AIG, Act Three: the ‘Controlled Breakup’…
Yes the Third Rescue in 3 months!! And who devised the incredibly effective Plan to Rescue AIG in the first place?? Hmmnnn? Why our very own Secretary of the Treasury, that Wonder Boy we all know and love, Turbo Tax Tim Geithner!!
Yes as head of the NY Fed he made the call on AIG and CITI, smooth moves! See our previous posts on AIG here and here and here and here and yes here.
As former employees we follow with interest the trials and tribulations, the Perils of Pauline-esque series of AIG action….
FT is reporting AIG is now discussing a ‘controlled breakup’ with the government..
AIG and the US authorities are in advanced discussions over a radical restructuring that would split the stricken insurer into at least three government-controlled divisions in an attempt to keep it afloat, according to people close to the situation…
…The final shape of the new rescue attempt – the third government bail-out of AIG in five months – could still change as talks between company executives, US Treasury, the Federal Reserve and credit rating agencies continue.
In addition FOX won that FOIA case against Treasury on the AIG bailout forcing them to disclose what collateral the government is taking and how much cash they are giving AIG behind the scenes..
However, people close to the situation said AIG was on track to announce the overhaul on Monday, when it is expected to report a $60bn loss with its fourth-quarter results. The board is due to meet on Sunday.
-snip-
Under the plan, the government would swap its current 80 per cent holding in the insurer for large stakes in three units – AIG’s Asian operations, its international life insurance business and the US personal lines business. A fourth unit, comprised of AIG’s other businesses and troubled assets, could also be formed.
In return, the authorities would relax the terms, or even cancel a large portion, of a $60bn five-year loan to AIG and convert $40bn-worth of preferred stock into shares, in an effort to ease the company’s burden.
So AIG has not divested itself of any of its many many units. Now as they prepare to report a stunning 60 Billion dollar loss, WOTS is they approached the government for more bailouts…the Neverending Story of AIG….
We are guessing someone realizes the public mood will not sustain this when there is more funding by the taxpayer coming down the pike for those 19 financial institutions currently undergoing Stress Tests...
Thus a last minute rush to sell their units and unsurprisingly, they are having trouble getting it done:
(AIG) may scrap a plan to repay a US$60bil US government loan by selling businesses, after failing to find enough promising bidders, said two people with knowledge of the matter.
Chief executive officer Edward Liddy, who took charge in September and unveiled the strategy the following month, had concluded it wouldn’t work, said the people, who spoke on condition of anonymity because the insurers’ talks with the government are private.
AIG is proposing additional ways to reduce the company’s debt to the US, including handing over stakes in some operations directly to the government, a person said.
The talks come as AIG, already propped up with a total of US$150bil of US aid, prepares to disclose a fourth-quarter loss of about US$60bil and seeks to fend off credit-rating cuts, the people said.
AIG hopes to raise $20 billion selling off American International Assurance, its Asia-based crown jewel. Singapore’s sovereign wealth fund Temasek Holdings, British insurer Prudential and Toronto-based Manulife Financial are all supposedly trying to get ahold of it.
Also on the block is international insurance heavyweight American Life Insurance Co. . MetLife is rumored to have offered $11.2 billion for the whole shebang, and French insurer AXA is said to be interested in all but the unit’s Japanese operations.
David Monfried, an AIG spokesman, confirmed that multiple bids are expected for the Asian business by Friday’s initial deadline and that a few others will be given more time to pony up their offers. “We’d rather give them a few extra days, than abide by some self-imposed deadline,” he said.
Will AIG live to issue worthless, system destabilizing, CDS’ another day? Only time will tell. Tune in tomorrow to The Days of AIG’s Lives….
Market Mover Thursday: Team Obama Budget Presser…Healthcare funding via new additional tax increases in 2011….
Uh oh. For a bunch of people who like to read about FDR, they seem to be repeating some well known policy decisions that increased the severity and duration of the Great Depression here, ie Smoot-Hawley talk tariffs and tax increases on sources of production….our previous posts here and here
The Obama administration will announce a 10-year, $634 billion reserve fund Thursday aimed at expanding health care coverage – and will pay for half the plan with a new tax hike on wealthy Americans that surprised health care advocates and angered Republicans.
This is NOT the rollback of the Bush tax cuts alone, this is a NEW tax increase to be effective concurrently with the expiration of the Bush tax cuts in 2011…a double whammy, the one-two punch….IMO a bad idea…this is exactly what happened before, they raised taxes before the recession was over and made a Depression…can they be this obtuse? Is it deliberate? Seriously!
Under current law, high earners who are in the 35 percent tax bracket can take deductions at that rate. Under Obama’s plan, they would be capped at 28 percent – meaning instead of getting $3,500 back from $10,000 in mortgage interest or other deductions, these taxpayers would get $2,800. The plan would phase in during fiscal year 2011, just as Obama plans to let the Bush tax cuts expire.
OMB chief Peter Orszag is to announce the plan while outlining Obama’s budget in a press conference Thursday.
8 ‘Goals’ for Healthcare Reform:
Ahead of the release of his budget Thursday, Obama has endorsed eight guiding principles for health reform, the White House officials said on the conference call. They stressed that they intend to work with lawmakers and other stakeholders on how to accomplish the goals, but the principles will lay down a marker for any congressional plan.
Other goals include maintaining choice of insurance and doctors, ensuring affordable coverage, protecting Americans financial health, investing in prevention and wellness, improving patient safety and quality of care and is fiscally responsible, sustainable and portable.
So how is the initiative funded on an ongoing basis? Dunno. He seems to expect to recoup itemizations people get now, but if they keep taxing the producers to death their income will dry up no? Yes, Big Dawg said so and we all did well with Big Dawg policy of growing the economy for everyone, not taking one person’s share to give to someone else…IMO…
And he’ll pay for half his plan — $318 billion over 10 years – with new tax hike on Americans making more than $250,000.
Obama had pledged throughout his campaign to roll back Bush tax cuts for Americans making more than $250,000 a year in fiscal year 2011 – a plan that also will be included in Thursday’s budget — but this is different, aimed at reducing the itemized deduction rate for those taxpayers.
Some advocates for universal health coverage said they were surprised to learn that Obama would turn to a tax increase to create a dedicated fund for his program.
Huh, Seems odd to eliminate a subsidy that incentivizes RURAL CARE doesn’t it?
The other half of the $634 billion would come from changes in savings in Medicare, including ending subsides to private insurance companies that participate in the Medicare Advantage programs in rural areas.
From experience in the health insurance field, I can say rural care is an area that can least afford cuts like this. Urban areas are served by many charities and government programs, and their very ‘urbanity’ draws physicians there.
Getting an excellent doctor to a tiny town, and getting the attention of charities and glamorous Hollywood fundraiser types for rural areas is not doable. Seems Obama is not as concerned with the RURAL POOR..Country Mouse City Mouse Class Warfare and it sucks…
Omnibus Budget Passes House, Earmarks Abound: the Roll Call
The House has passed the Omnibus Bill…
Has Obama told them about the CRISIS? Not a sign of being careful with our money anywhere in sight in this bill…I dread hearing about what is in here over the next few weeks…Sounds like Our Government wants to…..party all the time, party all the tiiime….
Who voted how?
Dems who voted no: 20, including the 2 from my neck of the woods, Moderate Dems..
Cardoza,Childers, Cooper,Costa,Donnelly (IN),Driehaus, Giffords, Hill, Kind,Kratovil, Marshall, Matheson, Minnick,Mitchell, Nye, Peterson, Speier, Tanner,Taylor,
GOP who voted yes: 16
Bono Mack, Brown-Waite, Ginny, Cao,Capito, Castle, Dent, Emerson, Gerlach, LoBiondo, McHugh, Miller (MI), Murphy, Tim, Reichert, Upton, Whitfield, Young (AK)
From Bloomberg
The U.S. House voted to boost spending on domestic programs by 8 percent, ease restrictions on travel to Cuba and kill a school voucher program in Washington, D.C., as part of a $410 billion spending bill.
The chamber voted 245 to 178 to approve an “omnibus” bill combining nine appropriations measures needed to fund the federal government through September, the end of its fiscal year.
After persuading lawmakers to keep pet projects in their districts known as earmarks off the stimulus bill, Obama made no such attempt on the first non-emergency spending measure of his presidency. The result was that lawmakers claimed billions in federal funds for pet projects — a total of 8,570 earmarks at a cost of $7.7 billion, according to Taxpayers for Common Sense. Majority Democrats declined to provide a number of earmarks, but said the cost was far smaller, $3.8 billion, 5 percent less than a year ago.
ATTAAAAACK OF THE KILLER EARMARKS…..
Among the earmarks was one sponsored by Rep. Howard Berman, a California Democrat, who secured $200,000 for a “tattoo removal violence outreach program” in Los Angeles. Aides said the money would pay for a tattoo removal machine that could help gang members or others shed visible signs of their past, and anyone benefiting would be required to perform community service.
Under the bill, Mexican-licensed trucks are banned from operating outside commercial zones along the border with the United States. The Teamsters union, which supported Obama’s election last year, had sought the move. The Bush administration backed a pilot program to permit up to 500 trucks from 100 Mexican motor carriers access to U.S. roads.
Bush administration restrictions on travel to Cuba were loosened in the legislation, to permit more frequent visits and expand the list of family members permitted to make trips to see relatives on the Communist nation-island.
Do you get the sinking feeling that the Congress and the Administration are full throttle ahead on spending of any and all sorts?? It is almost as if…all they want to do is dance….they want to partay oooh they want to get down ooooh
The 1,000-plus-page spending bill provides a fat target for deficit hawks. It includes hundreds of pages of earmarks – pet spending projects inserted by lawmakers, ranging from $185,000 for coral reef research and preservation in Maui County, Hawaii, to $55,000 in meteorological equipment for Pierce College in Woodland Hills, Calif., to $9.9 million for science enhancement at historically black colleges in South Carolina.
Some lawmakers are SO excited they cannot contain themselves and are already reporting back home about all the pork they will be sending :
Memo to Team Obama: When TIME agrees with Rick Santelli you are losing the argument….Tea Party Update
…The only people affected by plummeting real estate prices are the ones who bought a house that cost more than they could afford, hoping for a spike in value so they could sell at a profit or take out a new loan based on an increased value. Their home wasn’t just a place to live; it was an investment they thought they could liquefy at will. If we’re saving these poor souls from the 26.7% drop in their investment, we should give twice as much aid to everyone who has lost approximately 50% in the stock market since its peak. Especially those in Vanguard’s Tax-Managed Capital Appreciation Fund.
Meanwhile, mortgages held by the responsible people Obama says he is trying to help only go into foreclosure when the owners lose their jobs. But the best way to help them is through increased unemployment benefits and job creation. In fact, James Lockhart, who regulates Fannie Mae and Freddie Mac, says he hopes this backward plan keeps at best 40% of the people it dishes out money to from redefaulting on their mortgage. The only plan worth pursuing that works at best 40% of the time is hitting a baseball. I would love to yell that in front of the traders at the Chicago Board of Trade. I would also like to yell at them to get computers like everyone else so they can stop executing trades by waving their hands like idiots.
-snip-
Much as it pains me, housing prices need to come down a lot more for the sake of the country. It’s not that the housing market has suddenly gotten sick and needs medicine. It was sick, and it’s getting better. Just like $4 gas, Pets.com and Jim Carrey’s career, we are undergoing a needed correction. So I want in on the Chicago tea party that Santelli, in his rant, promised to organize, only I’m hoping it isn’t in Chicago and is more of a cocktail/wine thing or maybe just a Facebook group. But I’m with him on standing back and letting the housing market lose some of its vaulted ceilings, guarded gates and Argentine Balmoral granite tops. It’s not going to be a pretty few years. So let’s save our government money for things we need. Like high-definition television converters.
Tea Party Update from MM:
A reminder of the main resources for activists looking to join:
ginaswo
