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lquadland10 (< 20)

A.I.G. just called the bottom. 5 years from now and the IMF ( Fed ) are sweating bullets.

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November 10, 2008 – Comments (4) | RELATED TICKERS: AUY , GLD , SLV

http://www.nytimes.com/2008/11/11/business/economy/11aig.html?ex=1241931600&en=2771a0383a0e4c50&ei=5087&excamp=GGBUaig&WT.srch=1&WT.mc_ev=click&WT.mc_id=BI-S-E-GG-NA-S-aig       U.S. Provides More Aid to Big Insurer
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By ANDREW ROSS SORKIN and MARY WILLIAMS WALSH Published: November 10, 2008

BOLD LETTER IN PAREMPENCY"S ARE MY INSERTS   

 


The government created an $85 billion emergency credit line in September to keep A.I.G. from toppling and added $38 billion more in early October when it became clear that the original amount was not enough. As part of the revision, the Federal Reserve ( IMF ) said it would reduce that credit line to $60 billion.

When the reorganized deal is complete, taxpayers (central bank) will have invested and lent a total of $150 billion to A.I.G., the most the government has ever directed to a single private enterprise. It is a stark reversal of the government’s assurance that its earlier moves had stemmed the bleeding at A.I.G. But Fed ( IMF ) officials said the $40 billion investment would allow them to reduce their exposure to $112 billion from $152 billion, and improve the condition of the collateral for its loan. The revised deal will probably intensify the debate in Washington over why some companies should be saved while others are left to wither.

Congress had authorized the Treasury (central bank) to use the $700 billion to shore up financial companies. But just this weekend, Democratic leaders in Congress called on the Bush administration to drop its opposition to using some of that money to rescue Detroit automakers.

The government’s (central bank) original emergency line of credit, ( given under the threat of martial law ) while saving A.I.G. from seeking bankruptcy protection for a time, now appears to have accelerated the company’s problems. The government’s (central bank) original short-term loan came with a high interest rate — about 14 percent — which forced the company into a fire sale of its assets and reduced its ability to pay back the loan, putting its future in jeopardy.

The Fed ( IMF ) said Monday that it would reduce the interest rate on that credit facility to three-month Libor plus 3 percentage points from the current rate of three-month Libor plus 8.50 points. Libor, the London interbank offered rate, is a commonly used index that tracks the rates banks charge when they lend to one another. The fee on undrawn funds will be reduced to 0.75 point from the current rate of 8.5 points.

When the reorganized deal is complete, taxpayers (central bank) will have invested and lent a total of $150 billion to A.I.G., the most the government  (central bank) has ever directed to a single private enterprise. It is a stark reversal of the government’s assurance that its earlier moves had stemmed the bleeding at A.I.G. But Fed ( IMF ) officials said the $40 billion investment would allow them to reduce their exposure to $112 billion from $152 billion, and improve the condition of the collateral for its loan. The revised deal will probably intensify the debate in Washington over why some companies should be saved while others are left to wither.

Congress had authorized the Treasury (central bank) to use the $700 billion to shore up financial companies. But just this weekend, Democratic leaders in Congress called on the Bush administration to drop its opposition to using some of that money to rescue Detroit automakers.

The government’s (central bank) original emergency line of credit, while saving A.I.G. from seeking bankruptcy protection for a time, now appears to have accelerated the company’s problems. The government’s (central bank) original short-term loan came with a high interest rate — about 14 percent — which forced the company into a fire sale of its assets and reduced its ability to pay back the loan, putting its future in jeopardy.

The Fed  ( IMF ) said Monday that it would reduce the interest rate on that credit facility to three-month Libor plus 3 percentage points from the current rate of three-month Libor plus 8.50 points. Libor, the London interbank offered rate, is a commonly used index that tracks the rates banks charge when they lend to one another. The fee on undrawn funds will be reduced to 0.75 point from the current rate of 8.5 points.

Federal Reserve officials ( IMF )  said they had held discussions with A.I.G. management since they struck the original deal in mid-September. At the time, the government (central bank) did not have the authority to make direct investments in financial companies. _Now that they do, they say they believe that the approach is a more prudent way of stabilizing companies.

The new deal makes the government (central bank) a long-term investor in A.I.G., something that Treasury Secretary Henry M. Paulson Jr. (central banker) had said he hoped to avoid.

The government (central bank) will also spend $30 billion to help A.I.G. buy up a type of security called collateralize debt obligations that the company had agreed to insure against default. The securities are now held by institutional investors.

As their insurer, A.I.G has been forced to put up large amounts of cash as collateral as the global economy has soured and the securities seemed increasingly likely to default.

The new arrangement calls for A.I.G. to put the securities into a new entity, effectively removing them from the company’s balance sheet.( more off balance non transparency in our money system. )   Now I want my bail out. Hey POWERS how about the American Tax Payer. You can start with the banks. No more credit card lending to the shareholders ( we the american tax payer ) at 110% APR with fees included. You now have to change the rules for us shareholders to no more that 20% APR. including fees. That is just the start for you to get me to trust you again. Otherwise it is cash and cary and living below my means. 

4 Comments – Post Your Own

#1) On November 10, 2008 at 4:29 PM, LordZ wrote:

AIG isnt calling JACK......

 

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#2) On November 10, 2008 at 4:36 PM, lquadland10 (< 20) wrote:

Oh LordZ yes they are. You see they know the Arms resets for housing are for the next 5 years and that is how long they got the loan for. So in essence they are calling the bottom in 5 years without saying it.

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#3) On November 10, 2008 at 6:31 PM, oldfashionedway (35.57) wrote:

Metaphysical question: How much money can the Fed/Treasury pour into the BLACK HOLE that is corperate America in the next year or so?

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#4) On November 10, 2008 at 7:12 PM, lquadland10 (< 20) wrote:

As much as they can print. After all it is just thin air.

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