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Deal of the Century?

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  • 17-09-2008 3:31pm
    #1
    MCMLXXXIII
    Closed Accounts Posts: 412 ✭✭


    Seems like it is so far...

    The US government buys 79.9% of AIG for $85 billion.

    Yes, it's listed as a loan - but that basically just means that AIG will be buying back its own stock over time.

    That's $840 billion in equity (80% of $1.05 trillion) for $85 billion, or 10.1¢ on the dollar.

    Now, the "capitalistic" US governmentt owns 4/5 of the world's 18th largest company. This includes life insurance, auto insurance, retirement accounts, brokerage/advisor firms, the world's largest aircraft leasing company, all of the US's shipping ports, 90% of the Bulgarian Telecommunications Company, even resort hotels, as well as other small stakes in many other companies (such as London City Airport, etc.).

    Is this a sign that the US wants control over its domestic assets during this period of uncertainty?
    If so, is that good or bad for the American people and Ireland/the world?


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    #2
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    MCMLXXXIII wrote: »
    Seems like it is so far...

    The US government buys 79.9% of AIG for $85 billion.

    Yes, it's listed as a loan - but that basically just means that AIG will be buying back its own stock over time.

    That's $840 billion in equity (80% of $1.05 trillion) for $85 billion, or 10.1¢ on the dollar.

    Now, the "capitalistic" US governmentt owns 4/5 of the world's 18th largest company. This includes life insurance, auto insurance, retirement accounts, brokerage/advisor firms, the world's largest aircraft leasing company, all of the US's shipping ports, 90% of the Bulgarian Telecommunications Company, even resort hotels, as well as other small stakes in many other companies (such as London City Airport, etc.).

    Is this a sign that the US wants control over its domestic assets during this period of uncertainty?
    If so, is that good or bad for the American people and Ireland/the world?

    It certainly looks like a good deal. I went through AIG's financial last night and at, essentially, 10 cents on the dollar, I wouldn't mind a piece.

    The Fed has also taken 79.9% which allows AIG to remain public and insulates the Reserve from any toxicity which mightn't be evident at first blush.

    The Fed has also extracted a nice rate of return: LIBOR plus 8.5 percentage points.

    When he was appointed back to the Federal Reserve for the last time, Alan Greenspan came out with the following interesting statement in his "acceptance speech": "the future is fundamentally unknowable." I love that quote. It's apropos in the current financial crisis as things move very quickly. It's almost impossible to believe that AIG's assets could deteriorate by 80 to 90% in the next month, but my guess is that that's the time frame in which the Fed will be made whole again.


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    #3
    utick
    Closed Accounts Posts: 562 ✭✭✭utick


    deal of the century? normally i might agree with you, but the way things have been going it MIGHT, possibly be the deal of the week


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    #4
    sock.rocker*
    Registered Users Posts: 478 ✭✭sock.rocker*


    i think the harsher the better.. moral hazard is too big an issue. a company has to know it'll lose that much.


    feel bad for AIG tho, they got riddled from insuring banks losses wasn't it?


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    #5
    Minder
    Registered Users Posts: 2,774 ✭✭✭Minder


    It is always possible that the message got lost in translation. A loan of $85b at a rate of more than 10%? Repayable in two years with the Fed retaining ownership of 79% of AIG? I know that's what the press release says but it doesn't ring true, unless Ben Bernanke turned into Tony Soprano over night. AIG assets are supposedly worth in excess of $150b on breakup - how do the Fed recover $85b through the remaining 20% equity stake that they don't own?


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    #6
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    utick wrote: »
    deal of the century? normally i might agree with you, but the way things have been going it MIGHT, possibly be the deal of the week

    LOL. That's the scary part: things are moving so quickly.


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    #7
    SoCal90046
    Closed Accounts Posts: 192 ✭✭SoCal90046


    Minder wrote: »
    It is always possible that the message got lost in translation. A loan of $85b at a rate of more than 10%? Repayable in two years with the Fed retaining ownership of 79% of AIG? I know that's what the press release says but it doesn't ring true, unless Ben Bernanke turned into Tony Soprano over night. AIG assets are supposedly worth in excess of $150b on breakup - how do the Fed recover $85b through the remaining 20% equity stake that they don't own?


    I haven't seen that figure of $150 billion, but presumably AIG will start to sell assets to pay off the Fed. LIBOR jumped a little today, so at this rate, my guess is that they want to get rid of the Fed ASAP.

    If they end up owing 79.9% of the voting stock, they just need someone hold 0.1% of the rest (like the founder) to vote along with them to have a controlling interest. If the value of the company really is only $150 billion, there's more than enough there to cover the "loan."


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    #8
    derry
    Banned (with Prison Access) Posts: 1,380 ✭✭✭derry


    The whole meltdown is not for sure finished

    A very endepted USA has become the final payer of insurance claims

    The incentive for lots of building and lots of private jets all to catch fire is very strong with this formula

    I ant sure if this is just a sticky plaster over the head that has been cut off and how deep this pile of crap is

    Derry


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    #9
    OfflerCrocGod
    Registered Users Posts: 6,304 ✭✭✭OfflerCrocGod


    The value of the company migth be $150 Bil but its liabilities are massive and in the current climate it's quite likely that it will have to pay out on them. The market knew that which is why its stock was tanking.


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