AIG Has “Excellent Chance” to Repay Bailout Money
Will it be enough to restore confidence?
Of all the companies the United States government has bailed out during this recession, few have drawn as intense a degree of the public’s ire as American International Group, the company that is commonly known as AIG. Their indiscriminate use of the credit default swap seemingly didn’t include any hedging at all, and thus they were unprepared when values dropped due to delinquency. The insurance monster found itself in a deep grave. It would need more than $100 billion to get out.
As you may know, the government ponied up the money – which means you and I paid to rescue the irresponsible, greedy AIG. Would the government (forget about us, cowboy) ever get its personal loans and cash advances back?
AIG stock could be on the way up soon, as outgoing CEO Edward Liddy believes the company has “an excellent chance” to repay the government, reports Bloomberg. The insurer has plans to pay down its massive Federal Reserve credit line of $25 billion by selling off two of its foreign life insurance interests.
They have to do something. AIG has received four bailouts so far, making their take so far $182.5 billion. Their gambles in the housing market prompted them to turn over majority stake to the government. In addition to a $60 billion credit line (are they worth it, or should they be nationalized?), there’s also $52.5 billion to buy mortgage assets and another investment of $70 billion. It’s truly staggering.
Sell, sell, sell[ad_block type=”horizontal” float=”left”] “We believe there is an excellent chance that we can repay the government,” Liddy said. “The government is not prepared to make any adjustments to the arrangement that turned over majority control to the U.S. My hope would be that as we make progress in the overall restructuring, that maybe those conversations will bear fruit.”
So far, AIG has put its money where its mouth is when it comes to selling off its interests. They’ve raised $6.7 billion by making deals in a variety of industries, including those with an American auto insurance company, an equipment guarantor, the title-holder for its New York headquarters and the owners of a Japanese office building. AIG is also working to sell off its airline-leasing and consumer-finance businesses, said Liddy.
“We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate, and have specific plans for each of those nine,” he said. “We expect this process to advance steadily in the next six months, and may involve public offerings.”
Replacing Liddy, moving forward
Former AIG CEO Liddy no longer holds that position with the company. He has said that he will also step down from his position of board chair. He had come out of retirement to run the company after it was taken over by the United States government. His annual salary was $1. An executive search firm is currently working to find a replace for each position. Liddy urged the company to keep the two positions separate in the future.
Liddy’s departure, as well as a number of high-ranking members of the AIG board, has given investors something this doesn’t exactly resemble new hope, but it is looking upward.
“Goodbye and good riddance,” said Kenneth Steiner, who holds 10,000 AIG shares. “I hope our new directors will do a better job.”
One concerned person in attendance at a recent shareholders’ meeting was retired AIG employee Kathleen Mylott. Her reaction to her once great company and its need for bailouts seems to accurately gauge the temperature of the water: “It’s like watching your house burn down, The emotional toll has been worse than the financial toll, if you can believe that. It’s an American tragedy.”