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| Wed, 09-17-2008 - 2:07am |
AIG Gets $85 Billion Fed Loan, Cedes Control to Avoid Collapse
By Hugh Son, Erik Holm and Craig Torres
Sept. 17 (Bloomberg) -- American International Group Inc. averted the worst financial collapse in history by accepting an $85 billion federal loan and giving the government a majority stake.
The U.S. reversed its opposition to a bailout of AIG, the nation's biggest insurer by assets, after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement late yesterday.
``It's an enormous relief,'' said David Havens, credit analyst for UBS AG in Stamford, Connecticut. ``Nobody really knows what it would have meant if they would have been allowed to fail, but there was an enormous amount of systemic risk. The problem was, nobody really knew how bad it could have been.''
AIG gives up a 79.9 percent stake to the government and senior managers including Chief Executive Officer Robert Willumstad, 63, will give up their jobs. Retired Allstate Corp. CEO Edward Liddy, 62, will be AIG's new leader, according to a person familiar with the plans, who declined to be identified because the change hadn't been formally announced. Allstate is the biggest publicly traded home and auto insurer in the U.S.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw.hphkcbZ_o&refer=home

We didn't have to do this - there was an earlier offer that was turned down:
http://www.bloomberg.com/apps/news?pid=20601087&sid=azTRq.G2zU7g&refer=home
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By Zachary R. Mider and Erik Holm
Sept. 17 (Bloomberg) -- Allianz SE, Europe's largest insurer, made an offer to invest in American International Group Inc. that was rejected by the U.S. insurer two days before it accepted a government takeover, said two people with knowledge of the bid.
Allianz teamed with J.C. Flowers & Co., the New York-based private equity firm run by J. Christopher Flowers, in an effort to help New York-based AIG stave off a cash crunch, according to the people who declined to be identified because the talks were private.
Sabia Schwarzer, a spokeswoman for Munich-based Allianz, declined to comment. Flowers and Nicholas Ashooh, an AIG spokesman, didn't return calls seeking comment.
AIG, the biggest U.S. insurer by assets, accepted an $85 billion loan from the government yesterday in exchange for a 79.9 percent stake. Edward Liddy, the former Allstate chief executive officer, will replace Robert Willumstad as AIG's CEO, said another person who is familiar with that situation. All three of the people spoke on condition of anonymity.
The U.S. Federal Reserve said it offered the loan because of the risk that an AIG failure would threaten the stability of world financial markets. >>>
Sopal
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Who knows why, but when I worked for an insurer, AIG tentacles were *everywhere.* And there was one rumour that persisted through time... that AIG was a nice home for CIA operatives around the world.
So setting aside how their financial reach is pretty significant in terms of reinsurance and taking a piece of the largest risks this nation has, there is that unknown element.
Who knows if there was ever any truth to it? It is also quite a reach, but I can't help but wonder, given
Full length fiction: worlds undone
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