What's going on at AIG? ?
American International Group (AIG), which sponsors Manchester United FC, was hit hard by deterioration in the credit markets last week and yesterday issued a statement that said it was reviewing its operations. Its stock dropped 45% since the start of the week amid concerns about the security of its assets, many of which are linked to the financial turmoil on Wall Street. Over the weekend it crafted a $40bn loan facility from the federal reserve, which had obviously taken the view that AIG posed more of a systemic risk than Lehman. Who's next? Washington Mutual is named by several analysts as the next to find itself in serious trouble. It was the subject of a rescue led by private equity firm Texas Pacific group in the spring. But the billions poured into its coffers no longer look sufficient to satisfy investors and they are taking flight. It is possible shareholders will flee Bank of America, if they consider Merrill Lynch a bad buy. Another victim could be the US mono line insurers, so called because they only insure the bonds of large company's, including mortgage lending institutions. Like AIG, the insurance cover they provide could be invoked by customers and, like a tsunami, overwhelm their finances. In the UK, mortgage banks such as Halifax owner HBOS, Alliance & Leicester and Bradford & Bingley, could suffer further if investors switch to safer havens. Will it make a recession worse? Yes. The CBI predicts a "shallow recession" next year, but this now appears optimistic. If the last five years of our decade-long economic boom were characterised by reckless lending, then living standards, along with property prices, have a long way to fall. We are all spending money we simply don't have and when we stop it will spell the end for many jobs in retail, hospitality and may other industries. A fall in the value of the pound will help exporters and that will offset the worst of the economy's problems. But without banks willing or able to lend money to millions of people, except at sky-high interest rates, a long and deep recession seems inevitable. What are your views???????????
Asked By: Chicken - 9/22/2008
Best Answer - Chosen by Asker
The situation seems very complicated... More
Answered By: giginotgigi - 9/22/2008
Additional Answers (2)
Theft and fraud is always wrong. They should have been allowed to fail.Now they will be able to go out and steal again. You might as well start a bank yourself. No experience or qualifications necessary- just greed and ego. And stupid old politicians who can't do their sums... More
Answered By: Maya R - 9/22/2008
The bailouts will cost just under $3000 for every man woman and small child in the USA. Isn't that just brilliant of these bankers to unload that much debt onto infants. Sounds wrong to me somehow.
Answered By: Ben J - 9/22/2008
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