September 15, 2008 11:09 pm.
A number of analysts in the New York Times and the Wall Street Journal and on Bloomberg News are suggesting that the largest insurance holding company in America, AIG(the American International Group) is in serious trouble and at risk of failing in the next few days unless there are fresh infusions of billions of dollars of capital .AIG is involved in a myriad range of insurance activities on a global basis. AIG is the insurance counter party for many billions of dollars of credit default swaps held by a whose who of finance capital throughout the world. Its collapse would send even bigger shock waves world wide than the collapse of Lehman. So far the Fed and the US government have refused to directly bail out the troubled firm instead preferring to pressure Goldman Sachs and J.P. Morgan to pump an additional 70 to 75 billion in liquidity into the firm to cover the demands for increased collateral to cover its now down graded swap portfolio.It is yet unclear whether this additional loan capital will be made available to the firm. AIG's stock has fallen to $4.76 from $ 76 a year ago.
The state of New York has helped out by easing regulations and permitting AIG to borrow 20 billion in assets from its subsidiaries but analysts are saying this will only delay the problem for a few days once the credit rating of the company is lowered obliging it to put up collateral which it does not have. Because of the extensive and global nature of its counter party involvements in the derivatives markets AIG's failure coming on the heels of Lehman Brothers bankruptcy would be very bad news indeed.
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