Seeing ugly week ahead with AIG report its 3Q loss

“American International Group Inc. is expected to report third-quarter loss of 90 cents a share, according to analysts surveyed by Thomson Reuters.

Leading industry analysts have said that turmoil in equity and credit markets has been hampering AIG’s efforts to sell some of its businesses, a crucial part of the insurer’s plan to repay billions of dollars in expensive government loans.

Rival insurers that may be considering bidding for AIG businesses are now facing their own problems as slumping stock prices and wider credit spreads cut into capital, Andrew Kligerman of UBS wrote to investors about a week ago.

That’s slowing what investors hoped would be fast asset sales by AIG, possibly preventing the insurer from quickly repaying the Federal Reserve’s loan, the analyst wrote.

Wider credit spreads may be triggering more demands for AIG to post collateral to support the credit default swaps it wrote. That likely increases the amount of money the insurer has to borrow from the Fed, which, in turn, means even more asset sales, the analyst explained.”

This article explains why AIG had to be bailed out.

Here is the excerpt.

“We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for “regulatory capital relief rather than risk mitigation”. In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.”

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3118994/Financial-Crisis-So-much-for-tirades-against-American-greed.html

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• Governments feel forced to bail them out if they had problems.
• Geithner’s Fed told AIG to hide “backdoor bailout”
• Another bad PR for Goldman, Greenberg accused $GS behind AIG’s collapse..
• AIG May Have Zero Value After Rescue, Citigroup Says

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