It seems the information on AIG given last October by Messieurs Paulson and Bernanke is, shall we say, wrong, again.
In the flurry to save AIG from bankruptcy, we were told taxpayers would realize a gain on saving AIG because many of its parts were worth more than the government was putting in.
It appears that ain't so.
American International Assurance Co., the crown jewel of AIG was put up for auction late last year. AIG and the US Treasury told us back then the sale of two AIG subsidiaries would highlight how high the quality was of AIG's business.
Well, HSBC and AXA have both walked away from the process with AIA. Estimates last year said the company would get bids in the tens of billions. Now, there are few bidders at any price, and many are walking away as they discover previously unknown information.
The other subsidiary, American Life Insurance Co., or Alico, was estimated back then to be worth $30 Billion or more. Met Life, the first to put in a bid, did so at $11 Billion. Now, Propublica is reporting even that deal could be revised downward to as little as $8 Billion. The problem - apparently tax withholdings, amounting to $10 Billion, that weren't done in disbursements to foreign customers.
Next week AIG will announce they lost $60 Billion last quarter. Again, they will ask for tens of billions from US taxpayers.
What everyone would like to know is why the US Government really bought a 79.9% stake in AIG? It cannot be because they thought they would make money, even these guys aren't that stupid.
Or are they?
So much for honesty in the bailout promises.
3 comments:
if no help to aig, what to do? let it go way of LEH? that bankrupcy has tied up 400 billion of counterparty problems.
There are two ways it can be handled. Let them sink or swim on their own actions, or let the taxpayers pay for their losses. In the case of AIG, it is more a question of who will eat the losses. Paulson thought it would be good if the US taxpayer eat the losses. It is, afterall, GS, and the Chinese that bought life insurance through Alico, that will lose if the taxpayers here decide they don't want to pay.
In the case of LEH, that may be where a lot of the original TARP money went. Bad news - $400 Billion is a fraction of the total we are talking about.
If ten new banks are established with $30 Billion each, they can immediately lever 12:1 which would give each $360 Billion to lend, for a total of $3.6 Trillion. IPO's would dramatically increase that amount. All unencumbered by "toxic" assets. All that money could start being lent immediately.
With an idea like that, why give any money to C or BAC? They are bankrupt by several times each. Every penny given them is lost forever. Better they be seized, the good assets separated, and let to die. If, as some suggest, they are sound companies, then they will survive without taxpayer money.
There is no sense in killing the US Treasury note trying to fill a bottomless pit. These CDS are everywhere, and as we are finding, written many times by companies that never had the funds to pay off. These derivatives have been a big scam from the beginning.
Where were all the people now saying we should nationalize the banks three years ago? Structured financial debt based derivatives were a ticking bomb then.
Many people told me back then this would NEVER be a problem. I think they are just as wrong today about their "remedies" as they were then about the coming tsunami.
Unfortunately, since all the profit of the last 30 years was stolen by trading good paying jobs for cheaper imports, that is where the Dow is heading. 1987 levels.
The numbers never lie.
"In theory, there is no difference between theory and practice. But, in practice, there is." -Yogi Berra
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