American International Group Inc. was seized by the United States for an estimated $85 billion deal proving that the companies collapse could pose too great a threat to our own financial system here in the United States. "The ability of AIG to meet its obligations is important to the stability of the U.S. financial system and to getting credit flowing to households and businesses," Federal Reserve spokeswoman Michelle Smith said. (http://www.huffingtonpost.com/2009/03/16/aig-90-billion-bailout-fu_n_175190.html). Through the hard negotiations between the United States government gains 79.9% equity in the company in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of 8.5 percentage points. The loan will be secured through the assets of AIG, including its profitable insurance businesses protecting the FED if the market continues to sink. And if AIG rebounds, taxpayers could look forward to a huge payoff through the government’s equity stake. AIG’s shares have are now down 94% for the year and this financial pain has been through is horrible corporate level management. Also the company lost billions through the crumbling housing market causes them to seek the help of the FED. With this money AIG will be paying off foreign and domestic banks some of whom received their own multibillion-dollar U.S. government bailouts. All this is fine and dandy if AIG ends up paying off their debt but what happens when they don’t. The FED is in more debt trying to bail themselves out through the down fall of multibillion dollar companies. Let us know how you feel and be sure to check the link on the side for additional information.
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