Who could forget AIG? The never ending bail outs, the fictional derivatives, the funneling of U.S. taxpayer money to foreign banks, the outrageous bonuses and most of all, TARP. Yet it seems the Obama administration wants you to do such that. It seems the Treasury department planning to dump off AIG by the end of the year. What they are not telling you is the total taxpayer losses.
The biggest part of that strategy is for Treasury to begin converting its $49 billion preferred stake into common stock for sales by the first half of next year.
Common stock means no dividend, coming in last in the shareholder pig trough and taking a financial bath.
The Wall Street Journal is reporting the deal consists of:
The U.S. Treasury converting some of its $49 billion in AIG preferred shares into common stock. Then the stock can be sold over time. The conversion, which could take place at about $35 an AIG share, is likely to occur in the first half of 2011.
Why is Treasury converting to common stock? Is it to extend TARP de facto, allowing them to hold on to 2011, all the while making it appear they got out of the AIG bail out biz by 2010?
Below is the table, from the last TARP Congressional Oversight report, on how much bail out money AIG still has.
Meanwhile, Bloomberg reports more division sell offs at AIG, note the over time U.S. taxpayer pay back plan and AIG is selling two Japanese insurance units for $4.8 billion.
The government is seeking to dispose of its AIG stake as Chief Executive Officer Robert Benmosche, 66, prepares divestitures of two non-U.S. divisions that he said would largely repay the firm’s Federal Reserve credit line. MetLife Inc. said this month its purchase of American Life Insurance Co., for about $15.5 billion, is “on track” to be completed on Nov. 1. AIG may hold an initial public offering of another business, AIA Group Ltd., in October.
The insurer’s objective is to “repay the taxpayers and position AIG, over time.
The New York Times, notes the stall tactics to avoid a credit rating downgrade and a dumping of AIG stock:
To close the deal by the end of the year and avoid a downgrade, A.I.G. will have to complete a number of steps. Foremost is securing a credit facility from a bank to replace the one now provided by the Federal Reserve Bank of New York, the people briefed on the negotiations said. As part of the deal, the Treasury will convert its preferred shares into billions of dollars’ worth of common stock.
Underscoring the risks of huge government bailouts, the government may be forced to sell its stake very slowly. And it is not at all clear that the government will recoup its full investment, some analysts say.
These sanitized phrases deliberately mask what the Administration is so keen to hide: that it has been badly overmastered, whether by incompetence or design, by the world’s biggest deadbeat. And the government’s eagerness to distance itself from a $182 billion sinkhole means it is yet again giving more unwarranted financial concessions.
Let’s not kid ourselves: all this fancy financial footwork is to divert public attention from the fact that AIG will deliver big losses to the taxpayer.
Current loss estimates on AIG vary, from $35 billion to over $50 billion (CBO, OMB, Treasury). AIG has received $185 billion in government bail out funds. Last June, the Congressional Oversight Panel released a scathing report on AIG. The last TARP COP report (TARP ends October 3, 2010), states losses to taxpayers are highly dependent upon the AGI common stock value. The report also states how AIG is going to pay back the government is extremely unclear.
So, is this latest move by Treasury an attempt to hide the losses and the fact taxpayers are going to take a bath on AIG?