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SMALL BUSINESS
AIG to Spin Off Units, Cut Gov't Debt
By STEPHEN BERNARD
, AP
posted: 153 DAYS 17 HOURS AGO
filed under: Financial Crisis
NEW YORK -American International Group Inc. said Wednesday it will reduce outstanding federal loans by $25 billion by giving the government a preferred stake in two units that will be spun off from the insurance giant.
Embattled insurer AIG is placing two life insurance subsidiaries — American International Assurance Co. and American Life Insurance Co. — into special purpose vehicles ahead of planned initial public offerings.
As part of the plan, the Federal Reserve Bank of New York will receive preferred interests in the SPV's, which will eventually be independent companies once a public offering is completed.
The Fed will receive preferred interests worth $16 billion in American International Assurance and $9 billion in American Life Insurance.
The stakes will cut AIG's outstanding debt owed to the Federal Reserve Bank of New York to $15 billion from $40 billion.
The government rescued New York-based AIG from the brink of collapse last fall as the credit crisis worsened. The government first extended AIG a loan package worth $85 billion in September. As market conditions worsened and losses piled up at the insurer, the government revised and expanded its loan package several times. AIG now has up to $182.5 billion in funding available to it from the government.
AIG was hurt not by its traditional insurance operations, but by its financial products business, which underwrote risky credit derivatives contracts known as credit default swaps. The swaps are essentially insurance contracts protecting an investor against default on an underlying investment, such as mortgage-backed securities.
The insurer is shedding assets, including some of its profitable insurance subsidiaries in an effort to repay the government debt.
AIG will continue to hold common and preferred stakes in the two SPV's. It will raise additional capital, which could be used to further reduce the government loans, once it sells common shares in the two life insurers. AIG said the timing for the public offerings would depend on market conditions.
AIG has previously said it also plans to spin off AIU Holdings, its property and casualty insurance business.
Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
2009-06-25 07:15:02
COMMENTS ( 33 )
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Starr international A COMPANY CONTROLLED BY THE FOU DER OF AIG...Its all there and the politricksters know it..They are part of the scam...LOOK IT THE FUGG UP...
It is 'owned' by the member banks of each district, which get nothing but a fixed dividend in return by law. It is responsible to Congress which gives it independence, but subject to laws which Congress can change. Most of the rest of the world follows the same kind of system because it works best, not due to some conspiracy.
You are right, but it is much worse than that! The Fed prints our money for our gov't. It does it for a huge fee and at interest. Then once the Fed prints the 800 billion, The Fed loans it to our gov't. Once our gov't pays the 800 billion dollars back, The Fed get to keep the 800 billion plus interest that it printed out of thin air. There is never anything behind the money that is printed. No gold, no silver, nothing.
Every bit of money in circulation are Federal Reserve Notes printed by the Fed and loaned to our gov't at interest. Therefore, once repayed, The Fed owns every bit of our wealth. It is the biggest scam ever perpetrated on any people on this earth. With the Fed doing this there is no possible way for us to pay down our national debt. When our clown politicians speak of reducing the debt, the only thing they can reduce is how much more we go into debt.