AIG Has Already Used 3/4 of Its $123 Billion Bailout Loan
Ouch. Does anything more need to be said other than Ouch?
The troubled insurance giant American International Group already has consumed three-quarters of a federal $123 billion rescue loan, a little more than a month after the government stepped in to save the company from bankruptcy.
AIG has borrowed $90.3 billion from the Federal Reserve’s credit line as of yesterday, the bulk of it to pay off bad bets the company made in guaranteeing other firms’ risky mortgage investments. That’s up from roughly $83 billion AIG had borrowed a week ago, and the $68 billion level it reached a week before that. The news comes as the company’s new chief executive warned Wednesday that the government’s financial lifeline may not be enough to keep AIG afloat.
Why in the world did we want control of this company? Within days I imagine they will have burned through all of the $123 billion they borrowed, and come back asking for me. Enough is enough.
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It is quite clear that they need more than 123 billion dollars to bail them out of the situation that they are in. Expect an international investor or a large U.S. corporation to purchase them.
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But think what this situation implies: these guys aren’t burning money of their own, they are paying up on bond insurance contracts that they were party to. And if they are required to pay it means that there are a LOT of bond failures out there… if AIG is not there to pay up, what will happen to the lenders who have purchased the insurance? What will be the impact on the rest of the financial system if all these bonds default without recourse or insurance?
But when does it end? Do we just keep giving them more and more money? It has to stop eventually.
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