AIG Gets More from the Government
This morning, the big news (aside from a Chinese economic stimulus announcement) is that AIG is getting a new bailout deal. The deal keeps getting better for AIG, with the total package now coming to $150 billion. It seems that it doesn’t matter what AIG does (read: luxury retreat), the company is going to get whatever it *needs*.
The new measures in the AIG bailout deal include the following, as reported Calculated Risk:
- Provisions for the establishment of a capital structure that is more durable.
- Efforts to resolve issues with liquidity.
- Help AIG in its efforts to sell some of its businesses off.
- Government will purchase preferred shares from AIG.
The government, as well as AIG, point out that the idea is to provide more protection for U.S. taxpayers and the government as they take on more risk with regard to the shaky assets that have been plaguing AIG’s performance. The move is also supposed to provide stock market stability.
Chinese economic stimulus
While the AIG news probably will add some confidence to the stock market, the Chinese economic stimulus announced yesterday is likely to do even more. Indeed, the Chinese economic stimulus package may even prompt faster passage of another economic stimulus package by the U.S. government. A $200 billion to $300 billion package is rumored to be in the works (although that still won’t catch the U.S. up to the $586 billion China is using for stimulus).
The new economic stimulus is expected to help homeowners directly, as well as possibly provide funding for infrastructure projects. There is some doubt that another stimulus check is coming, but the thinking is that if the government can get directly involved in mortgage loan modification, it might head off more foreclosures. Anyway, another U.S. stimulus package should add further confidence to the market, since it would prove that the government is determined to do whatever it takes to try and avert a “disaster.”
