The future of AIG?

Jim Kim — Wed, 17 Sep 2008 13:42:08 -0400

AIG survives, but it will be a shell of its former self. Which may not be a bad thing. In agreeing to to an $85 billion bridge loan from the government, the insurer basically gave up operational control. The Federal Reserve could end up owning as much as 80 percent of the company, reports Fortune. The deal also requires AIG to sell businesses to raise capital, and to repay the debt. One unit that is toast: AIG's Financial Products unit, once hugely profitable thanks to the insurance guarantees it sold on credit default swaps tied to mortgages. Most people are guessing assets will be sold at fire sale prices. Just look at Lehman's pitiful deal for its investment bank. AIG competitors will be forced to take a hard look at some assets. You can bet jobs will be at stake.

For more:
- here's the article

Related Article:
Regulators change tune, bail out AIG

Fannie and Freddie, the final shoe to drop?

Jim Kim — Thu, 10 Jul 2008 22:13:41 -0400

We tend to take Fannie Mae and Freddie Mac for granted. They have long been securitizing mortgages, and that expanded liquidity greatly, without a doubt. That they were government-sponsored enterprises made their guarantee seem fail-proof. But all noble securitization eventually gave way to casino practices. Now, the idea that both could actually fail has gained steam, pushing their stocks to new lows, notes Fortune. William Poole, former president of the St. Louis Federal Reserve, has been quoted as saying the entities are already insolvent. That may be overstating it, but we really do not know. This fresh worry for the industry is keeping regulators up at night. They were scrambling to reassure the markets yesterday. Plans for possibly placing the agencies in conservatorship were leaked to the New York Times. Wow! If they were to fold, the real estate market as we know it would crumble. We can't have that.

For more:
- here's the Fortune article
- here's the New York Times article

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