AIG Was Likely to Fail Wednesday: Bailed Out by US Government
If a financing solution is not reached, American International Group (A.I.G.) may file for bankruptcy as soon as Wednesday, a person briefed on the matter told the New York Times Monday night. The company has hired the law firm Weil, Gotshal & Manges - which is also handling the Lehman Brothers bankruptcy - to draw up bankruptcy papers.
But by Tuesday night, the Government had already bailed out A.I.G.
Gov. David A. Paterson of New York, who recently allowed A.I.G. to borrow $20 billion from its subsidiaries, reinforced this position on CNBC Tuesday morning, saying that the company could survive only one day without the financing.
It is possible that the banks are maintaining this argument to prod the Fed into adding money, perhaps in a 50-50 joint effort.
What would an A.I.G collapse have meant to the economy?
A.I.G. collapse could be an even bigger systemic threat to major financial firms than Lehman's downfall, because of the company's dominant position in insuring mortgage-linked securities. Should A.I.G. fail, it could kick off a wave of additional write-downs at banks already staggering from the credit crisis.
Kenneth D. Lewis, the chief executive of Bank of America, told CNBC on Monday that virtually every Wall Street giant would be touched by an A.I.G. failure. (In a surprise commingling of financial crises, the landlord of Lehman's London office said the bank's rent payments were insured by A.I.G.).
According to the 2008 Forbes Global 2000 list, AIG was the 18th-largest company in the world. It became a component of the Dow Jones Industrial Average on April 8, 2004. As of March 16, 2007, AIG Investments, a division of AIG, completed the purchase of 100 percent of the stock of P&O Ports North America from Dubai-based Dubai Ports World.
On June 15, 2008, under intense pressure due to financial losses and a falling stock price, Martin Sullivan resigned from the CEO position. He was replaced by Robert B. Willumstad who has served as Chairman of the Board of Directors of the Company since 2006.
In 2008, AIG's share prices fell over 95 percent to less than $3 in September and the company reported over $13.2 billion in losses in the first six months of that year.
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Jagajeet Chiba, Gambling911.com
