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  • AIG posts $8.9 billion loss

    AIG posts $8.9 billion loss

    "American International Group Inc (AIG.N) reported a quarterly loss of $8.9 billion on Friday and warned that it may need additional U.S. government support, even as it tries to pay back taxpayers after a $182.3 billion bailout."

    AIG shares fell 14 percent in premarket trading.

    The insurer said in a filing with the Securities and Exchange Commission that without additional government support, "in the future there could exist substantial doubt about AIG's ability to continue as a going concern."

    AIG, which is nearly 80 percent-owned by the government, reported an adjusted loss of $7.2 billion, or $53.23 per share, compared with an adjusted loss of $38.5 billion, or $287.69 per share, a year earlier.

    The net loss includes $6.2 billion related to paying back the Federal Reserve Bank of New York, $2.8 billion on the pending sale of Nan Shan Life Insurance Co, $2.3 billion in increased commercial insurance reserves, and a $2.7 billion valuation allowance charge for tax benefits not presently recognizable.
    It seems some of the losses are due to paying back a loan from the Federal Reserve Bank of New York. So the Federal Reserve gets their money back before the US taxpayer, Ok. Now they are saying they might need more money from the government/taxpayer, who owns 80% of this failed nonsense. We have already given them $182.3 billion, and now they want more?

    Remember all the ruckus earlier this month about the new wave of AIG bonuses:

    $100 Million More In AIG Bonuses Causes Another Stir

    In the ongoing AIG bonus saga, the troubled insurer will distribute around $100 million in bonuses today, that's likely much to the dismay of taxpayers who now own the firm. Despite the fact that AIG is technically under compensation restrictions, many so-called "guaranteed bonuses" that were in place before AIG's collapse still must be honored by law. This is a regrettable situation, and speaks loudly to the messy problem that bailouts pose.
    The employees of AIG did agree to take a little less of a bonus though:

    AIG derivatives employees agree to $20 million in bonus cuts

    "Employees of American International Group's derivatives unit agreed to bonus cuts totaling roughly $20 million, moving the giant insurer closer to a pledge to recoup $45 million of retention payments."

    About 97% of active employees at AIG Financial Products, the derivatives unit also known as AIGFP, volunteered to reduce their upcoming 2010 payment, the New York-based insurer said in a statement.

    AIG said it's starting to make the lower payments to these active employees as well as non-active employees who also agreed to reductions.

    "The reductions from these two groups stand at about $20 million, and we believe this allows us to largely put this matter behind us," AIG added.

    AIG nearly collapsed in 2008 under the weight of billions of dollars in derivatives-based guarantees the unit sold on mortgage-related securities.
    The fact that the people working in the derivatives branch of AIG recieved ANY bonus at all, is just mind boggling to me. As they were the ones responsible for having so much exposure into that so called market.

    Maybe this kid from the AIG commercial should have been running the derivatives department, he seems pretty smart:

    |TG-X| mp40x



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  • #2
    Re: AIG posts $8.9 billion loss

    Its not a bonus if you get it automatically, just like it isn't volunteering when you are required to do so. Giving them the bailout should have had a string where they rewrote their contracts, or a provision in the law that voided the contracts.
    |TG-6th|Snooggums

    Just because everyone does something does not mean that it is right to do.

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    • #3
      Re: AIG posts $8.9 billion loss

      Originally posted by snooggums View Post
      ... or a provision in the law that voided the contracts.
      Normally I would agree with you, and on a personal level I do, but the Pandora's box that such acts would create in the legal system is scary to think about.

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      • #4
        Re: AIG posts $8.9 billion loss

        Originally posted by DrakenViator View Post
        Normally I would agree with you, and on a personal level I do, but the Pandora's box that such acts would create in the legal system is scary to think about.
        I don't think it would be a problem at all, if worded right: "Acceptance of this ridiculous amount of government assistance is contingent upon the voiding of all ridiculous amounts of bonuses that are normally paid by this company to already ridiculously overpaid executives."
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        • #5
          Re: AIG posts $8.9 billion loss

          Originally posted by DrakenViator View Post
          Normally I would agree with you, and on a personal level I do, but the Pandora's box that such acts would create in the legal system is scary to think about.
          There is a difference between voiding a contract directly and requiring the contract to be voided as a condition of an extraordinary bailout that specifically addresses companies with unrealistic 'bonuses'. The companies could simply not take the bailout money, fail, and if they had the funds to pay the bonuses they could do so.
          |TG-6th|Snooggums

          Just because everyone does something does not mean that it is right to do.

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          • #6
            Re: AIG posts $8.9 billion loss

            Originally posted by CingularDuality View Post
            I don't think it would be a problem at all, if worded right: "Acceptance of this ridiculous amount of government assistance is contingent upon the voiding of all ridiculous amounts of bonuses that are normally paid by this company to already ridiculously overpaid executives."
            You can't make their acceptance contingent on something not in their power to do though. The company does not have the legal authority to void those contracts even if they wanted to. The only way to void those contracts under current law is to use bankruptcy law, but the whole point of the bailouts was to AVOID using bankruptcy proceedings so that's kind of working at cross purposes.

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            • #7
              Re: AIG posts $8.9 billion loss

              Originally posted by Kerostasis View Post
              You can't make their acceptance contingent on something not in their power to do though. The company does not have the legal authority to void those contracts even if they wanted to. The only way to void those contracts under current law is to use bankruptcy law, but the whole point of the bailouts was to AVOID using bankruptcy proceedings so that's kind of working at cross purposes.
              Ah, I see... Wait, the bonuses are contractual? There's no loophole that says when you perform so poorly that the company needs to be bailed out by the gov't, you don't get a bonus?

              Why are we trusting these companies with our money?
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              • #8
                Re: AIG posts $8.9 billion loss

                Yeah, the bonuses are contractual. Many of the bonuses are for executives in the departments that weren't the cause of the collapse. They did their job, and apparently they did it well enough to satisfy the bonus conditions in their contracts. I'm not sure why they don't deserve their bonuses in those cases - unless the conditions in the contracts were at some unacceptably low standard or something.

                Not everyone performed poorly. Moreover, they're now in a rebuilding stage. That they needed to be bailed out, or possibly need even more bailing out doesn't tell us how well the executives have done in the past year at rebuilding the company. Perhaps they've been doing a satisfactory job that warrants their contractual bonus.

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                • #9
                  Re: AIG posts $8.9 billion loss

                  Bankruptcy proceedings would mean all their assets (loans) would get redistributed to their creditors, all the original overpaid executives would be out of work, and the assets would now be managed by a completely different group of people.
                  Dude, seriously, WHAT handkerchief?

                  snooggums' density principal: "The more dense a population, the more dense a population."

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                  • #10
                    Re: AIG posts $8.9 billion loss

                    I'm not saying I'm opposed to bankruptcy, if that's the way you want to go. Just pointing out that if you're going to pass a bailout whose sole purpose is to AVOID bankruptcy, then it doesn't make much sense to require the company use bankruptcy proceedings to qualify.

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