Sunday, November 16, 2008

It's Too Quiet at AIG

Uncle Sam has a lot of skin in the game with AIG. A lot.

We have committed $153 billion so far to unwinding the balance sheet. We own 79.9% of the equity. We haven't sold any assets or raised any private money to speak of.

The NY Post is reporting that Hank Greenberg is trying harder to get back in the mix. I was ready to snap dismiss this. Greenberg was AIG CEO until three years ago so hand a big hand in building the pyramid scheme that is their balance sheet. Of course he wants to be the white knight.

What the Post writes however has a lot of merit. Greenberg argues the structure if the U.S. efforts and offers some suggestions that will be taken seriously in the coming weeks:

"[Greenberg] was the quiet and effective force behind the government's recent move to slash the high interest rates on the emergency $85 billion loan needed to keep AIG afloat by 38 percent.

"They recognized that the restructuring they put in place was too punitive," Greenberg said in an interview at his office last week. "It was more harmful than good. You can't make an $85 billion loan at 14.5 percent plus own 79.9 percent equity of the company - and then essentially nationalize the company."

"You can't raise money from the private sector if the company is owned by the government," he said. "Obviously. Who the hell is going to invest? The sooner they can reduce the equity into a non-voting preferred, the better everyone will be. Then you can try to raise money and sell assets. But in the meantime, the government is running an insurance company.""

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