Hard to believe there would be buyers unless a gun was held to their heads - or unless the government planned to give AIG unlimited billions forever.
Britney Spears got it right - Oops, they did it again.
Here's a corporation that, Naked Capitalism, the WSJ, Bloomberg and the NYT just announced, will be taking another $30B from the U.S. government. This on top of other billions. And they'll be announcing a quarterly loss somewhere north of $60B tomorrow.
Great time for a public offering, right? Looks like they'll be doing it within the next 12 months. Better still, they may change the company's name because, after all, who'd be stupid enough to buy anything from the likes of AIG?
Here's the quote from Bloomberg:
"American International Group Inc., the insurer getting a third bailout from the U.S., may sell a 19.9 percent stake in its main unit offering coverage to corporate clients, a person familiar with the matter said.
An initial public offering of the property-casualty division, which was previously intended to be the core of New York-based AIG after a U.S. rescue, may happen by 12 months from now, said the person, who declined to be identified because no formal announcement had been made. The business may get a new name, the person said."
Read the whole piece here.
Excellent compendium post by Yves Smith as AIG takes $30B more from the U.S. government to avoid bankruptcy.
TARP one, TARP all. AIG in flames and with analyst firms threatening to downgrade it - which would potentially end in bankruptcy - so Uncle Sam throws out another $30B. Ugly.
"The Journal really bends over for Citi. It conveniently omits the tantamount to $250 billion in guarantees that Citi has received. Last week, the Journal ran a piece that had the hallmarks of being a PR plant.
Alert readers pointed out earlier today, when the Bloomberg story first ran, that it fingered some of the big beneficiaries of the AIG rescue:
I agree with the comment about the Wall Street Journal story being a PR plant.
My experience in the PR industry in Silicon Valley tells me that companies and the government will use the media [which will let itself be used - it sells newspapers, which means it sells advertising] to 'shape' public opinion. That's PR-speak for controlling what people think so they don't protest too much.
The entire piece, with Bloomberg and Wall Street Journal excerpts, can be seen here.
Perhaps four times will be the charm?
Salvador Dali, master surrealist, would love this. Believe it or not, the Fed will now provide $30B in further guarantees for troubled insurance company AIG.
With the U.S. government now owning nearly 80% of AIG's holding company due to earlier interventions - including a $60B loan, a $40B purchase of preferred shares and $50B to eat toxic assets - the additional monies provide further TARP coverage.
The company isn't expected to tap the funds immediately. AIG appears ready to announce a huge quarterly loss on Monday and it appears that this is a preemptive strike to avoid a painful downgrade on its credit ratings which could have led to bankruptcy.
This is precisely the 'good money after bad' kind of move that we believe will come back to haunt the U.S. AIG is a zombie - let go of it.
AIG - we knew you when, and it's not now.
Another good catch by Yves Smith at Naked Capitalism - looks like the team at Goldman sees some discrepancies in China's tax reporting. Puzzling, no?
It appears individual tax receipts have slowed significantly, yet wage growth continues. How?
If you're a great chef, you know the answer. It's all in the cooking. See the post here.
Stress test? Organizations that fail get 6 months to raise private capital or be required to take both governmental capital and terms. The CEOs of B of A and Citi must be sweating up a storm.
Here's the dope on the terms the government is dishing out: "Any new government money will come in the form of convertible preferred securities, which would acquire voting rights if converted into common stock. U.S. officials, speaking to reporters after the announcement, said there would be no limit on how much money the program could provide banks, raising questions about whether the Obama administration will need to ask Congress for more bailout funds."
Throwing good money after bad? Yes, doubtless - in some cases.
The terms still appear too generous to me. I'd like to see government control, a change in the C-suite, and a new Board of Directors for a start.
Read the entire piece here.
Eric Etheridge has created a column that gathers the opinions of many with the same outlook - Citicorp is dead.
The Wall Street Journal, Jeff Matthews, David Reilly, Barry Ritholtz, and Henry Blodget all concur - Citi is done, let's move on.
How long will it take the government to react properly? It's anyone's guess, but you can be sure that what will precede any action will be lots of PR designed to comfort, educate and get people receptive. Anything will be said except nationalization.
Receivership, which will likely be the reality of what happens, won't be whispered either.
Read the NYT Opinionator piece here. Thank you Mr. Etheridge.
It's deja vu all over again, as Yogi Berra said. B of A heiress Virginia Hammerness came out punching in an interview in which she blasted current bank management.
Hammerness' comments today (she called bank management 'idiots') reminded me of a B of A shareholder meeting I attended some years back in San Francisco. Sam Armacost was the CEO at the time and, similar to today, the bank wasn't doing so well.
Armacost spoke, there was a financial presentation, then the period for shareholder comment occurred.
A gray-haired lady rose, walked to the microphone, then introduced herself to the audience as Claire Giannini, daughter of B of A founder A.P. Giannini. Ms. Giannini proceeded to give Mr. Armacost a tongue-lashing. She chided him for irresponsibly managing the bank, not taking into considration the many widows and orphans who depended on the bank's dividends, and refused to listen to any excuses. Her coments were blistering.
Sam Armacost may not have been smiling - his was a difficult tenure - but I'd bet A.P. definitely was. Claire's statements were true to her father's founding principles - care for those less fortunate, serve your community, be fair and equitable in your dealings with others.
It's not an overstatement to say that a big part of the reason San Francisco was able to recover from the earthquake and fire of 1906 was because of A.P. - his courage and his integrity.
I think he's calling on all of us to step up and do what needs to be done to resolve the current situation. We don't need to passively wait for leadership. Those who have inspired us before - A. P., Martin Luther King, Churchill, Ghandi, Eleanor Roosevelt and so many others - are great examples. In our relationships, our homes and our communities let's dedicate ourselves to positive action with integrity.
Read the entire Hank Plante story and see the video here.
Stress tests? And now, with the government 'ownership' of Citi at 8%, we find it may grow to 40%. Here's a quote from the article:
"Citigroup approached the regulators with a plan that would allow them to convert a large amount of the government’s $45 billion of preferred shares, which is treated as debt, into common stock, this person said. The government owns a stake of roughly 8 percent, but that could grow to as much as 40 percent.
Converting the preferred shares while also issuing more common shares would bring Citigroup closer to the mix of equity that the government is likely to demand when it introduces the stress test. But that would severely dilute the value of shares held by existing Citigroup stockholders."
Looks like we're having a raftload of shoes dropping one at a time regarding the ongoing quibbling over the health of U.S. banks.
Case in point, now the government is going to test the top 20 banks to see which are tough enough to withstand even more economic turbulence.
The question isn't which are strongest and what they can withstand - it's actually where do they stand right now. Are they solvent? Do they have enough capital? Are they making loans with the TARP money they've been given?
There are lots of other questions that could be asked, but the point I'm getting at is this: if Citi and B of A aren't in decent shape (and I believe they're not) nationalize them now or enact another plan that will deal with them. At this point we're billions in the hole and not much closer to a solution than we were before Obama was elected. We need to move faster and combine the action with a solid PR campaign that leads the electorate and provides people with transparency and confidence.
Obama would do well to model himself after Winston Churchill in this. The British government under his leadership did an exemplary job of outbound communications that pulled the populace together and got people to understand quickly what their role was.
People are willing - leaders need to lead. Stress tests? I think Treasury already knows what's inside the top 20. Decisiveness will surely be seen as a virtue given the situation.
Read the article here.
Though Heath Ledger didn't get to pick up his Oscar, his parents and sister did a fine job.
At this point, is the megalomaniacal Joker just a metaphor for banking CEOs like ex-CEO John Thain, formerly of Merrill Lynch, who turned in non-performances, then thought millions would be a suitable good-bye kiss?
Why the squeeze on automakers and the non-squeeze on bankers? Is it because the failure of GM and Chrysler is all too public and humiliating, whereas banking and money are ephemeral?
I have a feeling banking CEOs and the rest of the Wall Street gang are about to get that 'the music just stopped' feeling.