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By Jason Simpkins
Managing Editor
Money Morning
American International Group Inc. (AIG) will receive as much as $30 billion government aid after posting a $61.7 billion fourth-quarter loss, the largest loss ever by a public company.
In addition to receiving $30 billion in government capital, AIG will benefit because the U.S. Treasury Department will relax the terms on loans it provided the insurer last year. This marks the third time since last September that the government has had to rescue AIG, which the government has deemed a "systematically significant failing institution."
The federal government acquired an 80% stake in AIG last September, stepping up with an $85 billion rescue package. But authorities were forced to bail out AIG again in November after the company posted a $24.5 billion third-quarter loss and struggled to sell enough assets and subsidiaries to repay its original government loan.
The government restructured the terms of the original relief package by slashing the amount owed from the initial $85 billion loan to $60 billion. It also replaced a separate $37.8 billion loan to the insurance company with $52.5 billion in aid and made $40 billion of new capital from the U.S. Treasury's $700 billion Troubled Asset Relief Program (TARP) available to purchase the AIG's toxic assets.
"Counterparties around the world continue to have significant exposure to AIG, and market conditions continue to be fragile and sensitive to the potential disorderly failure of AIG," the U.S. Federal Reserve said in November.
AIG serves businesses and individuals in more than 130 countries and jurisdictions. Its operations extend beyond providing life and retirement insurance, to financial services and asset management, and protection against terrorist attacks. Banks relied on AIG to back more than $300 billion in assets through derivative contracts as of Sept. 30, according to Bloomberg News.
Those derivatives essentially serve as a kind of insurance against losses on other financial assets or agreements. Were AIG to fail, the fallout would be widespread.
AIG wrote down $25 billion in assets in the fourth quarter and took a charge of $21 billion related to taxes. Costs associated with repaying the government totaled about $7 billion. The company lost a total of $99.3 billion last year.
AIG claims that interest paid to the government through preferred shares and pressure to sell off its business units has worsened the company's position.
"You can't sell many assets in this market today," former AIG chief Maurice Greenberg said last month. "You can't sell parts of AIG around the world, because companies don't have any money and you'll never get fair value for what you're trying to sell. That is not the solution."
Greenberg said the government should reduce its ownership of AIG to 15% or less, and the loan should be extended so "that you're not trying to pay it off in a quick period of time, because you can't."
The government has agreed to accept lower interest rates on loans to the insurer and will exchange $40 billion in preferred stock for non-cumulative preferred shares that "that more closely resemble common equity," the Treasury said in a joint statement with the U.S. Federal Reserve. AIG was paying 10% dividend on the government's preferred stock. It pays nothing for common shares.
AIG will repay as much as $26 billion in existing loans from the Fed with preferred interests in two AIG subsidiaries, American Life Insurance Company and American International Assurance Company Ltd.
AIG must also "adhere to the most stringent limitations on executive compensation as required under the newest amendments to the Emergency Economic Stabilization Act," the Fed's statement read. "Additionally, AIG must continue to maintain and enforce newly adopted restrictions put in place by the new management on corporate expenses and lobbying as well as corporate governance requirements."
U.S. stocks were pounded, as the news about AIG stoked fears that the global financial crisis continues to grow. The Dow Jones Industrial Average fell nearly 300 points, or 4.2%, to close at 6,763.29 – it's lowest level since 1997. The Standard & Poor's 500 Index dropped 4.7%, while the tech-laden Nasdaq Composite Index was off 4%.
News and Related Story Links:
- Federal Reserve:
U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan
- Money Morning:
AIG to Seek More Government Assistance as it Braces for a $60 Billion Quarterly Loss.
- Wikipedia:
Emergency Economic Stabilization Act of 2008.
[…] Monday, the government announced that the already-hard-pressed U.S. taxpayer is being forced to put another …, bringing the total rescue package, thus far, to $180 […]
[…] Monday, the government announced that the already-hard-pressed U.S. taxpayer is being forced to put another …, bringing the total rescue package, thus far, to $180 […]
Champion Manufacturers, some sort of leader in operation motor oils, possesses announced a $20 Discount supply for end-users with Champion 12 pack/ quart situations, 4 gallon scenarios, 5 gallon pails along with 55 gallon percussion for either Champ Racing Motor Essential oil or Champion Orange Flame® Performance Diesel Generator Oil.
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What kind of Garage Entry ought to I purchase?
While looking for a garage entry, you notice that you'll find a couple important designs: tilt-up doorways and sectional roll-up doors. Sectional roll-up gates are more high-priced than tilt-up entrance doors, but the additional cost will be properly really worth it.
Tilt-up doors include a single panel of fabric. To open the door, it's important to pull it out along with pivot it as much as slip it along the roof top of your garage. Sectional roll-up entrance doors, on the flip side, are made from several horizontal sections. Every single section is lightweight to the next section, enabling the door a specific penetration of flexibility. Because the front door is mounted on paint rollers, to open a sectional roll-up home you just must lift the doorway and it's going to roll in place along the roof of one's garage.
Sectional roll-up doors can be better than tilt-up doors. From a solely practical point these people take up significantly less place. Simply because you do not have to move the door out, you will see a lot more room before your garage home for issues like your truck. The door may also fill up significantly less area in the spare area, due to the fact it can be positioned greater than a tilt-up door.
Just what exactly need to my Car port Door be created connected with?
Garage doors, equally tilt-ups and sectional roll-ups, are mainly made from wood and also steel. Of those not one but two supplies, wood will be the less expensive and ( blank ) arguably – extra attraction choice. In the event you made the decision to obtain a hardwood door please take into account that just like your porch, a wooden car port door might be a lot more effortlessly damaged from the weather conditions than a steel home. Should you live in a notably hot or cold climate, you might find your self with a deformed or broken storage door.
Steel car port doors are more costly, however you is not going to encounter precisely the same problems that you simply would expertise using a wood home. Should you choose to have a material door the principle thing to confirm is the fact that it has been effectively prepared to prevent corrosion.
Garage doors also are sometimes made with light weight aluminum or fibreglass. When each of those materials be cheaper than steel entrances, you should be cautious whenever using them. Neither content is as strong while steel so they won't hold up to the usual wear out of a garage entry. And after again dependant upon your climate, they do not be as high efficiency as being a steel home if which is a concern to you personally.
How do I search immediately after this Garage Door?
As with every other exterior exterior in your property, a person's garage door will require periodic maintenance to prevent it operating effortlessly and hunting as superior as your entire home. You'd be pleasantly surprised how the appear of one's garage door not just affects the all round search of your property, however the thought of value of one's home far too.
Irrespective of what materials the garage door consists of, it must be washed routinely. Should you have a timber door, you ought to paint the door each and every other calendar year to make certain that the wooden stays protected. When you have a steel doorway, you can give it a year by year shine with auto wax
To prolong everything with the mechanical areas, you ought to lubricate all of moving components having motor oil when the door starts to sense sluggish.
Safety Issues with Garage Entrances
Each and every year, young children are severely injured from incidents involving garage doorways. To prevent these possible to avoid accidents, the Ough.S. Client Merchandise Security Commission advises that you just must only use computerized garage door openers when they have been an automatic reverse functionality. This can reverse the shutting in the garage entry if an obstacle is actually encountered.