http://www.reuters.com/…

Troubled insurer American International Group Inc had borrowed $90.3 billion from the U.S. government as of Wednesday, three-quarters of the emergency funds made available to it under a federal rescue plan, the Wall Street Journal reported.

AIG, once the world’s largest insurer before it was hammered by bad bets on mortgages, borrowed a further $7.4 billion from a government loan facility in the last week, the paper said on its website.

The move marked the first time the insurer had borrowed more than the government’s original $85 billion rescue loan, announced on September 16.

Earlier this month, the government gave AIG nearly $38 billion more in fresh cash.

On Thursday, AIG Chief Executive Edward Liddy warned that the $120 billion-plus in emergency federal cash extended to the insurer may not be enough.

Obviously, AIG is perfectly stable.

http://www.reuters.com/…

The New York Times, quoting unnamed government officials, said Treasury was considering taking ownership stakes in many U.S. banks. A Treasury spokesperson could not be reached for comment on the story.

Sure… why not. These people like Barney Frank and Charles Schumer have no problems pushing the government closer and closer to some Nazi / fascist / Soviet communist amalgamation. The police state of the right and the economic totalitarianism of the left. Either these guys are so blinded by their position of power they don’t see this lockstep toward Amero-fascism or they are Manchurian candidates.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTfNzYM.5Wfk&refer=home

Iceland’s government seized control of Kaupthing Bank hf, the nation’s biggest bank, completing the takeover of a banking industry that has collapsed under the weight of its foreign debt.

Iceland is guaranteeing Kaupthing’s domestic deposits and taking control of banks in an attempt to provide a “functioning domestic banking system,” the country’s Financial Supervisory Authority said in a statement on its Web site today.

The banks are saddled with about $61 billion of debt, 12 times the size of the economy, according to data compiled by Bloomberg.

Twelve times? Sounds huge but I’ve nothing to compare it to.

http://www.bloomberg.com/…

American International Group Inc., the insurer taken over by the government, may access $37.8 billion from the Federal Reserve Bank of New York, in addition to the $85 billion loan that helped it stave off bankruptcy.

AIG can swap as much as $37.8 billion of its “investment- grade, fixed-income securities” for cash to “replenish liquidity” at the New York-based insurer, the Fed said late yesterday in a statement. AIG spokesman Nicholas Ashooh said the assets were held mainly in U.S. life insurance subsidiaries and declined to say how much of the new program has been used.

“You’re in for a dime, you’re in for a dollar on this one,” said David Havens, a credit analyst at UBS AG. “The core problem is liquidity as opposed to solvency, though as the businesses deteriorate and adverse economic conditions take hold, solvency will also become more of an issue.”

The problem is liquidity as opposed to solvency? Sounds familiar. Sorry gentlemen but not having the liquidity to pay for one’s debts is insolvency:

A business may be cash flow insolvent but balance sheet solvent if it holds illiquid assets, particularly against short term debt. Conversely, a business can have negative net assets showing on their balance sheet but still be cash flow solvent if ongoing revenue is able to meet debt obligations, and thus avoid default – for instance, if it holds long term debt.

From the email I just received:

On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.

The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a “show cause” hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.

Beyond the Constitutional deficiencies, the bailout establishes a dangerous precedent enabling the Fed and/or Government to nationalize virtually any business or property within the United States without legal authority or congressional approval.

The defendants include the Federal Reserve System, Fed Chairman Ben Bernanki, the U.S. Treasury, Treasury Secretary Hank Paulson Jr. and the United States Government.

The WTP Foundation today issued a press release citing Schulz:

“Beyond the moral hazard and dangerous precedent established by this action, it is of vital importance that the American people recognize that the present financial crisis is a direct and predictable result of decades of constitutional violations by the Federal  Government.  Through a long-standing policy of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied public access to information about the secretive operations of the privately owned and operated Federal Reserve and its monopoly control of America’s money system.

“This monopoly control of our currency by a private banking cartel has resulted in increasing distortion, volatility and cyclical (boom and bust) economic conditions in the U.S. and abroad.  America’s fiat currency (produced from thin air) is manipulated by the Federal Reserve for the benefit of its owners, major Wall Street financial institutions and the Federal Government and is not unaccountable to the taxpayers. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost.”  Click here to read the Complaint, the Memorandum of Law supporting the TRO, and Schulz’s Declaration which includes several recent articles from the New York Times.

As the announcer from Smash TV once said: Good luck! You’ll need it!

This won’t get anywhere but it’s nice to see someone is trying.

http://www.reuters.com/…

An $85 billion government rescue of insurer American International Group Inc looked increasingly likely on Tuesday to stave off a bankruptcy that would have thrown world markets back into turmoil.

The Federal Reserve will extend AIG $85 billion in exchange for a nearly 80 percent stake to bail out the troubled insurance giant, a person briefed on the matter said.

The deal would avoid the biggest corporate bankruptcy ever and follows a government bailout of mortgage lenders Freddie Mac and Fannie Mae just over a week ago.

Then AIG shares, which had sunk 21 percent in regular trading, fell as much as 48 percent in after-hours dealings after reports of a rescue that could wipe out shareholders.

The New York Times, which had reported that AIG could file as soon as Wednesday for bankruptcy protection, later reported the deal with the Fed.

“This would mean another shareholder wipeout,” said David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich, Connecticut.

Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson were briefing members of Congress on the deal on Tuesday evening, a Treasury official told Reuters.

“They’re too big to fail. AIG touches too many people and too many companies globally, and it would be much more of a disorderly event if it went bankrupt than it was with Lehman,” said Anton Schutz, president of Mendon Capital in Rochester, New York.

Of course they did. The government goes back on it’s claim, tax payers get it in the ass and the economic problems will continue that much longer.

I bet Lehman Bros. is a bit pissed.

UPDATE:

A bit more info over at CNN:

The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today’s rates. AIG will sell certain of its businesses with “the least possible disruption to the overall economy.”

AIG will sell certain of its businesses with “the least possible disruption to the overall economy.” The government will have veto power over the asset sales and the payment of dividends to shareholders.

The company’s management will be replaced, though Fed staffers did not name the new executives. The board will remain. For customers, it will be business as usual, officials said.

Two years ain’t no bridge loan.

http://online.wsj.com/…

American 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.