So the Fed is now going to bail out AIG by "loaning" them 85 billion dollars. Don't worry though, its all good because the Fed is watching out for our tax dollars by taking about an 80% equity position in AIG as collateral:
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. -The Federal Reserve
Doesn't that make you feel better? Never mind the fact that as of close of business today AIG's market cap was only $10 billion.
I wish I could get a loan like that:
Hey Mr Banker, I want to buy this $100,000 house, can I have loan for $850,000? No? Ok how 'bout if I give you an 80% equity position in the house? No? How about an 80% equity position in my neighbors house? Sweet!
Another thing I like about this is that the Fed "took" an 80% (actually 79.9%) ownership stake in the company.
The US government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders...what about the people that already owned AIG, you know those pesky shareholders? Did the fed "take" that from them, or did they buy it? If they did buy it, what price did they pay?
- Federal Reserve
Did AIG own 80% of it's own shares?
85 billion dollars divided by 80% of 2.69 billion shares comes to $39.50 per share.
So basically AIG can buy the share from their shareholder at $3.75, or even better, NOT buy it and NOT pay dividends on it and then they can use that share as collateral on a loan (not sell it mind you) and receive $39.50. I wish I could collateralize other peoples property for a loan, that would be great, I could get all kinds of money and not have to worry about losing any of my stuff when I didn't pay it back...sounds like a sweet deal for AIG!
3 comments:
Just one more example of our government tending toward Statism with the federal government and big business as chief bedfellows.
Airline industry, automotive industry, agriculture, now major finance institutions are being propped up by the federal government.
It's high time we let the losers lose and quit trying to subsidize the entire US GDP. We are spending ourselves into oblivion with this nonsense. I fear for our children with the world we're leaving them.
Alexander Hamilton would like this very much. I say down with the Federal Reserve and up with the National Bank. We can just keep printing money until gold is worth a billion dollars an ounce. Then we'll all be rich. Imagine all the extra ink we will go through when they print our paychecks.
Quick! Invest in ink!
Post a Comment