AIG’s situation considered ‘dire’
Posted on September 16th, 2008 by bile Tags: American International Group Inc., Bank of America Corp., Federal Reserve System, Goldman Sachs Group Inc., insurance, J.P. Morgan Chase & Co., Lehman Brothers, Merrill Lynch & Co., ratings agencies, United States, Wall StreetAmerican International Group Inc. was facing a severe cash crunch as ratings agencies cut the firm’s credit ratings, forcing the giant insurer to raise $14.5 billion to cover its obligations.
With AIG now tottering, a crisis that began with falling home prices and went on to engulf Wall Street has reached one of the world’s largest insurance companies, threatening to intensify the financial storm and greatly complicate the government’s efforts to contain it. The company is such a big player in insuring risk for institutions around the world that its failure could shake the global financial system.
Shares of AIG fell 42% to $2.70 in recent premarket activity Tuesday after earlier in the premarket session rising 5% to $5. The stock tumbled 61% on Monday amid the U.S. stock market’s worst daily point plunge since the first day of trading after the Sept. 11, 2001, terrorist attacks. In addition to AIG’s woes, the financial markets were rattled by the rushed sale Sunday of Merrill Lynch & Co. to Bank of America Corp. and the bankruptcy-court filing of Lehman Brothers Holdings Inc.
AIG has been scrambling to raise as much as $75 billion to weather the crisis, and people close to the situation said that if the insurer doesn’t secure fresh funding by Wednesday, it may have no choice but to opt for a bankruptcy-court filing.
“The situation is dire,” a person close to AIG said.
With strong encouragement from the Fed, Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. are seeking to raise $70 billion to $75 billion in loans to help prop up AIG, according to people familiar with the situation. Word of AIG’s efforts to borrow that much sent the stock market tumbling in the last hour of trading.
Korean markets were down 6% today. Many of the banks are down in premarket. Looks like it’s going to be another interesting day.
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September 16th, 2008 at 11:47 am
Timber!