This may be the most important story today. AIG is the largest issuer of Credit Default Swaps, insurance against bond defaults. That is the reason the government has put up $150 billion to support it. If it files Chapter 11 all the dominos will begin to fall. Just look at the chart above. The country's largest insurance company was $50/share only 9 months ago and is now 49 cents, yikes.-LouSAN FRANCISCO (MarketWatch) -- American International Group Inc. said Monday that it's evaluating "potential new alternatives" with the Federal Reserve Bank of New York to tackle the giant insurer's problems.
...AIG's statement came after cable network CNBC reported that the company will report a $60 billion loss next Monday and is seeking more government support.
The loss may trigger more ratings downgrades, which would leave AIG needing to raise more collateral, according to CNBC's David Faber. The law firm of Weil, Gotshal & Manges is preparing a bankruptcy filing for but that outcome is unlikely, he said.
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Lou,
ReplyDeleteI could be wrong but it seems like the continual government bailouts of companies like AIG will end up being a real but undetected driver of inflation. If the treasury makes 50-100B of payments every quarter, is this not money that is going to meet counter-party obligations-the drug going straight into the vein? It seems like checkmate: don't bailout AIG and banks don't have their insurance, do bailout and inflation/interest rates are going up.
Thanks,
gfh