AIG's $85 billion bailout package quickly becomes $150 billion. Will it ever end?

Most of us can clearly remember the day – way back in September – when they woke up to hear that they were loaning AIG $85 billion to keep it from failing.  There was a tremendous amount of debate as analysts went back and forth about whether or not this would be good for the American people or not.  Apparently AIG was too big to fail, and apparently that remains true today, but now the terms are a little different and the potential benefit to the American consumer is significantly less than it was before, and if you think that’s bad, keep reading, it gets worse.

So the original terms were pretty good – assuming that AIG could repay – but with very little fanfare the original $85 billion line of credit was supplemented by another $38 billion which was then added to additionally when AIG was allowed to sell another $21 billion of commercial paper to the US Government.  These are big numbers, we’re talking about nearly $150 billion in since September, and some economists are questioning if this will be enough!  But this is where it gets really good…

According the Edward M. Liddy, the insurance executive brought in to lead AIG through the crisis, the original terms of the agreement are not sustainable.  He was of course referring to the 10% interest that had originally been agreed to, which has subsequently been reduced.  Adding insult to injury they completely restructured the loan resulting in an added layer of confusion to the point that most Americans should just bury their head in the sand when it comes to AIG because in my opinion, that money is gone.

Where this gets even more frustrating is when you look at the counterparties to AIG – the other financial institutions and banks in the United States and Europe.  These companies are not bearing any of the loses on their investments in AIG – we, as taxpayers, are essentially bailing them out, too.  As if they weren’t rich enough and the American people weren’t suffering enough.  Liddy even went on to say that “it’s not exactly a bailout” because AIG is being asked to pay interest on the money that they’re loaned.  I guess he didn’t recognize that without that “bailout” AIG would have joined Enron.

Finally, AIG decided that a little salt on the wounds of the American public might be in order, and continued with hosting a $340,000 conference for independent financial planners at the Pointe Hilton Squaw Peak resort in Pheonix.  AIG says that sponsors coverd most of that investment, but it stills opens AIG up to questions about why?  It’s like someone borrowing money to throw their bankruptcy party – just doesn’t make sense.

“AIG is coming to the government claiming to be in critical condition and asking to be placed under intensive care, but they are still going out and partying and acting as healthy as ever,” U.S. Rep. Elijah Cummings, D-Md., a member of the House Oversight and Government Reform Committee, said in a statement. “It is even harder to sympathize when this company’s executives continue to wade by luxury pools while the everyday American whose taxpayer dollars are being used to save the company are hard at work.”

Just to drive their point home – AIG also reported a $24.47 billion, or $9.05 per share loss in the third quarter.  Based on the bailout play – 79.9% of that loss goes to the American publics bottom line.  Thanks guys.

Ranter