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March 6, 2009
On March 1st of this year we found out that the American taxpayers will divvy up another $30 billion for those wonderful folks at AIG, the supply-siders poster child for “too big to fail”. This forth bailout brought the total kitty to about $180 billion. Analyst Bill Bergman with Morningstar said “it’s like triage. Band-Aids all over the place. I think it’s a lost cause already. Maybe we’re forestalling even bigger consequences by trying to keep it alive”.
As of today AIG stock is only worth about $0.35 after hitting their high in 2000 at just under $100. That is a 99.6% loss. Their current market cap is less than $1 billion, which is their worth based on the number of outstanding shares. 
Therefore, based on the stock price, taxpayers have a collateral of $1 billion against a $180 billion “loan”. Of course, AIG has some assets such as the beautiful corporate building pictured here, but that’s probably hocked to the hilt. And to think we are so upset with a delinquent homeowner whose home is only worth 80% of what’s owed on it.
Of major concern this time around is just who exactly will be getting the taxpayer money. No one, at least publically, knows who bought the credit-default swaps from AIG. But whoever they were (Saudis, China?), they will be the ones getting a lot of taxpayer money. At least some in Congress are demanding to know. Republicans Jim Bunning & Richard Shelby, along with Democrat Chris Dodd, told the Federal Reserve they would get the biggest “No” they ever got when asked for more money for AIG unless the parties were revealed. But I don’t think AIG will be coming back for more money. The end is nigh.
AIG is history. But this comes as no surprise. As I pointed out in this post last November, there were plenty of experts who recognized that. The only problem at that time was that there were too many wealthy people who was going to loose a lot of money, so they had to be taken care of first. But now, with the gift of $180 billion from the taxpayer, most of them have been covered. Therefore, the road is clear to let them go.
Of course, a derivative of the name will probably survive. We need that so others can later point to this “fact” and say, ‘see, the bailout worked’. Naturally, there will be various “legitimate” reasons for why the taxpayer didn’t get their money back, which both they and we will know to be lies. But that’s ok as long as they can simply dismiss that little insignificant fact with a wave of the hand.
Finally, we have to insure that future corporate crooks will be inspired to do it all over again. In reference to folks buying insurance from AIG they knew couldn’t be paid out, Jim Carney of Clusterstock said this kind of behavior is being rewarded by the US government. “The idea was that AIG would never be allowed to default on its obligations – it would be bailed out by the American taxpayers”, he said. Well, we know now that those greedy crooks knew what they were [not] talking about.
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I have been studing AIG and understand that it gave out more insurance loans than they had money for …so if it does indeed go bankrupt then what will happen to all of the homes of people that had that perticular insurance …???is that just their mistake of getting involved with such a company but how would they have known….. this bail out has to work or else this will effect even more home owners…..
Thanks for your comment Chris. However it wasn’t individual homes they were insuring that caused all their troubles — it was insuring other banks, funds, and very large bundles of mortgages, of which many were bad, they were insuring. The latter was their Achilles heal.