DOW Slides under 7000 as AIG gets 30B Bailout

[Vteckidd]

INDEX VALUE CHANGE OPEN HIGH LOW TIME DJIA INDEX 6,939.00 -113.00 7,040.00 7,041.00 6,872.00 09:00




AIG has received the biggest US bail-out package

Insurance giant AIG has reported a loss of $61.7bn (£43bn) in the final three months of 2008 - the largest quarterly loss in corporate history.

And the firm will receive an extra $30bn from the US government as part of a revamped rescue package.

AIG has already received $150bn in financial support - the biggest bail-out by far of any US company.

Stock markets slid sharply as AIG's plight underscored fears about the health of the global financial system.

The Federal Reserve and the Treasury said that AIG posed a "system risk" to the global financial system.

"The potential cost to the economy and the taxpayer of government inaction would be extremely high," they said.


BAIL-OUTS RECEIVED
Bank of America - $45bn
Citigroup - $50bn
JP Morgan Chase - $25bn
Wells Fargo - $25bn
Goldman Sachs - $10bn
Morgan Stanley - $10bn
State Street - $3bn
Bank of New York Mellon - $3bn

"The additional resources will help stabilise the company, and in doing so help to stabilise the financial system."

As well as insuring households, AIG plays a key role in insuring risk for financial institutions around the world.

The news of AIG's historic loss comes as HSBC, Europe's biggest bank, seeks to raise £12.5bn ($17.7bn) to strengthen its finances following a 62% fall in annual profit.

Revamp

The revamped rescue package also involves a restructuring of AIG's operations.

It calls for the Federal Reserve to take stakes in two of AIG's international units in exchange for reducing AIG's debt.

The new measures will also effectively cut the interest payments the insurer must pay to the Federal Reserve.

The AIG financial support is about three times greater than that given to Citigroup, which has received $50bn, and Bank of America, which has received $45bn.

Fear of failure

US officials fear that a failure of AIG would be disastrous for both the US and the global economy.

Credit rating agencies, such as Moody's, Fitch and Standard & Poor's, had been poised to cut AIG's credit ratings as a result of the record loss.


AIG: QUICK FACTS
30 million US policy holders
Operates in 130 countries
Provides insurance to 100,000 companies and other entities

That could have forced AIG to default on its debt, which would have had a knock-on effect on all of AIG's businesses.

AIG provides insurance protection to individuals, small firms, municipalities, personal pension plans and major US listed companies.

It also insures major financial institutions against complex deals going wrong through derivative contracts such as credit default swaps - the main cause of its problems.

The company first received financial assistance from the state in September in the wake of Lehman Brother's collapse.

In the UK, AIG is best known as a sponsor of Manchester United, but the deal is due to come to an end.

It also underwrites insurance sold by a number of High Street names including Boots and Argos.

[punkr6]

Were soooooo fu%ked...

[SPOOLIN]

this recession is ethnic cleansing corporation style.

[BanginJimmy]

6k by the end of March, 4k by the end of July, and 2500 by the end of the year. It will be a slow fall from 4k to 2500 because of the companies that are doing well will do alot to prop up the companies that are not.

[Paul]

They are still reporting bad numbers b/c they aren't changing the way they do business; instead they are using tax payers $ to support their bad habits

One day after announcing strict limits on salaries and bonuses for its top tier of executives, AIG revealed that some of those executives will receive millions in “retention bonuses” next year...

The retention bonuses for 130 key executives were disclosed by AIG in September, after the US government rescued the firm from bankruptcy by purchasing 79.9 per cent of the company for $85bn. After the government takeover, Edward Liddy, the former Allstate chairman, was named chief executive and AIG offered retention bonuses to Mr Wintrob, head of AIG’s retirement services division, among others....

[SampaGuy]

Would be hilarious if AIG pulled the sponsorship from Manchester United the day after they win the League Cup...

[Paul]

Would be hilarious if AIG pulled the sponsorship from Manchester United the day after they win the League Cup...

Actually they have already planned they aren't going to sponsor next year... AirAsia is interested and its a 30 million dollar sponsor

[SampaGuy]

Actually they have already planned they aren't going to sponsor next year... AirAsia is interested and its a 30 million dollar sponsor

Oh did not know that. Im not familiar with how much are the sponsorship deals but 30 million sounds kinda low when you consider how much the players get payed.

[leobond001]

They are still reporting bad numbers b/c they aren't changing the way they do business; instead they are using tax payers $ to support their bad habits

Alot of companies are still doing that. I was having a discussion with a co-worker about that last week.

[Paul]

Oh did not know that. Im not familiar with how much are the sponsorship deals but 30 million sounds kinda low when you consider how much the players get payed.

ya i figured it would be more but that is only for T-shirt sponsor for ManU, but that is 1/6 of their overall revenue and 1/2 of sponsorships

Insurance giant American International Group (AIG.N) will not renew its shirt sponsorship of world club soccer champions Manchester United and has already started cutting back costs in relation to the existing deal. The American company also said in an email sent to Reuters that it was "in active discussions" with the club regarding the current four-year $100 million deal, which runs until next May.

Manchester United relies on sponsorship for around a third of its revenues. The club pays around 43 million pounds ($59 million) a year to service 660 million pounds in debt created when U.S. owner Malcolm Glazer bought the club in 2005.

[BanginJimmy]

They are still reporting bad numbers b/c they aren't changing the way they do business; instead they are using tax payers $ to support their bad habits

I understand the arguement for compensation limits for execs, but at the same time, they are a deathblow to any company that has to abide by them. Anyone with at least half a brain knows that too.

If you had a job that you made 200k a year and AIG came and offered you a contract for 50K a year would you take it?

Now think of it at the price levels of an exec at a major corporation. You are a pretty sucessful CEO of a smaller corporation making 1M a year. AIG needs a new CEO and they offer you the job. Do you take the the 50% pay cut to take a harder job? You know you will be ridiculed in the press endlessly. If you take a vacation or you take a division that just broke a corporate sales record out for a weekend at the spa and golf totalling 5 million (1% of their years profit) you will be in front of congress having to explain why you are an idiot and taking advantages of taxpayers. Why would you take that job?

What is really going to happen is that (insert corporation here)'s CEO will be someone that is only worth 500K a year. That means he will be some mid level exec that has never been in the big seat. He will be over his head from day 1 and will never recover, taking the corporation along with him.

[BanginJimmy]

DOW finished down 300 points today. 6k may happen by the end of the week at this rate.

[chnco]

it'll be up above 7k tomorrow. Rumors and speculation have a huge affect on stocks

[green91]

Forgive me but i dont think the stock market is a great indicator of actual economic conditions and therefore dont give it much attention.

[SPOOLIN]

Forgive me but i dont think the stock market is a great indicator of actual economic conditions and therefore dont give it much attention.

i feel somewhat the same way.

[Vteckidd]

as stocks plummet, unemployment will go up, thats direct to the economy fellas

[green91]

By the time stocks plummet, the numbers have already been calculated by the companies and they are well aware of whether they need to lay people off or not. The damage or gain is already done well before you see the result on the market.

[BanginJimmy]

If you dont think the stock market is a good measure of the economy, what would you consider a good measure of the economy?

[Paul]

If you dont think the stock market is a good measure of the economy, what would you consider a good measure of the economy?

i don't believe so either; new studies are out last month consumers spending went up. there is money out there the problem is people/companies are more cautious b/c of the state of things around them. my company is a 30+ million dollar company and we are just tightening our belts a little and pushing off expensive projects till we see some turn for the better.

[BanginJimmy]

i don't believe so either; new studies are out last month consumers spending went up. there is money out there the problem is people/companies are more cautious b/c of the state of things around them. my company is a 30+ million dollar company and we are just tightening our belts a little and pushing off expensive projects till we see some turn for the better.

Retail did have a small bounce last quarter, but it was small and most people associated it with xmas spending. There was also a rise in consumer debt during the same period. People bought more, but they just put it on credit and put themselves in an even worse situation.

The only real, 100% truthful measures of the economy are the GDP and unemployment. The problem is, they are only quarterly, at best, indicators. For more up to date info the best places to look is the stock market because you will never see the GDP go up and unemployment go down while the market goes down.

[green91]

A market based primarily on speculation is a lot different than actual GDP and employment figures.

[green91]

If you dont think the stock market is a good measure of the economy, what would you consider a good measure of the economy?

Honestly i think that consumer confidence is one of the better indicators although its not as solid as GSP & unemployment numbers.

High consumer confidence means that people have the ability (credit, money in pocket etc) and the desire to buy goods. When consumers are in a position to purchase it trickles to all areas of the economy.

[SampaGuy]

The only real, 100% truthful measures of the economy are the GDP and unemployment.

Lol, those are just two slices of a big and complex pie.

you will never see the GDP go up and unemployment go down while the market goes down.

Not true at all, its a lot more complex than that. Katrina caused the GDP to go up (money spent on the reconstruction of New Orleans). The market went the other way.


There is no specific indicator that is best, all aspects of the economy fluctuate, sometimes together, sometimes independently of each other, all the government can do is try to keep it balanced through monetary policy.

[BanginJimmy]

Honestly i think that consumer confidence is one of the better indicators although its not as solid as GSP & unemployment numbers.

High consumer confidence means that people have the ability (credit, money in pocket etc) and the desire to buy goods. When consumers are in a position to purchase it trickles to all areas of the economy.

Consumer confidance is a very good indicator of the general public, but that is still subjective. This is especially true in a time like this where the govt is consistantly forcing itself deeper and deeper into the business world. A lack of confidance in govt will color people's confidance in the economy.

[BanginJimmy]

Lol, those are just two slices of a big and complex pie.

I realize that, but IMO they are the best indicators. I know that no single factor is a tell-tale sign, but those 2 indicators tell you the actual state of the business community. If 1 sector or another is having larger than average lay-off's or hiring it is a great indicator of the health of that sector.

Not true at all, its a lot more complex than that. Katrina caused the GDP to go up (money spent on the reconstruction of New Orleans). The market went the other way.

That is the result of a specific event though. Just like Xmas sales numbers are higher than an average day doesnt mean retail sales are booming.

There is no specific indicator that is best, all aspects of the economy fluctuate, sometimes together, sometimes independently of each other, all the government can do is try to keep it balanced through monetary policy.

I agree that all sectors opperate indipendantly, but you will not see many times when the indicators dont match the reality.

[BanginJimmy]

it'll be up above 7k tomorrow. Rumors and speculation have a huge affect on stocks

do you still believe this? I was about to post that it was down around 30 more points, but I just looked and it was up 6 points. We only have another 230 points to go.