Second bailout effort for AIG
The government bailout of AIG wasn't enough to help it stay afloat. Now it will buy preferred stock in the insurance company to the tune of $40 billion. Jeremy Hobson reports the AIG bailout is now worth $150 billion.
AIG logo (Stan Honda/AFP/Getty Images)
TEXT OF STORY
Scott Jagow: The insurance company AIG was considered too big to fail, remember? That's why the Fed loaned it a ton of money in September. Apparently, it wasn't enough. This morning, the government announced a second rescue package. Some of it is just restructuring the loans, but the Treasury's also buying a stake in AIG this time. Marketplace's Jeremy Hobson has more on that.
Jeremy Hobson: The government will lower the interest rate on the loan it made to AIG and give the insurer more time to pay it back. Uncle Sam will also help AIG take billions of dollars worth of debt off its balance sheet.
Donn Vickrey of Gradient Analytics has been looking over AIG's earnings report this morning.
Donn Vickrey: If you believe their reported results, they are not nearly as bad as I would have expected to justify the funding that they got from the government.
Even so, the government will buy preferred stock to the tune of $40 billion, making the entire AIG bailout worth a whopping $150 billion. Some of that money will come from the Troubled Asset Relief Program or TARP, marking the first time TARP money has been used to aid a company other than a bank.
Still, White House spokesman Tony Fratto tells Marketplace this move doesn't open the door to TARP money being used to rescue the auto industry, because he says much of AIG's business is clearly within the financial sector.
In New York, I'm Jeremy Hobson for Marketplace.
Comments
Comment | Refresh
From TX, 11/12/2008
I have auto insurance with AIG. I shouldn't have been surprised that they raised my rates fifty dollars a vehicle. Needless to say I will be shopping for another provider. I refuse to pay for their mistakes in running their company.If all insurers drop them a bailout will not help. It will be money thrown away. Why not give that money to the taxpayers of this country? We wouldn't spend it lavishly like the honchos of Aig on vacations--we would use it for neccessities of life.I am afraid the people making these decisions about who to bail out are digging a hole that is going to haunt America for years.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.