News and Reviews USA - When world will wake-up tomorrow, the largest Insurance Company and the symbol of American Capitalism - American International Group (AIG), would have transformed itself into the largest Govt. Insurance Company in the world. This is sad and disappointing for both players and supporters of Free Economy. Just now (today), we have learnt that the benevolent Fed Reserve has extended another tranche of big USD 37.8 billion to this struggling company which was once the darling of Policy Holders and Insurance Professionals. With this, the total aid / loan to the company now stands at staggering USD 122.8 billion. How much can change in month’s time is evident from that fact that AIG had to ask for another round of funding or should we say govt. bail-out, as it had taken USD 85.00 billion just 10 days back. Why? Because AIG has not been able to sell its asset so far. Looks like they are interested to keep only P&C business and rest is all for sale. The future of AIG is as uncertain as the Stock or Financial Markets. The oversight hearing in Washington yesterday by legislators grilled the last 2 CEO’s of AIG for their failure to prevent the losses for the company. The questions were particularly harsh on why the AIG Executives carried home huge salaries, perks and bonuses when company was in financial turmoil close to bankruptcy. The worst punch came when a Senator produced bill payment of USD 400K (Rs 1.85 Crs) by AIG to a high-end California based Health Spa for few executives just last week. This incident is now the topic of discussion in American media and public as why average Americans are bearing the bill for bad managed companies and their lavish expenses like AIG? AP has more on the new loan given to AIG. Click to read on …
AP reports that The Federal Reserve on Wednesday agreed to provide insurance giant American International Group Inc. with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed income securities from AIG in return for cash collateral. These securities were previously lent by AIG’s insurance company subsidiaries to third parties.
The arrangement will help AIG secure funds on an as-needed basis, the New York-based insurer said in a statement.
As of Monday, about $37.2 billion of securities were available for loans under AIG’s securities lending program.
On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the ongoing credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp. In return for the two-year loan, the government received warrants to purchase up to 79.9 percent of AIG.
As of Sept. 30, AIG had drawn $61 billion on the credit facility, of which about $54 billion has gone toward its securities lending and AIG’s financial products area. The rest of the money has been for other liquidity needs amid an “unprecedented” freezing of credit markets, Chief Executive Edward Liddy said last week.
Last week, AIG said it would sell off a number of business units to pay off its massive government loan. The company didn’t specifically disclose all the assets it would sell or the expected prices from the sales. However, the New York-based insurer said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and also plans to retain an ownership interest in its foreign life insurance operations.
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