CHARLOTTE, N.C. -- It's been bristles months aback American International Group Inc. accustomed its aboriginal massive banknote bailout from the U.S. government, a move that put the New York-based insurer advanced and centermost in a banking crisis that was aloof starting to get ugly.
A lot of the aboriginal account about the banking accident independent the belletrist "AIG." It was the amidst the aboriginal companies to be questioned aftermost year about abundant spending by executives, to cut advantage bales and to face investigations by U.S. and adopted authorities. The government maintains that it bare to footfall in, adage AIG's abortion would added agitate markets and abuse the already brittle economy. Admitting critics of the move afraid about taxpayers actuality on the angle for billions of dollars in bailout money if the government kept dispatch in to advice afflicted banking companies.
How has AIG been accomplishing aback it started accepting government help? Here are some questions and answers.
Q: How abundant money has the government accustomed AIG?
A: On the border of abortion in September, AIG was bailed out aback the government offered it an $85 billion accommodation during the advancing acclaim crisis that saw Lehman Brothers Holdings Inc. book for defalcation aegis and Merrill Lynch & Co. get awash to Bank of America Corp.
Less than a ages later, the allowance behemothic accustomed an added $37.8 billion accommodation from the Federal Reserve, and afterwards was accepted the adeptness to admission up to an added $20.9 billion beneath a new affairs area the Fed would buy bartering cardboard -- concise debt generally acclimated for circadian costs -- from the company.
In November, the U.S. government restructured its loans to AIG, giving the aggregation about $150 billion in absolute as allotment of a accomplishment amalgamation to advice the aggregation abide in business amidst the deepening acclaim crisis. That amalgamation replaced beforehand loans afterwards it became credible the insurer bare added funds.
It included a $40 billion banknote beverage from the $700 billion banking bailout the government appear backward aftermost year. The government is affairs adopted shares of AIG stock, giving taxpayers an affairs pale in the company. In turn, restrictions accept placed on controlling advantage at the firm.
As allotment of the amalgamation restructured in November, the government is additionally spending up to $53 billion to buy up mortgage-backed assets and added AIG affairs on debt.
AIG backer Christina Pretto said the government has not acclimatized all its warrants -- in added words, its appropriate to access AIG banal -- with the company.
Q: Why did they charge the money in the aboriginal place?
A: AIG begin itself beggared for banknote as it was hit adamantine by abasement in the acclaim markets and apropos that the complex, structured investments it insures would added default.
Problems at AIG did not appear from its acceptable allowance operations, but instead from its banking casework units, and primarily its business insuring mortgage-backed balance and added chancy debt adjoin default. If AIG couldn't accomplish acceptable on its affiance to pay aback soured debt, investors feared the after-effects would affectation a blackmail to the U.S. banking arrangement -- and that's what led to the government bailout.
Q: How abundant has AIG paid back?
A: In October, AIG said it would advertise off a cardinal of business units to accord the antecedent $85 billion Fed loan. The loan, which was bargain in admeasurement to about $60 billion beneath the restructured accomplishment amalgamation the government put calm in November, had almost $35 billion outstanding as of aftermost week.
The aggregation has not accurately appear the assets it is affairs or the accepted prices from the sales. However, AIG has said it affairs to absorb its U.S. acreage and blow and adopted accepted allowance businesses, and affairs to absorb an affairs absorption in its adopted activity allowance operations.
Q: How abundant of the aggregation has AIG awash off?
A: As of Friday, AIG had already awash interests in nine businesses.
While agreement of anniversary accord accept not been disclosed, "AIG is focused on repaying the government and the taxpayers, affairs assets, and attention the amount of AIG's assorted businesses," Pretto said.
Q: Has the bailout been successful?
A: Without alive accurately how AIG is spending the money it's accustomed from the government, it is difficult to apperceive if AIG's bailout amalgamation has helped.
"To the admeasurement the bailout was able to accord them a arch that would accredit them to abandon or abstracted the acceptable business from the bad business, I anticipate they accept been able to do that," said David Steuber, co-chair of law close Howrey LLP's Allowance Recovery Practice Group in Los Angeles.
And admitting all the banking woes, AIG's acceptable allowance subsidiaries accept broadly been beheld as safe, Steuber said. AIG operates allowance and banking casework businesses alignment from property, casualty, auto and activity allowance to accomplishment and advance services.
"As the all-around bread-and-butter mural continues to change, AIG is consistently evaluating new options to accomplish its ambition of repaying the government and advancement the animation of our allowance and added businesses about the world," Pretto said.
Even with the government help, though, AIG's approaching charcoal questionable, wrote Morningstar analyst Bill Bergman in a contempo agenda to clients.
"The ambit of approaching possibilities for AIG charcoal wide," Bergman wrote aftermost week. "The abeyant for asset sales at afflicted prices could able-bodied leave shareholders with nothing."
Q: How has AIG's position in the industry changed?
A: Once one of the world's better insurers, AIG's annihilation has opened the aperture for added insurers to accretion bazaar share.
While the accepted ambiance is a difficult one for affairs assets, "the companies AIG is affairs are well-run, assisting businesses that could not be re-created today in some of the world's best adorable markets," Pretto said.
Still, not anybody is adopting their duke to buy up pieces of the company.
Like AIG, added insurers accept taken losses on investments in debt such as collateralized debt obligations and mortgage-backed securities, too. CDOs are investments backed by pools of mortgages or added assets. They accept plummeted in amount aback the acclaim crisis erupted added than a year ago as investors fled all but the safest forms of debt.
As a result, there aren't a lot of allowance companies in a position to be affairs annihilation appropriate now.
"I'm not abiding there were that abounding absolutely financially able or able abundant companies that were aggressive with AIG to absolutely booty as big of an advantage as conceivably they hoped for," Steuber said.
-- The Associated Press
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