AIG Loses $62 Billion In A Single Quarter

The government is taking steps to revamp the AIG bailout, after the company lost a mindbogglingly huge amount of money, $62 billion, in a single quarter.

“Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high,” Treasury said in its announcement.

So far, the government has spent $150 billion to keep AIG afloat.

If you’d like to read the statement by the Treasury Department, click here.

AIG suffers $62B loss, bailout revamped [CNNMoney]

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  1. David Schripsema says:

    You’re doing it wrong!!! <–Has anyone told them that yet?

  2. Homerjay - (insert star here) says:

    Mindbollgingly… That probably took some though. :)

  3. Nogard13 says:

    And the government is going to give them that money back. We’re the ones paying for it.

  4. morganlh85 says:

    Way to go! Everyone there really deserved those bonuses!

  5. sir_eccles says:

    Stupid question but where did it go?

    Bonuses etc only account for a small bit. Is it just bad debt that is written off or does someone somewhere actually have all this money, like a Bernie Madoff sitting somewhere on a desert island?

    • AdmiralKit says:

      @sir_eccles: From what I recall reading about the whole AIG debacle, they’re losing money because they insured the mortgage-backed securities against risk… seemed like a good idea when they’re all rated AAA (a bit of hyperbole there, but sadly not as much as there should be), but given the mind-boggling amounts of money that were sunk into all of those securities and are now disappearing like dust in the wind, they’re on the hook to pay out and pay out and pay out now that these securities are defaulting.

      The banks say, “Hey, you promised to pay up if these things went under,” and AIG can either fold and cause all of the banks to take even bigger losses (and thusly freeze up the markets even more), or we can prop them up by shovelling wheelbarrows full of cash into the furnace that is their balance sheet.

      The problem now is that banks are still valuing those securities and the mortgages behind them at far higher levels than they’re worth in this market. That’s where the kabuki theatre going on between the government and the banks asking for bailouts is happening… they want us (by way of the government) to buy up their bad assets at 75 cents on the dollar (where they have them listed on their balance sheet so that they’re not considered insolvent) while everyone realizes that in this market they’re worth maybe 15 cents on the dollar (which puts most of the banks deeply in the red.

      • KyleOrton says:

        @AdmiralKit: It even worse when you realize that the only reason they were AAA rated was because AIG insured them.

        Since we can’t let the company fold, I think the managers and executives of that division need scarlet-letter treatment. Something that makes it not “ok” to destroy the economy and waste taxpayer money.

        • Corporate_guy says:

          @KyleOrton: One would think jail time and criminal charges would follow the cleanup of this mess. But they can’t even punish Madoff and that guy intentionally stole money.

      • chrisgeleven says:

        @AdmiralKit: @sir_eccles:

        It to me almost sounds like an insurance run (instead of the classic run on the bank). Instead of people showing up to the banks withdrawing all of their money at once, it is all of the banks running to the insurance companies with insurance claims all at once.

        This is a great reason why good regulation is needed. With smart regulation, AIG would have been significantly less exposed. Maybe not as high profits in the good times, but certainly not a $62 billion loss in one quarter either.

      • ARP says:

        @AdmiralKit: Great summary. Like all the other banks, AIG overexposed themselves to mortgage securities. You’d think an insurance company with all sorts of finance and actuaries, would know that you shouldn’t concentrate your risk of loss so heavily in any market.

        Also, that’s the one of huge pains in my as* on this bailout. We should not be paying a premium for these worthless assets. We should be paying market rate or below.

      • varro says:

        @AdmiralKit: I might be naive about this, but would it be possible to dismember AIG – sell the profitable divisions to other financial companies and let the derivative insurance division float belly-up?

        Same thing with the huge banks that went all-in on the mortgages – sell the deposits and performing loan packages to solvent banks, then deep-six the rest?

  6. bohemian says:

    Ugh. Maybe the government should be working on a plan to deal with the fallout of AIG failing rather than giving them more money to waste.

    • Shadowfire says:

      @bohemian: My thoughts exactly… let them die.

      • varro says:

        @Shadowfire: Strip them like a corporate raider, sell the profitable divisions to solvent financial institutions, then let them die, just like the Feds did with WaMu – although a larger bank like B of A or Citibank would need regional banks to hit their carcass like piranha…they’re too big to be taken over by one bank, but not by dozens or hundreds.

  7. Chong Soh says:

    lol is anyone surprised ne more ?

    we ve been propping up bad businesses for a year now.. you thought that was going to stop?

  8. grapedog says:

    that would be what I would like to see aswell, let AIG fail like it should have. It’s not the taxpayers job to keep all these crummy businesses afloat. Let em fall…

  9. Justin Linett says:

    i agree , cant bailout a ship in 3 pieces and ever expect it to stay afloat.

  10. Gokuhouse says:

    Every single manager and exec should be fired from AIG. They suck big time. Replace them all with people who are not retarded.

  11. xdreamwalker says:

    At this point shouldn’t the government cut their losses and get out? Let them fail already.

    • Darkest Daze says:

      @xdreamwalker: Actually, the government should bail out, and then repo the execs cars, planes, and mansions to pay back all the money they’ve wasted and stolen.

  12. Papa Midnight says:

    I’m sorry… I’m sorry…

    I don’t usually comment in this manner
    But What The Fuck?

    How do you lose $62,000,000,000 in a single financial quarter?

    No Bailout. Period.

  13. mbgrabbe says:

    Wow. This is completely mind-bottling. They lost $23 per share in 3 months? Their stock is only worth 50 cents per share…

  14. Mikestan says:

    I couldn’t lose $62 Billion during a bad quarter at a Vegas craps table. What are these jokers doing?

  15. Featherstonehaugh says:

    Why are we bailing them out? Talk about throwing good money after bad…

    • quizmasterchris says:

      @Featherstonehaugh: Major Obama campaign supporters. (McCain too, but less so.)

      • ARP says:

        @quizmasterchris: Um, no. It’s because we’re stuck. If they fail, it will have a downstream effect on banks that are barely holding on and even banks that are doing OK. Why? Because if AIG doesn’t pay out on its claims, they have to write down the value of their assets. This means they might not be properly capitalized and so they’ll need TARP money, to be nationalized, or sold. This would even impact banks that aren’t financially distressed because AIG insures all sorts of securities (not just mortgages). Same thing would happen (write down assets, not properly captialized, etc.). It has nothing to do with being an Obama contributor. It’s because we let them get “too big to fail.”

        If you say, “let them all fail.” The US government will need to back up all the deposits which will cost a lot more than all the TARP and stimulus money we’ve spent so far. We’ll need to print a lot more money and the dollar will become worthless. We’re talking post WWI worthless. Also, with fewer banks, the credit crunch will get 10x worse and you won’t be able to buy a house, a car, credit cards will be frozen, etc. The economy will grind to a halt.

        So, all you people complaining about “socialism” need to get your heads on straight. If you want socialism, then yes, by all means, let them fail.

        • quizmasterchris says:

          @ARP: Um, no, it’s because these people bought off our elected officials.

          Who let them get “too big to fail?”

          The general American populace has always been too big to fail IMO, but we’re perfectly happy to let the population go without kidney transplants or decent education or potable drinking water.

  16. Thaddeus says:

    For some comparison, the budget of NASA was 17.2 billion for all of 2009.

    In 1969, it was 21.3 billion in 2007 dollars. The whole cost of the Apollo project was 136 billion, again in 2007 dollars.

    We got half way TO THE FREAKING MOON on what AIG lost in one quarter.

  17. Kos says:

    The money is going to subsidize counterparties from CDS. This is an indirect subsidy to lots of banks, credit card companies, hedge funds, etc. The insurance arms of the company are supposedly healthy. Read the articles below. Don’t blame me if you got too mad.

    See [www.nytimes.com]

    See [www.villagevoice.com]

  18. radiochief says:

    My gosh! (Site-friendly to what I was really thinking!)

    They lost $62 Billion, so they lost what we gave them on that 1st payment?


    Re@Thaddeus:
    And to think the Apollo mission up that point was 9.5 years long — 38 quarters!!!

    • Thaddeus says:

      @radiochief: I’m starting to think we would get more out of the money if we shot it into space… Literally. Pallets of cash jammed into a Taurus rocket sent screaming into the sun.

  19. Harry Pujols says:

    Maybe we should tell them not to spend bailout money on spas and golden parachutes?

  20. rpm773 says:

    Does anyone have a link to the entire income statement? Maybe we could refine the direction of our speculation.

  21. Feminist Whore says:

    How do you lose 62 billion in a single quarter? Here’s how:

    1. Initial fuck-up
    2. Receive Bailout funds
    3. Conduct business as usual
    –a. Spend money on lavish getaways
    —i. piss off: investors, customers, general public
    4. Send a message that you don’t give a fuck who you piss off.

    Seriously, if you were in the market for what AIG is selling, would you buy it from them? Or would you go to some other company that didn’t just give us all the finger?

  22. superhumanben says:

    Sounds ripe for a government take-over. Simply astounding …

  23. Corporate_guy says:

    It sounds like AIG is a ponzi scheme.

  24. lars2112 says:

    Lets paint the picture of what happens if AIG was to go under or their credit rating (which is crap to begin with) is downgraded.

    Lots of Banks (good and bad ones) hold securities that are insured by AIG, these securities range from muni, water, sewer, school, revenue, corp, RMBS (mortgage)…. bonds. A lot of conservative (good) banks have impairment policies that would require them to write down the value of such assets if the security was downgraded (which would happen if AIG was downgraded).

    These banks (or other investment firms) would have to take the impairment charges which would further downgrade their portfolio and require more capital to protect against any losses. This could cause them to fall below the required capital level which means they would do some of the following:
    -require more TARP money
    -cut customers credit, included good customers
    -stop all future lending (this is how banks make most of their money)
    -sell the bank

    So for banks it is not a good picture, but you might say who cares my bank does not own any of those securities how does it effect me?

    Muni, school, water, sewer, revenue… bonds are all paid by you the taxpayer, resident etc… All of these bonds have to pay a premium if they do not receive a AAA rating or if they were to be downgraded there are triggers in most of them that would require them to pay extra fees or increase the payment amounts to help pay the bond off faster…

    In addition if they want to issue new debt (which a lot are doing now to make up for the shortfall), they have to pay higher fees and rates since the insurance is so hard to get these days. All of this is passed onto you the resident, taxpayer…

    Don’t get me wrong I think the whole system is messed up (last time a muni bond defaulted was about 15-20 years ago and was in Orange Co. CA) because munis and other public bonds have not defaulted in a long time and don’t need the insurance.

    • KyleOrton says:

      @lars2112: How much would it cost to buy the securities in question? Buy them, demand payment from AIG, demand payment. Banks are safe; justice is served.

  25. Tyler Waldman says:

    This extra money will really help bail out the resort industry.

  26. jcargill says:

    {{{{capitalism}}}}

  27. Hey Friend. says:

    I already disagree with rewarding failure, but it’s extremely disappointing to hear that we are helping those who are destroying themselves (bonus checks instead of reinvestment). As a VT Pamplin College of Business Grad, I can’t wrap my head around the idea of a business losing $62B in 3 months, yet we can’t let the business go under.
    If it can lose that much, what’s the difference, obviously the money is headed places it shouldn’t be. I am confident the market will fix itself if you just leave it alone. That includes major corporations.

  28. tailstoo says:

    It won’t help to fix this problem, but the govt should go after all of the bonuses that were paid out by this risky and unsafe business strategy.

    Maybe if the execs knew that they would lose their shirts when their quick money grab failed they might actually try and figure out a solid, long term business strategy rather than one that pays out quickly with disastrous long term consequences.

    If I could make 100 million in a year, then get fired because the company was run into the ground, why wouldn’t I do that instead of work for 20 years making 5 mil a year? There’s no incentive for these vultures to do otherwise.

  29. Smorgasbord says:

    First the Federal government let AIG dig themselves into a deep hole by LETTING them break some banking rules. Now the feds are giving them more shovels to dig the hole deeper at a faster rate. I don’t understand politics.

  30. Smorgasbord says:

    WASHINGTON DC TEA PARTY

    I sent the below letter to Barack Obama and my Federal officials and included a tea bag:
    ——————————————–

    Mr. President,

    As the early colonists of the USA did on December 16, 1773 I am starting a Washington DC Tea Party for the same reason as they did: TOO MANY TAXES. THE STIMULUS TAX INCREASE is the straw that broke the taxpayers back.
    This is my token way of tossing YOUR TEA into Boston Harbor. I will be contacting as many people as I can to do the same thing if they feel the government is overtaxing us. We need TAX RELIEF, not a bunch of NEW TAXES. No reply necessary, except to start putting the taxpayer first.
    ———————————————

    I encourage anyone who feels the stimulus bill is the tax that broke the taxpayers back to do the same, and to send a tea bag to each of your members of Congress. Please pass this idea along to others. Send the president and members of Congress a tea bag, and include a SHORT, polite letter explaining why you are doing it. The address to send it to the president is:

    The White House
    1600 Pennsylvania Ave. NW
    Washington DC
    20500

  31. Smorgasbord says:

    After I posted the above items I happened to wonder if AIG checked with their Lost And Found department. Maybe someone found the $62,000,000,000 they lost and turned it in.

  32. pancakeman says:

    i suppose they not going to continue sponsoring Man Utd then?

  33. MooseOfReason says:

    We could always try capitalism.

    Let AIG fail, like we should have six months ago.

  34. Triterion says:

    If my Math is right with 62 billion you could buy… THIRTY MILLION two-thousand dollar hookers.

  35. runswithscissors says:

    The best part in all this is that there have been and will be absolutely NO negative repercussions for the execs and managers that steered that ship into the black hole.

    None whatsoever.

    In fact, after this is all blown over, those execs – still gainfully employed either at AIG or a peer institution – will look back over it all and chuckle at just how much insane wealth they made between 2000 and 2010 (even if they got less in 2009 and 2010 because the serfs made a fuss).

    Can taxpayers really say that any amount is too much to pay these folks?