Ken777
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US Selling $18 Billion In AIG

Mon Sep 10, 2012 6:31 am

Good headline to see:

Quote:

US government to cut AIG stake to below half of bailed-out insurer’s stock in $18 billion sale

Basically the taxpayers will end up getting out of AIG with a profit.

Important parts for me:

Quote:

The U.S. government is selling more of its shares in insurer American International Group Inc., in a move that should decrease its holdings below a majority stake for the first time since the $182 billion bailout in 2008.


If there is more demand, the government will grant the underwriters a 30-day option to buy up to $2.7 billion more of its stake in the company.

AIG said it will buy back $5 billion worth. The price is not yet determined.
Quote:

AIG, which is based in New York, nearly collapsed in 2008. It received $182 billion from the U.S. government — the biggest of the Wall Street bailout packages — after suffering massive losses from investments in derivatives.

The company has sold off several different units in order to raise money to pay off its debt to the government.

The insurer has been profitable the last two years and is expected to post a net profit of $7.4 billion in the year through this December. CEO Robert Benmosche said last month the company was close to its goal of repaying the government everything it provided to AIG during the financial crisis “plus a profit.”

Plus a profit. Just like Chrysler many years ago? Don't now if it will be that big a profit, but it's a profit.

Now we just need to get rid of GM shares at a profit and we'll be in pretty good shape. Maybe allowing US Taxpayer to purchase some of those shares with their refunds might be nice. Cut out the middle man (brokerage house) and get some more value to the middle class.


http://www.washingtonpost.com/busine...5a-d6e62f9f2a5a_story.html?hpid=z3
 
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Dreadnought
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RE: US Selling $18 Billion In AIG

Mon Sep 10, 2012 11:22 am

Quoting Ken777 (Thread starter):
Basically the taxpayers will end up getting out of AIG with a profit.

Forgive me, but I have not gone into the accounting details.

It appears to me that the government paid $182 billion for 93% in 2009. It has already sold 40% for $23.3 billion, and still holds 53% worth $30 billion at today's prices.

So please explain to me how the government has made a profit, instead of a loss of about $130 billion.
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moo
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RE: US Selling $18 Billion In AIG

Mon Sep 10, 2012 11:52 am

Quoting Dreadnought (Reply 1):
Forgive me, but I have not gone into the accounting details.

It appears to me that the government paid $182 billion for 93% in 2009. It has already sold 40% for $23.3 billion, and still holds 53% worth $30 billion at today's prices.

So please explain to me how the government has made a profit, instead of a loss of about $130 billion.

Because there are two things changing hands here - loans and ownership.

The US government gained 93% of AIG in various bailout deals, but those deals were for loans, not handouts. AIG has gradually paid off a large amount of those loans over the past 3 years, but that hasn't affected the ownership issue so the government has ended up owning a large portion of a company which is now operating back in the black.

Over the past 3 years, AIG has managed to raise in excess of $40Billion in cash through sales of assets, most of which went into repaying the government loans.

The US government has also sold off various portions of its ownership.

So thats how the government will have made a profit - by *loaning* the money to AIG so that is repaid, and by receiving *ownership* of the company in addition to the loan repayments. The government get their money back, and get to sell the company off at a profit at the end of the day.
 
cmf
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RE: US Selling $18 Billion In AIG

Mon Sep 10, 2012 2:39 pm

Quoting moo (Reply 2):
Because there are two things changing hands here - loans and ownership.

It is amazing how fast people forget "details" like that when they want to complain.

Latest data I saw had AIG more than a year ahead in payments.
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Dreadnought
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RE: US Selling $18 Billion In AIG

Mon Sep 10, 2012 3:52 pm

Quoting moo (Reply 2):
So thats how the government will have made a profit - by *loaning* the money to AIG so that is repaid, and by receiving *ownership* of the company in addition to the loan repayments. The government get their money back, and get to sell the company off at a profit at the end of the day.

But only if they get back more than $182 billion, between the loan repayments and equity sales. Personally I don't care if they show a "profit" on the deal - that was not the purpose. But I do get wound up when politicians say something that is not true, like that GM paid all the money back which they hadn't.
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moo
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RE: US Selling $18 Billion In AIG

Mon Sep 10, 2012 4:21 pm

Quoting Dreadnought (Reply 4):
But only if they get back more than $182 billion, between the loan repayments and equity sales.

AIG originally took $182Billion - as of June 2012 they had reduced that to $34Billion outstanding, with the Federal Reserve Bank of New York having had its loans repaid in full, which has left it with AIG assets of around $18Billion.

(Its probably worth noting that the majority of the FRBNY loans were designed to allow a rescue of another investment bank through a merger with AIG, and not to prop up AIG - it was all brokered by the Government itself).

The US Treasury Department has $34Billion to collect, but also sits on another $15Billion of AIG assets on top of that. Its expected that AIG will have repaid that final $34Billion by the end of 2013.

So yes, its looking highly likely that the Government will get its $182Billion back. And then some  

Sources:

http://www.huffingtonpost.com/2012/0...epaid-bailout-loans_n_1597966.html
http://www.forbes.com/sites/stevesch...earns-rescues-have-been-paid-back/
http://www.telegraph.co.uk/finance/n...ke-to-pay-back-US-for-bailout.html
http://money.cnn.com/2012/05/03/markets/aig-earnings/index.htm
http://www.huffingtonpost.com/2012/0...profit-taxpaers-gao_n_1498645.html
 
Pyrex
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RE: US Selling $18 Billion In AIG

Wed Sep 12, 2012 12:43 am

Not really going to comment on the offering because of compliance reasons but:

Quoting Ken777 (Thread starter):
Now we just need to get rid of GM shares at a profit

Never going to happen. Those shares are so out of the money you will never see that money back (or GMAC, for that matter - another component of the GM bail-out that is usually not mentioned). And of course, there is the untold damage that process did to rule of law and the bankruptcy process in the U.S. - companies there are still paying that through higher borrowing costs.

Quoting Ken777 (Thread starter):
and we'll be in pretty good shape

If you conveniently leave out the $120+ billion and counting of those two government monstrosities, Fannie Mae and Freddie Mac, which you will never get back.

Quoting Dreadnought (Reply 4):
But only if they get back more than $182 billion, between the loan repayments and equity sales

The UST press release has a pretty good breakdown.
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connies4ever
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RE: US Selling $18 Billion In AIG

Thu Sep 13, 2012 7:43 pm

Quoting Ken777 (Thread starter):
Now we just need to get rid of GM shares at a profit and we'll be in pretty good shape. Maybe allowing US Taxpayer to purchase some of those shares with their refunds might be nice. Cut out the middle man (brokerage house) and get some more value to the middle class.
Quoting Pyrex (Reply 6):
Never going to happen. Those shares are so out of the money you will never see that money back (or GMAC, for that matter - another component of the GM bail-out that is usually not mentioned). And of course, there is the untold damage that process did to rule of law and the bankruptcy process in the U.S. - companies there are still paying that through higher borrowing costs.

Depends on how patient you want to be. GM at least is now profitable, not sure about Chrysler. My understanding is that all the loans made by Ontario and Canada to GM have been repaid, but the equity stake is still there.

http://news.ontario.ca/medt/en/2010/...cknowledge-gm-loan-repayments.html
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N1120A
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RE: US Selling $18 Billion In AIG

Fri Sep 21, 2012 9:49 pm

Quoting Ken777 (Thread starter):
Now we just need to get rid of GM shares at a profit and we'll be in pretty good shape.

GM is already profitable, so that is helpful.

Quoting Ken777 (Thread starter):
Maybe allowing US Taxpayer to purchase some of those shares with their refunds might be nice.

Would be cool. Sort of like state/local government bonds.

Quoting connies4ever (Reply 7):
GM at least is now profitable, not sure about Chrysler.

Chrysler is not only profitable, but paid back all its loans at credit card interest rates. FIAT has done a great job.
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Flighty
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RE: US Selling $18 Billion In AIG

Fri Sep 21, 2012 9:59 pm

Quoting Pyrex (Reply 6):
Never going to happen. Those shares are so out of the money you will never see that money back (or GMAC, for that matter - another component of the GM bail-out that is usually not mentioned).

Just to play Devil's advocate, given that the 2008 bankruptcy was pretty extralegal, some of the UAW gifting could be unwound. Taxpayers overpaid. Meanwhile the UAW got to keep a majority ownership of GM AFAIK. Why? Seems like taxpayers should every dollar back before UAW even thinks about getting 1 dollar. Just my opinion.
 
Pyrex
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RE: US Selling $18 Billion In AIG

Sat Sep 22, 2012 8:21 am

Quoting N1120A (Reply 8):
Would be cool. Sort of like state/local government bonds.

Yeah, nothing like stuffing unwanted shares down the throats of retail investors, nothing wrong could possibly come out of that. Just ask Bankia clients / shareholders in Spain.

Quoting Flighty (Reply 9):
Meanwhile the UAW got to keep a majority ownership of GM AFAIK. Why?

Do you really need to ask why? Isn't the answer obvious?

Quoting Flighty (Reply 9):
Seems like taxpayers should every dollar back before UAW even thinks about getting 1 dollar. Just my opinion.

Of course they should - that is how bankruptcy processes are supposed to work. DIB (Debtor-In-Possession, i.e., U.S. government) creditors get paid first, then in line are the senior secured and all the way down the food chain comes the unsecured creditors (such as unions). But that was not the most politically expedient thing, so screw centuries of bankruptcy law that has served the country so well. Who needs rule of law when you have a czar?
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