Tuesday, September 16, 2008

And now it's AIG

Today all of the talk in US financial and political markets has been about saving insurance giant AIG. 

Readers, all of this chaos did not happen overnight and it did not happen in a vacuum.

excerpt from:
Regulators struggle to keep AIG afloat
            - International Herald Tribune

By Mary Williams Walsh and Michael J. de la Merced
Tuesday, September 16, 2008

NEW YORK: U.S. regulators struggled Tuesday to prevent the collapse of one of the world's largest insurance companies, American International Group, as investors' fears of yet another failure of a Wall Street behemoth prompted another dramatic sell off in its stock.

Federal Reserve officials and two leading investment banks, Goldman Sachs and JPMorgan Chase, were in urgent talks to put together a $75 billion line of credit to stave off a crisis at the company. Without the financing, AIG might be forced to declare bankruptcy, according to two people briefed on the situation.

A failure of AIG would have a broad impact. The company has links to many of the world's financial institutions and plays a major role in the largely unregulated market for a complex financial instrument known as credit default swaps. Never before has a large participant in that opaque market failed, creating great uncertainty about the consequences in global financial markets if that were to indeed happen.

In Singapore, customers of AIG's local life insurance unit lined up outside its city center office to terminate policies, prompting the city-state's central bank to declare the unit had "sufficient assets" to soothe customers, Bloomberg News reported.

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