Fed Grants AIG Additional $37B Loan

(CBS/ AP)  The Federal Reserve has agreed to provide insurance giant American International Group 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.

Last month, the Fed provided an $85 billion loan to the company, which was on the brink of bankruptcy.

The White House said on Wednesday it was "despicable" that AIG executives spent hundreds of thousands of dollars on a posh California retreat just days after getting the $85 billion bailout.

Lawmakers investigating the meltdown of AIG said the retreat didn't include anyone from the financial products division that nearly drove the company under, but they were still enraged that executives of AIG's main U.S. life insurance subsidiary spent $440,000 on the retreat, complete with spa treatments, banquets and golf outings.

"It's pretty despicable," White House press secretary Dana Perino said.

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government that it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

"The president did not want to move forward on this rescue package to help anybody in the top positions on Wall Street," Perino said. "He was concerned about everyday people like you and me. ... He didn't do that to help top executives and certainly not to help executives go to a spa."

The hearing also revealed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released Tuesday by the panel examining the chain of events that forced the government to bail out the conglomerate.

AIG's problems did not come from its traditional insurance subsidiaries, which remain healthy, but instead from its financial services operations, primarily its insurance of mortgage-backed securities and other risky debt against default. Government officials feared a panic might occur if AIG couldn't make good on its promise to cover losses on the securities; investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.

AIG suffered huge losses when its credit rating was cut, thanks largely to complex financial transactions known as "credit default swaps." AIG was a major seller of the swaps, which are a form of insurance, though they are not regulated that way.

The swap contracts promise payment to investors in mortgage bonds in the event of a default. AIG has been forced to raise billions of dollars in collateral to back up those guarantees.

[doug5231]

Country is going to the DOGS...We''ll all have to bend over and kiss our butts goodbye!!!!

[ericv2644]

AIG will cancel your policy if you are a day late, they just had a 400.000.000 retreat. that is crazy another 37BILLION DOLLARS$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

[ericv2644]

this is crazy, where does all this end? Are we still in a free-market democracy? Why is the power of the Federal government drastically increasing. This seem like china rather than my beloved USA.

[fush2]

now this is where the tax payers money comes in..this is ridiculous i mean seriously they spend all this money and then the gov decides to give them another loan!!!! but then when the people need money they dont have any..whatever these ppl have problems

[hbevis]

And it would
determine whether the two are adequately managing the risks of their
ballooning portfolios.'' Democrats pushed back. ''Among the groups
denouncing the proposal today were the National Association of Home
Builders and Congressional Democrats who fear that tighter regulation of
the companies could sharply reduce their commitment to financing
low-income and affordable housing''. ''These two entities, Fannie Mae and
Freddie Mac, are not facing any kind of financial crisis'', said Barney
Frank of Massachusetts, the ranking Democrat on the Financial Services
Committee. ''The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see in terms of
affordable housing.''
Representative Melvin L. Watt, Democrat
of North Carolina, agreed. ''I don''t see much other than a shell game
going on here, moving something from one agency to another and in the
process weakening the bargaining power of poorer families and their
ability to get affordable housing,'' Mr. Watt said.

[hbevis]

Amazing how the Democrats keep trying to blame this on Bush''s
deregulation policy. It''s like the ''pot trying to call the kettle
black.''

New York Times - Five Years Ago

The following article reported in the
New York Times five years ago. You won''t hear this from the liberal
media !!
It seems that the Bush administration
proposed increased oversight and regulation of Fannie and Freddie, but
Democrats fought it. Here''s the article:

''The Bush administration today
recommended the most significant regulatory overhaul in the housing
finance industry since the savings and loan crisis a decade ago. Under
the plan, disclosed at a Congressional hearing today, a new agency would
be created within the Treasury Department to assume supervision of
Fannie Mae and Freddie Mac, the government-sponsored companies that are
the two largest players in the mortgage lending industry. The new
agency would have the authority, which now rests with Congress, to set
one of the two capital-reserve requirements for the companies. It would
exercise authority over any new lines of business.

[armydog2]

This is f@cking ridiculous, these guys just came back from a 400,000.00 retreat. Why give these bas-tards more money. I need a bailout too!

[ahrats]

What does AIG need another 37 Billion for, another junket for their executives? By the way that''s 122 billion for one company, who are they sleeping with in the white house or the treasury department. I would like the money be given to the american people instead of these low lifes. Just imagine if you gave everyone over 18 in america a share in this 122 billion what we could do with it, talk about stimulating our economy, but that will never happen, only Insurance companies and bankers get the money and the american people get the shaft.

[slim1h2o]

"Group with a loan of up to $37.8 billion, on top of one made to the troubled company last month".

Is this a classic example of throwing good money after bad.

Why give so much money to a foreign owned conglomerate ? I know, it''s only a loan, till they can''t pay it back. Then it''s free money to them.

And we the taxpayer, is left holding the bag.

[jsklinemn]

I''ll go you one better. I bet the execs right now are planning their permanent getaway to Europe, and all the cash that they got from the bailout, goes into their Swiss accounts so that nobody but them can get to it. I hate to say it but I think our friends in Europe are right; You Americans are so dumb sometimes and way so easily gullible. Just remember; our tax money for the next 30+ years will be going to pay for all this!