AIG has $61.7 billion loss, new U.S. aid may not be last
Mon Mar 2, 2009 6:07pm EST
By Lilla Zuill and Jonathan Stempel
NEW YORK (Reuters) - American International Group Inc posted a record $61.7 billion quarterly loss on Monday and got a new but not necessarily final government bailout, after officials concluded again that letting the insurer fail would threaten the world financial system.
AIG will get access to up to $30 billion of new capital after getting a commitment for $150 billion in aid last year that gave the government a stake of nearly 80 percent.
The latest bailout increases the government's commitment to keeping AIG on life support, and avoids for now any crippling credit rating downgrades that could force AIG to come up with billions of dollars it might not have.
"It's a pretty strong reminder that the U.S. Treasury is still all that stands between the current market environment and the ongoing threat of systemic financial meltdown," said Christopher Garman, head of Garman Research LLC in Orinda, California, and a former Merrill Lynch bond strategist.
White House spokesman Robert Gibbs said "today's actions were critical" to preventing AIG from further threatening the financial system.
Separately, the Treasury Department and Federal Reserve said urgent action was needed now to keep AIG in business.
"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," they said in a joint statement.
Speaking on a conference call, AIG Chief Executive Edward Liddy called the market "a pretty crummy place" right now, and said fixing the insurer could take "several years."
Monday's agreement came three days after a new federal bailout for Citigroup Inc, which like AIG has struggled to sell businesses and raise cash to repay the government.
Federal Deposit Insurance Corp Chairman Sheila Bair said U.S. regulators are committed to preserving financial companies that are too important to the system to fail. U.S. Comptroller of the Currency John Dugan separately told reporters he did not see the AIG situation as a template for banks.
"BLEEDING TERRIBLY"
AIG's fourth-quarter loss of $22.95 per share widened from $2.08 per share, or $5.29 billion, a year earlier.
Most of the loss stemmed from big writedowns tied to credit default swaps and other toxic debt.
The latest loss equaled about $465,000 a minute, and was a record for a U.S. company, according to Thomson Reuters data.
For all of 2008, AIG lost $99.29 billion, wiping out profits dating to the early 1990s. That amount is close to the gross domestic product of Kuwait.
Mon Mar 2, 2009 6:07pm EST
By Lilla Zuill and Jonathan Stempel
NEW YORK (Reuters) - American International Group Inc posted a record $61.7 billion quarterly loss on Monday and got a new but not necessarily final government bailout, after officials concluded again that letting the insurer fail would threaten the world financial system.
AIG will get access to up to $30 billion of new capital after getting a commitment for $150 billion in aid last year that gave the government a stake of nearly 80 percent.
The latest bailout increases the government's commitment to keeping AIG on life support, and avoids for now any crippling credit rating downgrades that could force AIG to come up with billions of dollars it might not have.
"It's a pretty strong reminder that the U.S. Treasury is still all that stands between the current market environment and the ongoing threat of systemic financial meltdown," said Christopher Garman, head of Garman Research LLC in Orinda, California, and a former Merrill Lynch bond strategist.
White House spokesman Robert Gibbs said "today's actions were critical" to preventing AIG from further threatening the financial system.
Separately, the Treasury Department and Federal Reserve said urgent action was needed now to keep AIG in business.
"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," they said in a joint statement.
Speaking on a conference call, AIG Chief Executive Edward Liddy called the market "a pretty crummy place" right now, and said fixing the insurer could take "several years."
Monday's agreement came three days after a new federal bailout for Citigroup Inc, which like AIG has struggled to sell businesses and raise cash to repay the government.
Federal Deposit Insurance Corp Chairman Sheila Bair said U.S. regulators are committed to preserving financial companies that are too important to the system to fail. U.S. Comptroller of the Currency John Dugan separately told reporters he did not see the AIG situation as a template for banks.
"BLEEDING TERRIBLY"
AIG's fourth-quarter loss of $22.95 per share widened from $2.08 per share, or $5.29 billion, a year earlier.
Most of the loss stemmed from big writedowns tied to credit default swaps and other toxic debt.
The latest loss equaled about $465,000 a minute, and was a record for a U.S. company, according to Thomson Reuters data.
For all of 2008, AIG lost $99.29 billion, wiping out profits dating to the early 1990s. That amount is close to the gross domestic product of Kuwait.
