Buddy, Can You Spare A Billion?

As Economy Tanks, More Companies Reach For A Piece Of The Bailout Pie

(CBS/AP)  The government's $700 billion bailout plan, which won Congressional approval in October, was designed to ease the mounting stresses on the nation's economic crisis. But the controversial legislation has invited a chorus of financial rescue pleas from industries nationwide and sparked controversy over which companies, if any, deserve a government lifeline.

Most recently, the situation surrounding insurance giant American International Group has underscored the problem. When the government offered an emergency loan to AIG in September, eyebrows shot up at the $85 billion price tag. Now it looks like pocket change.

The size of the AIG lifeline swelled to more than $150 billion on Monday, a record for a private company. But the head of the broader financial rescue package was cool to other companies reaching for a piece of the bailout pie.

The new AIG package includes a $40 billion chunk of the $700 billion financial bailout. It's the first time money from the big rescue bill has gone to any company other than a bank.

General Motors, Ford and Chrysler, burning through cash and bleeding jobs, are prodding the government for more help. The leaders of the House and Senate have urged Treasury Secretary Henry Paulson to get some of the $700 billion to the Big Three.

The automakers, covering all their options, are also pushing to get help as part of a new, multibillion-dollar stimulus package for the economy if Democrats push it through Congress when a lame-duck session convenes next week.

President-elect Barack Obama has said his transition team would explore options to provide relief to the auto industry, and President George W. Bush's press secretary said Monday the White House would "listen to" Congress if they try to help automakers.

Any money would be on top of the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.

Neel Kashkari, the interim head of the $700 billion bailout program, was cool to the idea of funneling the money to companies beyond banks and AIG.

"This morning's action with AIG was a one-off event necessary for financial stability. It is not the establishment of a new program," he said at a financial conference in New York.

According to the Wall Street Journal, the Treasury has committed all but $60 billion of the first $350 billion in funds granted by Congress under the bailout plan.

In a separate development late Monday, the Fed granted the request of credit card company American Express Co. to become a bank holding company.

Although the new status will subject the company to greater regulatory scrutiny, American Express will also gain access to the Fed's emergency lending program. The company, which last month announced plans to slash its global work force, has been hard hit by the credit crisis as even the more affluent consumers the company caters to struggle to pay off their debts.

The original Fed loan to AIG was $85 billion, and the Fed added a $38 billion loan in October. But that has not been enough to firm up the company, which is so big and interconnected to other firms that its failure would devastate the economy.

Under the new plan, the Fed will provide $60 billion in loans. The Treasury will provide $40 billion to buy up preferred stock. And the government will spend close to $53 billion to buy up mortgage-backed assets and other AIG contracts on debt.

Total package: $153 billion. And AIG has also taken advantage of a federal plan to buy up short-term debt routinely issued by companies, known as commercial paper.

The $40 billion going to AIG will buy preferred shares of company stock, giving taxpayers an ownership stake. In turn, restrictions will be placed on executive pay at the firm.

The Fed stepped in with an $85 billion loan in September because the company is so big - linked to mutual funds and retirement products held by millions of Americans, not to mention ties to U.S. mortgages - that its failure would have devastated the economy.

"The bailout continues, and essentially exemplifies the notion of `too big to fail,' said Anthony Sabino, a professor of law and business at St. John's University. "But the question must be asked: Where does it end?"

AIG also came under fire for spending hundreds of thousands of dollars on a California retreat just days after the Fed loan was announced in September.

In other bailout news Monday, mortgage finance company Fannie Mae said it may have to tap a $100 billion government lifeline as early as next year after posting a massive third-quarter loss.

Fannie Mae, seized by federal regulators more than two months ago, posted a staggering loss of $13 per share for the July-to-September quarter, compared with a loss $1.56 a share, for the same period last year.

The company's net worth - what it owns minus what it owes - fell to $9.4 billion at the end of September, from $44.1 billion at the end of last year. If that number turns negative, Fannie Mae said it would be required to tap Treasury for help.

The new package for AIG was unveiled as the insurer issued new, bleak quarterly results. It lost $24.5 billion in the third quarter after turning a $3.1 billion profit in the third quarter of 2007.

Under the restructuring, AIG also gets easier terms on the Fed loans, reducing the risk AIG will have to sell off assets at firesale prices to pay back the government.

"This is a very big deal for AIG. It essentially plugs two of the biggest holes that the company had," said Rob Haines, analyst at CreditSights.

Fed officials expressed confidence the money would eventually be repaid to taxpayers, and presidential press secretary Dana Perino said it would also be good for the fragile U.S. economy.

The federal help "will allow AIG to continue to restructure themselves in a way that will not hurt the overall economy. AIG is a large, interconnected firm," she said.

AIG Chief Executive Edward Liddy called the plan a "win-win."

"It sends a strong signal to our policy holders, to government, to regulators around the world, to our business partners and counterparts that AIG is in fact on the road to recovery," he said.

[triplet-man]

There is one word for what the Federal Govt. is doing RIGHT NOW. IT''''s called Socialism - look up the definition.
Taking "ownership" of the banks, loans, credit lines, Automakers. What is next?
Someone else in South America did this. Hugo Chavez - The only difference is, he just said it outright. I''''m "nationalizing" all of this. It''''s MINE now. The Feds are using FEAR tactics to take over this nation.
We the people..... are falling for it.
WAKE UP AMERICA!

[cbsblogger]

Regarding the outrageous unfairness of the bailout for the rich. It is not that far fetched to suggest that the backbone of Wall Street is represented by individuals such as wealthy AIPAC members? They have a history of getting what they want while the rest of us pay. Most small businesses and USA individuals are represented by no one.

[yeswedid]

I guess I''m just surprised by how passive we are acting as americans with all this business "b.s." going on right in front of us. Why isn''t there an uprising & more public outcry to these bailouts? They are effecting EVERY SINGLE AMERICAN. This is simply unacceptable!

[gorgeousm]

The US Govt is protecting major financial, criminal fraudsters who have wrongfully engineered not only the root causes of our financial disaster, and yes, our DEPRESSION, but our US Govt also will make we the workers and taxpayers, pay for what the aforementioned financier-parasites have perpetrated.

This bail-out is an obscene cover-up to protect individuals who are friends, relatives and cronies of US Govt officials, who should be made to serve long-term prison sentences, and in not too few cases, receive the penalty of death for the financial ruin they have indeed caused to tens of millions of people in America alone!

[bobnjersey]

[Just wanted to add one more thing about AIG getting all this money. I am a small contractor that employs 10-15 people and I am slowing down to unbelievable measures. I could use just $150,000.00. Think our government would bail me out? If so, who do I write to. LOL]
[Posted by jcci1 at 05:25 PM : Nov 11, 2008]

declare yourself to be a bank ... take some deposits ... and you should qualify. your compensation will be limited though ... to something less than $25 million a year.

[jcci1]

Just wanted to add one more thing about AIG getting all this money. I am a small contractor that employs 10-15 people and I am slowing down to unbelievable measures. I could use just $150,000.00. Think our government would bail me out? If so, who do I write to. LOL

[jcci1]

what about giving each taxpayer the bailout money. We would all be able to pay bills, save our homes, put money in the bank (bank bailout). I was told the other day that each taxpayer would get about $250,000.00 each. BOY, wouldn''t that help the economy and we wouldn''t feel so bad about paying it back.

[bobnjersey]

[Does anyone have anything to say about this, or are you all F-U-C-K-I-N-G MORONS? READ THE D-A-M-N STORY.]
[Posted by sincebyjake at 03:30 PM : Nov 11, 2008]

this, as with other subsidy/loan/bailout programs, have a sensitivity toward who are actually the recipients of these funds. acceptance of the money could infer that the institution is troubled ... which undermines confidence. confidence is all that keeps the investment/finance/stock market wheel rolling ... and that''s been undermined of late.

in fact, i believe they made many of the banks take some of the money ... even if they didn''t need it or want it ... so that it wouldn''t be obvious who really needed it.

[bobnjersey]

[i didnt give an opinion on either bailout....just pointing out that libs blast business bailouts given by Bush , but will praise any given by obama]
[Posted by jamesm12341 at 03:29 PM : Nov 11, 2008]

james ... if you wave the flag of ''i did it all myself'' ... and ''personal responsibility'' ... and ''free markets are the cure'' ... which are cornerstones of the republican dogma ... a flawed dogma albeit ... it''s an issue when your policies fly in the face of those very foundations.

this is primarily why there''s criticism of republican policies that seem to counter republican fundamentals.

i know ''you'' wont understand ... but this is for everyone else''s benefit ... to point out the complete absurdity of your commentary.

[stevador39]

The bailout is the FLEECING of America. Bush stinks, and every member of congress who voted for this outlandish transfer of money from the taxpayers to the wealthy, stinks. They should be tried, convicted and hung as traitors. I am a lifetime ''liberal.''

[lochlan-2009]

sincebyjake- Thanks, 99% of the people on here have their head up their @sss. Didn''t see that story though.

You have to love America, it is such a lie.

[minminmin-2009]

obama will want to bailout gm and the libs will be all for it
Posted by jamesm12341 at 02:56 PM : Nov 11, 2008

and you will be too, when you understand the how the unemployment, company collapses, and overall misery that will ensue if they do not...kinda like how the masses were against any bank bailout...until they saw their 401ks plummet.

[hypnotoad72]

Well, some republicans and the President signed the same bills - are they closeted democrats?

[sincebyjake]

You all need to get off your sides of the fence. You''re only over there because the elite want you to be. Tear down the *** fence, shake hands, and ask yourselves "what are we arguing about?"

answer: your differences.

Why fight/argue over differences? Everyone in the world is unique/different. Just consider how stupid you guys sound.

Now read my previous post and tell your friends.

[sincebyjake]

Expect the following comment to be censored/removed within 15 minutes.

You all need to ask yourselves, "Why is no one talking about this?" (Read below)

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

here''s the link:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide

Demand that the mainstream media present real news.

[random_radar]

If they just give me a million I will be happy.

[georgiadog8]

Mr Gop Loser wrote: You liberals have no sense of personal responsibility.

You are the liberal one - That cracks me up Liberal ...Mr Borrow and Spend. Mr Corporate Welfare. As a matter of fact you republicans run the govt like AIG runs its company. AND then blame the democrats or anyone for the mess you have created! Next lie pal!

[daruma_rds]

Welcome America to your brave new world of socilaist democracy. Now you look just like the rest of the world with your hand out looking for a bailout. What made your country great is that you were based on the ability to fail as well as succeed. That is why the rest of the world looked to you. Why the rest of the world envied you. But now you are headed down the path that has led most of the rest of the world to dictatorships or no political clout with the rest of the world. So... welcome, the prodigal son has returned...

[gop_will_win]

Excuse me... Where have you been the last 8 years? This economic disaster has been completely brought on by the GOP and republican policies over the last 8 years. 6 of which were completely republican controlled - house senate executive branch. When Bush stole office and Clinton''''s term was over Clinton left a balance budget and the govt was running in the red. The state of our union was strong. Next lie pal!


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Posted by Georgiadog8
===========================
You liberals have no sense of personal responsibility.

[mycommentspg]

The government bailouts will be full of corrupt situations and includes continuing outrageous pay levels for the executives and allowing them to continue in jobs when they should be fired. A big waste of taxpayer''s money without the necessary controls that members of Congress don''t fully understand.