I returned from a few days off to get some rest and gear up for the usual year end push to find that AIG has once again had their deal reworked by the Fed's, with the amount at risk now up to $150,000,000,000. I like the extra zeros to lay out visually what $150 Billion looks like on paper.
My quick thoughts on this latest bit of news, along with a link to the Wall Street Journal report that outlines some of the key elements of the deal.
1. As I stated early on in this crisis, this bail out stinks on several levels and it has the look of a major league pay off for years of AIG support of tort reform agenda and candidates who benefited from their largesse. The more I watch this unfold the thing that jumps out at me is how AIG has been rescued once, twice, three times and now a forth restructuring of the deal once the WSJ editorial board and others in the tort reform lobby started to discuss how unfair the deal was to shareholders and employees. I happen to agree the terms of the first deal almost guaranteed the destruction of the enterprise and needed to be changed, but I have a lingering feeling given the actions of the East Coast Corporatists of the Republican party that AIG is being propped up and saved in the fashion that it is because it provides the maximum protection to the Board of Directors and the "unnamed counter signatories" on their various financial contracts.
2. The unnamed people and governments who are being protected by AIG being propped up are the ones pulling the strings here. Once we find out who is most affected by a collapse of AIG we will realize who really engineered this deal. More and more the September 16th decision to seize the company and put the tax payers at risk is looking like a rush deal that was set in place to protect the board and the group down stream who is most at risk if they default. Once we follow the guarantee/money trail with some congressional oversite we will find out who actually put this deal in place.
3. The big guys are protected, the shareholders and employees get the shaft. It is becoming abundantly clear that the best thing that could have happened to AIG would have been a Chapter 11 filing and orderly sale of the life markets and other subsidiaries. There is considerable enterprise value in the AIG companies but it is being drained and destroyed by these loans and the new restrictions on how business is conducted. Letting the Fed into your business is a recipe for utter destruction, although it may take years. I've got an idea, how about we let the same type of people who are rebuilding Ground Zero in NYC take control of a massive, multi-national insurance company and start to direct politically how it will be run and operated. All you will have left once the political types and Treasury leeches are finished is a huge black hole in the ground 7 years later.
4. The AIG life companies are totally sound and protected, but are being devestated by the guilt of association. The now political mess created by the first panic move by the BOD of AIG has sapped the life from various markets that make up the AIG empire. How tough must it be to show up for work and grind this out right now knowing that some rogue division wiped out the ability to make a living in your area of expertise. Time is not on their sides as a quick sale is in their best interest, but there are no buyers and the buyers there are prefer to wait to purchase key assets at even lower prices.
In short, this saga is only beginning as the government now has a huge stake, has absorbed even more risk and has pushed out the date the asset sales will occur even further. The slow, painful bleeding of this company, has yet to be stopped and the truth of how this deal was motivated has yet to be revealed. This entire deal stinks for shareholders, employees, business partners and others and the blame is now laid at the feet of the BOD, Treasury and others who continue to protect the unnamed beneficiaries of the guarantees. When we find out the names and amounts at risk and the veil is lifted, I think it's going to be a very ugly picture.