BNet Business Network is reporting that AIG may be on the verge of collapse, depsite the $143 billion it’s been given in federal tax dollars to keep it afloat. If ever there were a time to tell Washington to stop the outflow to taxpayer money to private companies, it’s now.
Despite a $143 billion federal rescue effort, American International Group seems to be tottering towards collapse. The giant insurer is quickly running through Federal Reserve lending and key executives are jumping ship, leaving some experts to wonder if bankruptcy might have been a better alternative.
Claiming to be solvent in September, AIG has been spending nearly $123 billion of the emergency Federal Reserve lending made available in September and October to keep the firm from going under.
The money was part of a total of $143 billion in loan money given by the federal government to assuage fears that AIG was so large and intertwined with the financial community that its failure would have a disastrous domino effect.
The firm originally received $85 billion in bailout money in mid-September, but that sum has been increased by $38 billion more to give it credit in securities so it won’t spend the first $85 billion too fast. Last week, the Fed agreed to let AIG borrow $20 million more from a commercial paper bailout fund it had set up.
Burning so much money so fast has raised suspicions that AIG had already incurred billions of dollars in losses when the federal government extended it the $85 billion emergency line of credit. According to media accounts, AIG has not provided details of how it has spent the money. Complicating matters is that many of AIG.’s liabilities are in complicated and hard to value derivatives.