 billion now.

We also exchanged $38 billion for some of the company's illiquid securities (AIG Bailout No. 3); they will allegedly be purchased back at some point; if not, the taxpayer takes them as is.

In exchange for all this, we are now the proud owners of equity warrants amounting to 79.9% of AIG's shares. WAF.

Guys, I don't know what to write about this stuff anymore. They're doing it; they say they have no choice but to do it; and the people who could choose otherwise (the President or Congress if they yelled loud enough) aren't inclined to do anything different.

The credit-rating agencies were included in the deal negotiation and have promised not to downgrade the AIG's debt after tomorrow's announcements. That's the whole point of the doing all this on the same day, since everyone expects the whole world to melt down (too many pensions and institutions who are required by law to only keep investments with a certain credit floor would have to bail) if the credit-rating agencies put AIG in the dumps.


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posted by Gabriel Malor at 02:23 AM

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