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AIG Bailout, Wait a Minute I thought….

Tonight the government announced that they (this means you by the way) would provide an $85 LOAN to AIG.  For this they get a 79% stake in the company. Is this a good deal?

I checked. The entire market capitalization is $10 B. So the government could have bought every single share of the entire company, well in theory, no doubt some shareholders would want more for only $10 B

The net book value is $67 B. So you and I paid over book for a company on the ropes.

Would buying the stock of AIG help AIG?  No that money woudl go to the existing shareholders. THe Company needs the money. Hence a capital infusiotn was needed.

Wait, I thought Tsy Secy Paulson said no more bailouts?  What is Lehman thinking now?  Better yet, what is Jeff Skilling, sitting in jail thinking? Gee, if they had loaned Enron the money, Enron would not have upset the markets!

I must admit I am baffled at how the govwernement would not help Lehman on Sunday and is bialing AIG out two nights later. Just last year the government was chasing Hank Greenburg, former CEO of AIG. Strange bedfellows indeed.

Your thoughts?

Newsflash, today FED Chairman Ben Bernake announced a FED intervention for the students at Tx A & M San Antonio. Noting that both political  candidates have said the economy is (insert derogatory adjectives here) and so fearing a default at Sonics and Whataburgers and apartment complexes across San Antonio, not to mention a potential donwgrade of Sallie Mae debt, the FED took a 79% positikon and defacto now owns the student body at the school.

Ben finished his remarks noting that students should read their chapter assignments and arrive rested and ready for class. Your FED is depending on you, litgerally,  he said…

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8 responses to “AIG Bailout, Wait a Minute I thought….”

  1. Tina C Avatar
    Tina C

    Gee, if the Feds would bail out an A & M campus, I wonder if they would do the same for one of those other campuses – say UT or, oh my gosh, a catholic university…. Guess it all depends on how well their administration knows key players and can kiss up to them….
    As for arriving “rested for class” – that’s really hard at 7 pm after a full day of work!

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  2. Jordyn Avatar
    Jordyn

    I don’t understand the government! How can they say they will not bail out anymore companies but then pay out 10B dollars to AIG? I don’t get it!!

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  3. Yovela Rico Avatar
    Yovela Rico

    I heard about this on NPR. Not a good Idea at all. The governement is Cherry Picking. I see a lot of hearings coming up over their current decisions and possibly some resignations. Not to mention, where is all this money coming from, that the government can afford to give these loans. How does that work. I heard there is talk of a new stimulus package as well before year end. Taxpayers are going to suffer severely in the long run. Will we suffer more in the long run for these companies going belly up? What will the ramnifications be if the government DOES or DOESN’T interfere? Which is the lesser of two evils?

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  4. Jackie Perez Avatar
    Jackie Perez

    HAHA exactly.. Where is all the money comming from? We are all putting out $85 when the Net Book is $67? There has to be some kind of twisted strategy. Doesn’t make any sense. Why would we pull AIG out of the water and let Lehman drown?

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  5. Cresencio Davila Avatar
    Cresencio Davila

    Truth be told – AIG was a bigger player than Lehman. “AIG’s reach expands beyond Wall Street to other investments like money market funds and pension funds. It insures everything from cars to lives. It’s among the largest global insurance and financial services companies, and provides insurance and investment products to over 45 million individual and institutional clients in close to 130 countries, according to UBS.”
    My concern in all of these bailouts, is what the government plans on doing with these companies in a few years. The way I see it, it won’t be long before the government owns all the major businesses in the US and we slowly move away from a Capitalist society.

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  6. Yovela Rico Avatar
    Yovela Rico

    As I understand, this $85B AIG loan is only a 2 year loan and carries an interest rate of 11.99% apr. I don’t see how they could possible pay that back. I’m hearing that it is the feds plan to break it apart and sell parts of the company over time. They don’t actually plan on it surviving as a whole. I also heard that AIG owns over 1,000 commercial planes so, their span goes well beyond insurance.

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  7. Dennis Elam Avatar
    Dennis Elam

    Excellent point, what is the exit strategy?

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  8. Dennis Elam Avatar
    Dennis Elam

    The news continues to dribble out that whatever this week was it was a stopgap measure to try to stem the massive exits and selling. I think they have done that, we will see how this shapes up, it mkaes the election even more important.

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