The American International Group Story, reported in the NYT.
Extracts:
The American International Group said on Monday that it lost almost $25 billion in the third quarter and had secured a new $150 billion government assistance package intended to stem the bleeding from its complex financial contracts. Originally, the Federal Reserve rushed in with an $85 billion line of credit. When that proved inadequate, the Fed added a $38 billion supplementary lending facility, and A.I.G. recently qualified to sell $21 billion of commercial paper to the Fed.The new assistance package reduces the original $85 billion loan to about $60 billion, lowers the interest rate and gives A.I.G. five years, instead of two, to pay it off. The government will also use money from its Troubled Asset Relief Program to buy $40 billion of preferred shares in A.I.G. Another important feature will be government investments of about $50 billion to create special-purpose entities to relieve the company of its most tainted assets. About $30 billion of the government money will be used to buy complex debt securities that were insured by A.I.G. and about $20 billion more will be used to buy securities backed by home loans. A.I.G.’s counterparties — financial institutions in the United States and Europe — have not borne significant losses on the financial contracts that led A.I.G. to the brink, and the new program suggests they will not. “We’re funding somebody on the other side” of A.I.G.’s derivatives contracts, said Lynn E. Turner, a former chief accountant with the Securities and Exchange Commission who has been critical of the way the insurer’s crisis has been handled. Even though a large amount of public money is being extended, neither A.I.G. nor the federal government has been willing to provide the names of the company’s biggest counterparties, or their amount of exposure. “We’ve had way too many things here that nobody knows anything about,” said Mr. Turner, who is on the Treasury’s Advisory Committee on the Auditing Profession. “That’s why no one has faith in the capital markets.”
This hand-out is rushed out to the egregious AIG managers and shareholders while hardworking folks who acted "foolishly" and did not take out the 0% down no doc loans are now paying for their "sensibility."
American Express to Be Bank Holding Company (NYT)
American Express, the nation’s last big independent credit card company, said late Monday that it would transform into a bank holding company to strengthen its position in the market turmoil. Federal Reserve banking regulators said they approved its application because of the “unusual and exigent circumstances” roiling financial markets and the company’s interest in tapping up to $3.8 billion in government money. As a full-fledged bank, American Express would gain greater access to the Treasury Department’s bailout plan for banks, a move that might allow it to lend more freely and perhaps acquire a larger deposit-taking institution.
Everyone who is anyone is rushing to get the loot from Helicopter Ben and his piggy bank, the Fed.
Now, to the all-important jobs situation
Circuit City Short-Circuited:
Circuit City Stores Inc. filed for bankruptcy protection Monday. It said it cut 700 more jobs at its Richmond, Va., headquarters, after announcing a week ago that it would close 20 percent of its stores and lay off thousands of workers.
Delivery company DHL, hit by heavy losses and fierce competition, is significantly reducing its air and ground operations in the U.S. and cutting 9,500 American jobs, leaving rivals like FedEx, UPS and the U.S. Postal Service to fight over the customers it will stop serving.
Canadian telecommunications equipment maker Nortel Networks Corp. posted a third-quarter loss Monday, reversing a year-ago profit as the economic turmoil and a large goodwill impairment charge weighed on results.The struggling company also announced a new round of job cuts, saying it plans to eliminate about 1,300 positions starting this year and ending in 2009.
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