WASHINGTON, Nov. 11, 2008
Buddy, Can You Spare A Billion?
As Economy Tanks, More Companies Reach For A Piece Of The Bailout Pie
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AIG Gets Bigger Bailout
Two months after AIG, the nation's largest insurance company, received a huge financial bailout it will be receiving more help from Washington. Anthony Mason reports.
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Bear Stearns Bailout
A look at recent events at the 85-year-old investment firm.
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.
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See all 83 CommentsEndless War
Financial Ruin
Taxpayer subsidized welfare to large corporations
Is it any wonder that Obama won? He''s got his work cut out for him. A trial for Bush and Cheney at the Hague would be a great start.
Endless War
Financial Ruin
Taxpayer subsidized welfare to large corporations
Is it any wonder that Obama won? He''''s got his work cut out for him. A trial for Bush and Cheney at the Hague would be a great start.
Posted by Centerfall93 at 11:47 AM : Nov 11, 2008
I would be willing to help bring that trial at the Hague to fruition! Just advise me what needs to be done!
The Market would be doing the exact same thing its been doing under Dumbya
and The rest of the GOP criminals
Tanking!!!
Posted by gop_will_win at 12:05 PM : Nov 11, 2008
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Good Morning GOP, I am sure glad to see you here trolling today. Haven''t heard from you in three days, was worried that you were ill.
I am sure that you didn''t mean 20,000 for the market. I think you left out a few 0''s. You meant 20M or 20B didn''t you?
Posted by hennighg at 12:30 PM : Nov 11, 2008
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If you really want to find out about ''trickle down'' you need to talk to a Plumber, not ''Joe the Plumber'' since he wasn''t licensed. A plumber can explain what ''trickles down''. It is the same, just a different department.
For the love of money is the root of all evil.
Not money but the love.
Looks like the shoe fits doesn''t it.
What a wild ride and they say history repeats itself.
Looks like we are in for a repeat soon.
Posted by daveqwerty at 12:37 PM : Nov 11, 2008
NO!!!!
Bush managed America''s finances just exactly the same way he managed those of the companies he ran.
lolll...and, of course, being a good little Republican his biography will say "It wasn''t my fault.".
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Posted by gop_will_win at 12:05 PM : Nov 11, 2008
We got a pundit here ... All the screw-ups of the past eight years would have turned into gold within a week, if McCain had been elected. Get a life man.
Posted by jamesm12341 at 12:48 PM : Nov 11, 2008
Tough, making ends meet - when you have a President and a Republican Party controlling Congress and doing everything in their power to create funny money out of leveraged debt and increase energy costs so as to cause hyperinflation on all fronts...
They tried to, unfortunately, the used DHL to courier the paperwork.
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Posted by DaVicar1 at 12:48 PM : Nov 11, 2008
Good one !!!
now economy is so down, can i get bailout ?
Posted by DaVicar1 at 12:50 PM : Nov 11, 2008
These efforts are being made to fix a problem the Republicans created.
Now if you were a tad more intelligent, you would understand that the Republican tradition of inventing a lie and then repeat, repeat, repeat is passe.
No matter how many times you attempt to divert attention to this bailout, the responsibility ALWAYS comes back to Republican policy.
Posted by jamesm12341 at 12:51 PM : Nov 11, 2008
From the way you talk and how much time you spend posting, I suspect that your pop is still paying your way.
Posted by jamesm12341 at 12:56 PM : Nov 11, 2008
lolll...you are funny. Why don''t you practice what you preach, and go out and create some jobs, RINO?
You know - to employ some "libs" and get them off of your base assumption: Everybody but you is on welfare.
Posted by DaVicar1 at 12:58 PM : Nov 11, 2008
That is SUCH a stupid argument.
What policy has been passed by this Congress and signed by this President that lead to this fiasco?
Are you really arrogant enough to think that everybody else in America is stupid enough to believe you when you assert that past Republican actions had no effect, but current Democratic actions have had a nearly instantaneous effect?
On the massive, dominated-by-inertia system that our economy is?
It takes YEARS for Republican stupidity to appear in the economy...
But now those years have passed.
Posted by DaVicar1 at 12:59 PM : Nov 11, 2008
Oh, my...hey, your racist slip is showing, child. Pull your dress down.
IDIOT LIAR!
Hypocrits.
Posted by DaVicar1 at 01:05 PM : Nov 11, 2008
When I read comments like you post, it becomes apparent to me that good sense is not all that common, after all.
Posted by daveqwerty at 01:08 PM : Nov 11, 2008
Oh, they are; indeed they are.
Unfortunately, it is from the treasure held in the U.S. Treasury.
He was for the McCain Lieberman ticket.
Posted by used2bfedup1 at 01:10 PM : Nov 11, 2008
lolll...they should give Lieberman his own, personal country - of which he would be the only citizen.
Then at least I would know what country he worked for and who he represented within that country.
You know the best president the Republicans have ever had and probably the smartest W Bush.
You know the guy that has run every business he has ever owned into the ground.
Posted by scb1111_1 at 01:10 PM : Nov 11, 2008
lolll...you''re another funny man.
Tell the truth, scb...you WANT America to fail, don''t you?
You positively LUST for the days of the Great Depression, when you could get workers willing to slave for an apple and a bowl of soup, DON''T YOU?
lollll....trust fund baby...
Posted by gop_will_Win at 01:15 PM : Nov 11, 2008
a) He is not President
b) Use better flame-bait...the DJIA and other index and stock charts are way too easy to access.
Might I suggest that you claim that Obama intends to confiscate the property of all people who make more than, say, $250,000?
That should be good for a rise...
b) Use better flame-bait...the DJIA and other index and stock charts are way too easy to access.
Might I suggest that you claim that Obama intends to confiscate the property of all people who make more than, say, $250,000?
That should be good for a rise...
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Posted by ibsteve2u
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I grow tired of your feeble excuses for Obama liberal.
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Posted by daveqwerty
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100K? You got to be kidding. Markets dont go up that fast. I would however say it would be pushing 20,000 today had there been a McCain victory.
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Posted by ibsteve2u
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How many times do I have to tell you liberals I have 2 ID''s, this one and Mrs_Premise. I am not any of these other posters you claim I am.
Tell you one Industry who is not hurting
Television - the Big Networks
Betcha they just made at least $500,000,000 in profit
From all the Political Advertisements in last number months
And speaking of TV Ads
The Big Car Companies
How much do they spend on TV and other Ads each week ?
Have they cut back any ?
Seems a LOT of money - a LOT
Is being flushed down the TV Ad Toilet each week
From a LOT of businesses who really do not need to advertise
Posted by Hitoyou1 at 01:23 PM : Nov 11, 2008
lollll...after, what - 14 years of Republican Congress and 8 years of a Republican President - and all of their debt?
You can''t get clear title to the U.S. any more.
I keep trying to tell you people, in case you couldn''t tell these last eight years, the markets are fixed. Right now they are killing two birds with one stone. GM is priced for the rich to see the 1300% returns they are used to. Gm also is going to cut paying their pensions (government accepted), as they''ve made blatantly obvious these last few weeks in the market propaganda media. Now once they are "back on their feet" and raking in the cash come 2011-2012, do you think they are going to reinstate paying those pensions? Of course not, so let''s see. Do everything possible, in the propaganda media, to make your value appear down. Scare all the grandparents into selling their stocks at huge losses (95%) by telling them the company is going to be "worthless" ("sell, grandma, now that it''s at the bottom"). Move the rich and connected in for profits that are going to be through the ceiling in three years (what''s 1300% on a few million?). Ask the government to pick up the pensions or they''re going to have to cut them. Once those are gone start making money hand over fist, and all those pensions, conveniently, are gone, meaning more money for the companies elite, at the expense of people who worked their whole life, for a promise reneged on.
Love American greed.
Posted by Hitoyou1
Exactly!! There is nothing wrong with this country that 8 more years of Bush working with a Republican controlled Congress couldn''t fix. I shudder to think of the dismal state this country will be in after four years of liberal rule.
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Posted by frankson2
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Its the American way! I guess you liberals are against that too.
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Posted by melchg
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Lala land? I dont live there. I live in Altoona Pennsylvania, the birthplace of Jesus.
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