Federal Reserve takes control of AIG

Fed takes control over AIG

The U.S. government took control of American International Group Inc. in an $85 billion bailout to prevent the bankruptcy of the nation’s biggest insurer and the worst financial collapse in history.

The Federal Reserve will provide a two-year loan, take 79.9 percent of the New York-based company’s stock and replace its management because “a disorderly failure of AIG could add to already significant levels of financial market fragility,” according to a statement by the central bank late yesterday.

AIG unraveled as the worst housing crisis since the Great Depression led to more than $18 billion of losses in the past year. A meltdown could have cost the financial industry $180 billion, according to RBC Capital Markets, because AIG provided insurance on more than $441 billion of fixed-income investments held by the world’s biggest institutions, including $57.8 billion in securities tied to subprime mortgages.

Why? While Fed admiral recognised that these adjustment payments were “offensive”, they were defended to avoid dreaded collapse of the banking system. But we accept no way to appraise the absolute base of this defence. Similarly, Fed admiral initially denied to name the recipients of AIG’s payments on the area that acknowledgment would attenuate the adherence of AIG and the banking markets. However, the sky did not abate, though these names were disclosed in acknowledgment to pressures from the Senate Banking Committee.

Now, this essentially means American taxpayers now accept a 80% stake in AIG. In simple words they own a majority allotment in a broke company. Why? Because the geniuses at the Federal Reserve couldn’t let the streamlined big insurer fail.

Apparently America is not a capitalist country any more.Maybe American citizen should just pack it in and have the government nationalize all the companies. They can buy cars from the government, get loans from the government. Everything will be perfect, right? I mean, that sort of government has a pretty good track record throughout history right?

This thing is all about putting a band aid on a tumor. In the end it will out grow and scenic situation will be there after about a decade.

Won’t be out of context to mention Big insurer rejected a bid for a joint investment by Allianz SE and J.C. Flowers & Co. on Sept. 14, said two people with knowledge of the offer.

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