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Global Financial and Economic Crises

Failing Companies: Specific Cases

Project: Global Financial and Economic Crisis 2007-Present
Open-Content project managed by KJF, mtuck

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The insurance corporation AIG makes a profit for the second quarter of the year totaling $4.28 billion, a rise of 34 percent. However, when the results are published in August, AIG will not announce any writedowns in the value of subprime housing assets, even though analysts have said the company could lose as much as $3.25 billion in a worst-case scenario, and AIG’s stock closes at $66.48. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The profit of the insurance corporation AIG falls by 27 percent in the third quarter of 2007, to $3.09 billion. The decline is due to housing-related costs, including a $352 million fall in credit default swaps, which AIG sold to protect debt investors from losses. Despite the troubles, AIG says it is “highly unlikely” that it will be required to make payments on the derivatives. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Northern Rock, a large British bank specializing in mortgages, issues an upbeat set of trading results, saying the outlook for its business is “very positive.” It reveals it has sold a record volume of mortgages in the first half of 2007, up 47 percent on the same period a year before. This gives it a 19 percent share of the new mortgage market, making it the market leader in Britain. It also announces a small increase in interim profits and pledges to increase dividends by 30 percent. However, it notes that “sharp increases” in borrowing rates in the money markets are likely to make life more difficult and that changes in “interest rate and credit risk environments” will influence the size of its annual profits. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Robert Lewis, the chief risk officer at insurance corporation AIG, says that virtually all of the company’s subprime mortgage holdings are safe unless the US housing market crashes to “depression proportions.” [Bloomberg, 9/16/2008]

Entity Tags: Robert Lewis, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Mervyn King, governor of the Bank of England, is first alerted to the problems at the troubled British mortgage giant Northern Rock. [Daily Telegraph, 2/26/2008] In a phone call with officials at the Financial Services Authority (FSA) and the Treasury, he is told about the potential impact of the global credit crunch on Northern Rock’s business. [BBC, 8/5/2008]

Entity Tags: Her Majesty’s Treasury, Financial Services Authority, Mervyn King, Northern Rock plc, Bank of England

Category Tags: Northern Rock, Britain, Failing Companies

Matt Ridley, a former chairman of the troubled British mortgage giant Northern Rock, asks Governor of the Bank of England Mervyn King about possible support to help Northern Rock overcome a difficult period. In addition, Ridley starts to look for a buyer for the distressed bank. [Daily Telegraph, 2/26/2008]

Entity Tags: Bank of England, Mervyn King, Matthew Ridley

Category Tags: Northern Rock, Britain, Failing Companies

British Chancellor Alistair Darling is informed of “quite substantial problems” at the troubled British mortgage giant Northern Rock. The notification comes from Sir Callum McCarthy, chairman of the Financial Services Authority. [Daily Telegraph, 2/26/2008]

Entity Tags: Alistair Darling, Financial Services Authority, Callum McCarthy

Category Tags: Northern Rock, Britain, Failing Companies

Governor of the Bank of England Mervyn King writes to the Treasury Select Committee about current problems on financial markets. He tells it that the Bank will be prepared to provide emergency loans to any commercial bank that runs into short-term difficulties, provided this is because of temporary market conditions. However, he appears to rule out following the lead of the European Central Bank and US Federal Reserve in pumping huge sums into the banking system to ease problems with liquidity. [BBC, 9/13/2007; BBC, 8/5/2008]

Entity Tags: Bank of England, Mervyn King

Category Tags: Bailouts and Other Government Aid, Northern Rock, Britain, Failing Companies

News of the financial difficulties of troubled British mortgage giant Northern Rock breaks in the British media. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] The BBC reports that Northern Rock’s situation is so bad that it has asked for and been granted emergency financial support from the Bank of England, in the latter’s role as lender of last resort. BBC business editor Robert Peston says Northern Rock is not in danger of going bust and there is no reason for its customers to panic. However, he adds that “the fact it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives.” [BBC, 9/13/2007]

Entity Tags: Robert Peston, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Following a report that troubled British mortgage giant Northern Rock has asked the Bank of England for emergency funding (see September 13, 2007), a run on the bank begins. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] Northern Rock issues a statement confirming the emergency funding and blaming “extreme conditions” on financial markets. The Bank, the British Treasury, and the Financial Services Authority say they believe Northern Rock is solvent and that the standby funding facility will enable it to “fund its operations during the current period of turbulence in financial markets.” However, this does not reassure savers. The share price plunges 32 percent and depositors try to withdraw their savings. Queues form outside a number of branches, the bank’s website collapses, and its phone lines are jammed. Under current British legislation, savings are only protected up to £33,000 ($66,000). [BBC, 8/5/2008]

Entity Tags: Her Majesty’s Treasury, Financial Services Authority, Northern Rock plc, Bank of England

Category Tags: Northern Rock, Britain, Failing Companies

The Bank of England tries to find a buyer for the troubled British mortgage lender Northern Rock. It holds talks with Lloyds TSB, another large British bank, about possibly buying Northern Rock, but according to reports, by September 17 these discussions founder. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Her Majesty’s Treasury, Alistair Darling, Lloyds TSB Group

Category Tags: Northern Rock, Britain, Failing Companies

British Chancellor Alistair Darling intervenes in the crisis surrounding the troubled British mortgage giant Northern Rock. A run on the bank began three days ago (see September 14, 2007) and shows no sign of abating, as there are still queues outside a number of branches. Amid a further slide in the company’s share price and fears the run will undermine confidence in the whole banking system, Darling issues a statement saying the Treasury will guarantee all deposits held by Northern Rock. He says savers will not lose a penny and that his action is motivated by the “importance I place on maintaining a stable banking system.” The move appears to work and the queues outside branches will subside the next day. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Northern Rock plc

Category Tags: Bailouts and Other Government Aid, Northern Rock, Britain, Failing Companies

Governor of the Bank of England Mervyn King defends his handling of the banking crisis that has recently hit mortgage giant Northern Rock to members of parliament. Facing accusations of “being asleep at the wheel,” King says it would have been “irresponsible” to have intervened earlier to save Northern Rock. He also says that he would have liked to have offered financial support to the company in secret but that British and European regulations made this impossible. [BBC, 8/5/2008]

Entity Tags: Bank of England, Northern Rock plc, Mervyn King

Category Tags: Northern Rock, Britain, Failing Companies

Troubled British mortgage giant Northern Rock announces that it is canceling the dividend that it was due to pay shareholders in October. The dividend would have cost the bank £59 million ($118 million). In addition, the bank says that it is in preliminary talks with people who want to buy all or part of its business. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

The insurance giant AIG makes the biggest quarterly loss in its 89-year history, $5.29 billion. This is primarily due to an $11.1 billion writedown of derivatives known as credit default swaps. The loss will be announced on February 28, 2008 (see February 28, 2008). [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The British Treasury agrees to protect 100 percent of new savings deposited with distressed mortgage giant Northern Rock after September 19. The Treasury had issued a similar guarantee three weeks ago (see September 17, 2007), but that had only covered deposits made up to September 19. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Her Majesty’s Treasury

Category Tags: Bailouts and Other Government Aid, Northern Rock, Britain, Failing Companies

The chief executive of the British Financial Services Authority, Hector Sants, tells a hearing of the Treasury Select Committee that the regulator did not expect distressed bank Northern Rock to run into trouble. He tells MPs, “In terms of the probability of this organization getting into difficulty, we had it as a low probability.” He also admits that there are “lessons to be learned” from the failed regulation of Northern Rock. [BBC, 8/5/2008]

Entity Tags: Hector Sants, Financial Services Authority

Category Tags: Northern Rock, Britain, Failing Companies

Following the announcement of poor results for the third quarter the day before (see July-September 2007), shares in the insurance corporation AIG fall to $56. Despite the problems, in a conference call the company says it is “comfortable” with businesses and investments tied to the US housing market. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Six days after its shares hit a 52-week low (see November 8, 2007), the insurance corporation AIG announces that it will spend $8 billion on repurchasing stock. However, this program will be halted early next year (see February 28, 2008). [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Troubled British mortgage giant Northern Rock announces that its chief executive, Adam Applegarth, has resigned. It originally says he will step down from his post after completing a review of the bank’s operations no later than the end of January 2008. However, he will actually leave early, in the middle of December. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Adam Applegarth

Category Tags: Northern Rock, Britain, Failing Companies

Troubled British mortgage lender Northern Rock names a consortium headed by Sir Richard Branson’s Virgin Group as the preferred bidder to purchase it. The bank is up for sale because it has been hit hard by the credit crisis and requires new funding. The Virgin offer includes the immediate repayment of £11 billion ($22 billion) of the £25bn ($50 billion) Northern Rock has borrowed from the Bank of England to help it through the crisis. The remainder is to be paid over the next three years. RAB Capital, which is the second-largest shareholder in Northern Rock with a stake of about 6.7 percent, says it will oppose the move from Virgin. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Northern Rock plc, RAB Capital plc, Virgin Group Ltd

Category Tags: Northern Rock, Britain, Failing Companies

Martin Sullivan, chief executive officer of insurance giant AIG, says writedowns the company has been forced to make on assets linked to the US housing market are “manageable.” “The effectiveness of our risk management efforts will show through in our results,” he adds, sending shares up more than 4 percent to $58.15. Joseph Cassano, head of the company unit that sells derivatives known as credit default swaps, says the value of such contracts declined by $1.1 billion in the first two months of the fourth quarter. [Bloomberg, 9/16/2008] Cassano’s statement is inaccurate, and AIG will later reveal the loss is close to $5 billion (see February 11, 2008).

Entity Tags: Martin Sullivan, AIG (American International Group, Inc.), Joseph Cassano

Category Tags: Failing Companies, USA, AIG

The Olivant group unveils its rescue proposal for the troubled British lender Northern Rock, which is up for sale because of problems it has encountered during the credit crisis. Olivant is led by Luqman Arnold, formerly head of British Abbey bank. The company says it could immediately repay up to £15 billion ($30 billion) of government money that Northern Rock has borrowed to help it through the crisis. However, Olivant will later complain about the negotiating process and will not submit a final bid. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Luqman Arnold, Northern Rock plc, Olivant Ltd

Category Tags: Northern Rock, Britain, Failing Companies

Distressed British mortgage giant Northern Rock is dropped from the FTSE 100 index of leading London-listed blue chip shares. The move comes as part of the biggest shake-up of the index since the crash of 2001, when the “dotcom” investment bubble burst. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

SRM Global, a hedge fund that controls 9.9 percent of shares in ailing British bank Northern Rock, warns Chancellor Alistair Darling not to consider nationalizing the bank for less than a fair price. In a letter sent shortly before Christmas, SRM says it has been advised that otherwise there would be a breach of the Human Rights Act and it would have a strong case to pursue ministers through the courts. [BBC, 8/5/2008]

Entity Tags: SRM Global, Her Majesty’s Treasury, Alistair Darling, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Insurance giant AIG makes a loss of $7.81 billion for the first quarter of 2008. In the previous quarter, it had lost over $5 billion, which at that time was its worst ever result (see October-December 2007). The loss will be announced in May (see May 8, 2008). [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Troubled British mortgage giant Northern Rock agrees to sell £2.2 billion (about $4.4 billion) of its mortgage assets to US investment bank JP Morgan. The assets represent about 2 percent of its mortgage portfolio and the price represents a 2.25 percent premium on the assets’ value. Northern Rock says it will use the funds to pay back some of the £25 billion ($50 billion) in emergency loans it has been given by the Bank of England to help it through the financial crisis. [BBC, 8/5/2008]

Entity Tags: JP Morgan Chase, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

The British Treasury signs Ron Sandler, an experienced banker, to head ailing mortgage giant Northern Rock in the event of its nationalization, according to media reports. [Daily Telegraph, 2/26/2008] Commercial companies are currently finalizing bids in an attempt to keep the bank private, but it will be nationalized the next month and Sandler will be appointed to run it. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Her Majesty’s Treasury, Ron Sandler

Category Tags: Northern Rock, Britain, Failing Companies

At a meeting with management, the largest two shareholders in the troubled British mortgage lender Northern Rock—hedge funds RAB Capital and SRM Global—put forward a proposal that will stop the bank’s management negotiating its sale without consent from its shareholders. The bank needs to be sold to a new owner because of problems it has encountered during the credit crisis, and both major shareholders are worried they will not get much for their holdings (see November 26, 2007 and Shortly Before December 25, 2007). However, the bank’s management argues that the proposal should be rejected, as it would make a sale harder, and the other shareholders follow their lead, opening the way for the bank to be sold. [BBC, 8/5/2008]

Entity Tags: SRM Global, RAB Capital plc, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

British Prime Minister Gordon Brown confirms that talks are taking place to secure a private sale of ailing mortgage bank Northern Rock. However, he also says he has not ruled out the possibility of nationalizing the bank. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Gordon Brown

Category Tags: Northern Rock, Britain, Failing Companies

British Chancellor Alistair Darling announces a plan to sell government-guaranteed bonds worth about £25 billion ($50 billion) to help the sale of stricken mortgage giant Northern Rock to a private investor. The proceeds from the sale of the bonds would be used to pay off emergency loans the bank has taken out from the Bank of England. The British treasury thinks the bonds would speed up a private sale of the troubled lender. Although Northern Rock shares rise by about 42 percent on the news, the bank will be nationalized the next month and the bonds will not be issued. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Alistair Darling, Her Majesty’s Treasury, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

The House of Commons’ Treasury Select Committee says that Britain’s Financial Services Authority (FSA) was guilty of a “systematic failure of duty” over the crisis at stricken mortgage giant Northern Rock. MPs say the financial watchdog should have spotted the bank’s “reckless” business plan. In addition, they call for the Bank of England to appoint a head of financial stability. The FSA says it has already admitted failings in relation to Northern Rock and insists it is “addressing” them. [BBC, 8/5/2008]

Entity Tags: Financial Services Authority, Treasury Select Committee, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Sir Richard Branson’s Virgin Group submits a bid to take over the ailing British mortgage giant Northern Rock. Another bid is submitted by the bank’s own board of directors. These are the only two bids submitted by the deadline, as all the other potential buyers have already dropped out. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] Under the terms of its rescue plan, Virgin would inject £1.25 billion (about $2.5 billion) into the bank and take a stake of 55 percent in it. The bank would be rebranded as Virgin Money. Northern Rock’s managers say their proposal—which gained shareholder backing—includes raising at least £500 million (about $1 billion), reducing the assets on the bank’s balance sheet, and reorganizing its operations. The managers criticize Virgin’s bid over the job cuts it entails, although Virgin says they are needed in order to rapidly repay the government money propping the bank up. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Virgin Group Ltd

Category Tags: Northern Rock, Britain, Failing Companies

The British Office for National Statistics decides that £100 billion (about $200 billion) of debt owed by ailing mortgage giant Northern Rock will appear on government accounts, because of the government’s bailout of the bank. The move means the government may be at risk of breaking its rule to keep net debt below 40 percent of national income. The office stresses that the statistical change to public status should not be confused with nationalization, although the bank will actually be nationalized within days. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008]

Entity Tags: Office for National Statistics, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

The insurance corporation AIG submits a regulatory filing showing that its credit default swaps have declined four times more than previously announced (see December 5, 2007): by $4.88 billion in October and November of 2007. It also shows that AIG’s auditors have found a “material weakness” in the firm’s accounting for the contracts, and AIG does not know what they were worth at the end of 2007. The news means AIG shares suffer the worst one-day decline in two decades, falling 12 percent to $44.74. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The British Treasury says that it does not like either of two bids recently submitted for stricken lender Northern Rock (see February 4, 2008). The bank is being propped up by government loans and could be sold to a private buyer so that the government can get its money back. However, the Treasury is not satisfied with the bids and sees nationalization as a better outcome for the taxpayer. One of the consortia, led by Sir Richard Branson’s Virgin Group, is told that it is the front-runner to take control of the bank. The Treasury urges both Virgin and its rival bidder to offer more. [BBC, 8/5/2008]

Entity Tags: Virgin Group Ltd, Her Majesty’s Treasury, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

British Chancellor Alistair Darling rejects two bids to keep troubled lender Northern Rock in private hands and says the bank will be nationalized. Darling says that both bids would require a “very significant implicit subsidy” from the taxpayer, so the bank is to be placed into a “temporary period of public ownership.” Ron Sandler, a banking executive sounded out by the government in advance (see January 12, 2008), is placed in charge of the now state-owned bank. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] Shares in Northern Rock are suspended from trading the next day. Darling says the nationalized bank will operate “at arm’s length” from the government. Prime Minister Gordon Brown says the decision to nationalize is “the right move at the right time” and is one which “protects savers” and is in “the best interests of taxpayers.” Conservative Party shadow chancellor George Osborne tells MPs that Darling “is a dead man walking” and Conservative leader David Cameron demands Darling be fired over his handling of the nationalization. Sandler says it will take years for the bank to pay back its loans from the taxpayer, but declines to comment on potential job losses. [BBC, 8/5/2008]

Entity Tags: George Osborne, David Cameron, Ron Sandler, Her Majesty’s Treasury, Gordon Brown, Alistair Darling, Northern Rock plc

Category Tags: Failing Companies, Northern Rock, Britain

Following the announcement of a major loss for the fourth quarter of 2007 (see October-December 2007), the insurance corporation AIG halts a program to buy back shares it announced the previous year (see November 14, 2007). In addition, the loss prompts AIG to say for the first time that realized losses in derivatives known as credit default swaps could affect operations during a quarter. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Joseph Cassano, head of the financial products unit at troubled insurance giant AIG, will leave the company, Chief Executive Officer Martin Sullivan says in a statement. Cassano’s unit was responsible for a recently announced $11.1 billion writedown due to credit default swaps (see October-December 2007), and he is stepping down with the company’s consent. Cassano had co-founded the unit in 1987 and built it into a business providing guarantees on more than $500 billion of assets at the end of 2007, including $61.4 billion in securities tied to subprime mortgages. At the same time, AIG says it has $14.5 billion to $19.5 billion in “excess capital.” [Bloomberg, 9/16/2008]

Entity Tags: Martin Sullivan, Joseph Cassano, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently nationalized British bank Northern Rock says it will cut about 2,000 jobs and reduce its residential mortgage lending by half. The job cuts, which account for about a third of its staff, will be made by 2011 under plans to turn around the ailing bank’s fortunes. The staff unions strongly protest the move. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

The British Financial Services Authority (FSA) admits failures in its supervision of recently nationalized mortgage giant Northern Rock. The FSA admits it is guilty of “a lack of adequate oversight and review” of the troubled bank, adding that too few regulators were assigned to monitor it. However, the FSA argues it should continue to have responsibility for regulating the banking system and says it will overhaul its procedures as a result of the weaknesses identified. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Financial Services Authority

Category Tags: Northern Rock, Britain, Failing Companies

The recently nationalized British bank Northern Rock publishes its results for 2007, showing a pre-tax loss of £167.6 million (about $335 million). The bank also says it will be “significantly loss-making” in 2008, but pledges to repay its £25 billion (about $50 billion) loan from the Bank of England by 2010. In addition, it reveals that former chief executive Adam Applegarth (see November 16, 2007) will get severance payments totaling £785,000 (about $1,570,000). [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Adam Applegarth

Category Tags: Northern Rock, Britain, Failing Companies

AIG makes a quarterly loss of $5.36 billion. This is its third such loss in a row, but is lower than the previous quarter’s loss (see January-March 2008). The loss will be announced on August 6. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The European Union (EU) says it will launch a full investigation into the British government’s nationalization and bailout of troubled mortgage lender Northern Rock. Under EU rules, public support can be allowed to stop firms from going bankrupt, but long-term government aid that is seen to undermine competition is not permitted. [BBC, 8/5/2008]

Entity Tags: European Union, Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Shareholders in the recently nationalized British bank Northern Rock launch a court challenge over compensation they are due to receive from the government. The UK Shareholders Association submits an application for a legal review into the terms of the bank’s nationalization. According to the association, about 7,000 shareholders back the action. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, UK Shareholders Association

Category Tags: Northern Rock, Britain, Failing Companies

After announcing another record loss for the first quarter of 2008 (see January-March 2008), insurance giant AIG says it needs to raise $12.5 billion to protect against further possible writedowns due to problematic investments related to the US housing market. In addition, Standard and Poor’s and Fitch Ratings cut AIG’s credit rating after it announces the loss and the fact that it made more than $15 billion in first-quarter writedowns tied to credit default swaps and mortgage-backed securities. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

State-owned British lender Northern Rock says that mortgages in arrears for at least three months have increased significantly over the last four months. On April 30 they accounted for 0.95 percent of its total lending, whereas on December 31 of the previous year they were only 0.57 percent of lending. The bank also says the British mortgage market remains “uncertain.” [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Northern Rock, Britain, Failing Companies

Maurice Greenberg, a former long-time chief executive officer of insurance giant AIG, says in a regulatory filing that the insurer is in “crisis.” This is because its shareholders have lost about $80 billion in the past year. [Bloomberg, 9/16/2008]

Entity Tags: Maurice Greenberg, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

At the annual shareholder meeting of the insurance giant AIG, Chief Executive Officer Martin Sullivan says he is “not discouraged,” despite the fact that the company has posted successive losses (see October-December 2007 and January-March 2008). Company chairman Robert Willumstad says the directors support the management, adding, “We think Martin’s the right guy.” Shares close at $39.44, a 46 percent drop over the past year. [Bloomberg, 9/16/2008]

Entity Tags: Robert Willumstad, Martin Sullivan, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Martin Sullivan, chief executive officer of insurance giant AIG, says the company needs to raise a total of $20 billion to cover potential losses related to credit default swaps. Sullivan made a similar announcement two weeks earlier, but the potential problem was substantially lower then (see May 8, 2008). Shares fall to their lowest level since 1998, closing at $38.12. [Bloomberg, 9/16/2008]

Entity Tags: Martin Sullivan, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

June 6, 2008: AIG Announces Regulatory Probe

Insurance corporation AIG says the US Securities and Exchange Commission and the Justice Department are probing the way it valued derivatives known as credit default swaps. AIG recently announced that it was having problems valuing the derivatives (see February 11, 2008). The company says it is cooperating with regulators, but shares in it fall 6.8 percent to $33.93. [Bloomberg, 9/16/2008]

Entity Tags: US Department of Justice, US Securities and Exchange Commission, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

June 15, 2008: AIG Boss Replaced

Martin Sullivan, chief executive officer of troubled insurance giant AIG, is fired and replaced by Robert Willumstad, formerly chairman of the company’s board of directors. Board member Stephen Bollenbach is also named lead independent director. The next day, Willumstad says “there will be no sacred cows” as he launches a companywide review of AIG’s operations. [Bloomberg, 9/16/2008] However, he will only remain in the position for three months (see September 18, 2008).

Entity Tags: AIG (American International Group, Inc.), Martin Sullivan, Robert Willumstad, Stephen Bollenbach

Category Tags: Failing Companies, USA, AIG

Troubled insurance giant AIG makes a record quarterly loss of $24.47 billion. The loss is caused by writedowns on assets linked to subprime mortgages and capital losses. This is the worst loss it has ever made, coming hard on the heels of losses in the previous three quarters (see October-December 2007, January-March 2008, and April-June 2008). Over the four quarters, the combined loss totals $42.5 billion. The company will be in such bad shape that the government has to take it over by the end of the quarter (see September 16, 2008). The loss will be announced on November 10 (see November 10, 2008). [Reuters, 4/17/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently nationalized British bank Northern Rock announces that its chief executive, Andy Kuipers, will leave the bank at the end of August 2008. Kuipers is the final member of its original board to leave the bank after the crisis that led to its nationalization. Northern Rock appoints the vice chairman of Barclays Bank, Gary Hoffman, as its new chief executive. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc, Gary Hoffman, Andy Kuipers

Category Tags: Northern Rock, Britain, Failing Companies

State-owned British bank Northern Rock announces bigger-than-expected losses of £585.4 million (about $1.170 billion) for the first six months of the year. Much of the loss comes from the charges it takes to cover losses from struggling mortgage borrowers. However, it also managed to repay £9.4 billion (about $18.8 billion) of the emergency loan it had accepted from the Bank of England, reducing the amount owed to £17.5 billion (about $35 billion). The British government announces it will inject £3 billion (about $6 billion) to help the bank. [BBC, 8/5/2008]

Entity Tags: Northern Rock plc

Category Tags: Bailouts and Other Government Aid, Northern Rock, Britain, Failing Companies

The stock price of troubled insurer AIG falls 18 percent, closing at $23.84, following the announcement of a third straight quarterly loss the previous day (see April-June 2008). This is the largest fall since the company’s 1969 initial public offering, although this record will be broken next month (see September 9, 2008). In addition, Chief Executive Officer Robert Willumstad refuses to rule out raising more capital to supplement the $112.2 billion AIG held as of June 30. [Bloomberg, 9/16/2008]

Entity Tags: Robert Willumstad, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Shares in the insurance giant AIG fall 19 percent to $18.37. This is the company’s worst day of trading ever, beating the previous record set only a few weeks ago (see August 7, 2008). [Bloomberg, 9/16/2008; Bloomberg, 3/5/2009] The fall is caused by the news that the Korea Development Bank has backed away from a deal to purchase the ailing bank Lehman Brothers (see September 9, 2008), as this causes investors to become nervous about AIG’s ability to raise capital. [Bloomberg, 9/16/2008]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The share price in the insurance giant AIG collapses to $4.76 amid fears over the company’s credit rating, which is subsequently cut by Standard & Poor’s and Moody’s. This means that the company needs additional capital, and it is given permission by New York State to access $20 billion in its subsidiaries. In addition, Goldman Sachs and JPMorgan Chase work to prepare a potential $75 billion lifeline. [Bloomberg, 9/16/2008; Bloomberg, 3/5/2009] However, this is not enough, and the US government will be forced to seize control of AIG the next day (see September 16, 2008).

Entity Tags: AIG (American International Group, Inc.), Goldman Sachs, JP Morgan Chase

Category Tags: Failing Companies, USA, AIG

AIG logo.AIG logo. [Source: American International Group (AIG)]In an historic move, the federal government bails out insurance corporation AIG with an $85 billion loan, giving control of the firm to the US government. After resisting AIG’s overtures for an emergency loan or other intervention to prevent the insurer from falling into bankruptcy, the government decided AIG, like the now-defunct investment bank, Bear Stearns, was “too big to fail” (see March 15, 2008). The US government will lend up to $85 billion to AIG. In return, the government gets a 79.9 percent equity stake in warrants, called equity participation notes. The two-year loan will carry a LIBOR interest rate plus 8.5 percentage points. LIBOR, the London InterBank Offered Rate, is a common short-term lending benchmark. The bailout comes less than a week after the government allowed a large investment bank, Lehman Brothers Holdings Inc., to fold (see September 14, 2008). As part of the loan agreement, Treasury Secretary Henry Paulson insists that AIG’s chief executive, Robert Willumstad, steps aside. Willumstad will be succeeded by Edward Liddy, the former head of insurer Allstate Corp (see September 18, 2008). [Wall Street Journal, 9/16/2008] Shares in AIG drop to $3.75 on the news. [Bloomberg, 3/5/2009]

Entity Tags: Henry Paulson, AIG (American International Group, Inc.), Edward Liddy, Robert Willumstad, US Federal Reserve

Category Tags: Bailouts and Other Government Aid, Failing Companies, USA, AIG

The insurance corporation AIG, which was recently bailed out by the US government (see September 16, 2008), makes $18.7 billion in payments to other world banks. The payments are related to credit default swaps, and are made in the three weeks after the bailout to institutions such as Goldman Sachs and Société Générale. [Bloomberg, 3/5/2009]

Entity Tags: Société Générale, Goldman Sachs, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

September 18, 2008: AIG Boss Replaced Again

Edward Liddy is approved by the board of insurance giant AIG as its chief executive officer. Liddy replaces former boss Robert Willumstad, who had only been in the job for a few months (see June 15, 2008). [Bloomberg, 3/5/2009; Reuters, 4/17/2009] Liddy tells employees he intends to repay a two-year Federal Reserve loan that recently bailed the company out (see September 16, 2008) sooner than scheduled. [Bloomberg, 3/5/2009]

Entity Tags: AIG (American International Group, Inc.), Edward Liddy, Robert Willumstad

Category Tags: Failing Companies, USA, AIG

The recently bailed-out insurance company AIG makes the largest quarterly loss ever in the history of business. The $61.7 billion loss follows four other extremely high losses and is more than double what the insurer lost in the previous quarter (see October-December 2007, January-March 2008, April-June 2008, and July-September 2008). The result will be announced in March 2009 (see March 2, 2009). [Bloomberg, 3/5/2009; Reuters, 4/17/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Edward Liddy, the recently installed chief executive officer of troubled insurer AIG, says the company soon plans to repay the bailout loan it received from the US Federal Reserve (see September 16, 2008). To do this, it intends to sell life insurance operations in the United States, Europe, Latin America, South Asia, and Japan. Liddy says AIG has been contacted by “numerous” potential bidders, adding, “The values that we will receive from the assets we intend to dispose will be more than enough to repay the Fed facility.” [Bloomberg, 3/5/2009; Reuters, 4/17/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

October 8, 2008: Size of AIG Bailout Increased

The troubled insurer AIG, which was recently bailed out by the US government (see September 16, 2008), is given more money. In the additional bailout, the government enables AIG to borrow an extra $37.8 billion, on top of the originally provided $85 billion. This addition is provided after customers pull out of AIG’s securities-lending program. [Bloomberg, 3/5/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Bailouts and Other Government Aid, Failing Companies, USA, AIG

October 10, 2008: AIG Criticized over Spending

The insurance giant AIG, which was recently bailed out by the US government (see September 16, 2008), is criticized over post-bailout spending, on news it spent $200,000 on hotel rooms and $23,000 on spa services after it got the government loan. In addition, AIG says that, as of two days previously, it had borrowed $70.3 billion from the government. [Reuters, 4/17/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

New York Attorney General Andrew Cuomo says he is investigating what he calls “unwarranted and outrageous” spending by insurance giant AIG, which was recently bailed out by the US government (see September 16, 2008). Cuomo says he is seeking a full accounting of bonuses, stock options, and other perks. He wants AIG to either recover or rescind the payments. [Reuters, 4/17/2009]

Entity Tags: Andrew Cuomo, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Edward Liddy, chief executive officer of the recently bailed-out insurance corporation AIG (see September 16, 2008), says that the $122.8 billion already offered by the government “may not be enough” to stabilize the company. The size of the bailout and favorability of the terms will be increased the next month (see November 10, 2008). [Bloomberg, 3/5/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The troubled insurance giant AIG seeks a modification of a bailout it received from the US government in September (see September 16, 2008), according to reports. An additional loan following the initial bailout has already been made (see October 8, 2008). However, AIG now wants to alter the terms of the bailout, extending the duration and lowering the interest rate. Shares in the company close at $2.11. [Bloomberg, 3/5/2009] AIG will obtain the modification within a few days (see November 10, 2008).

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

To facilitate AIG’s ability to complete its corporate restructuring, the New York Federal Reserve, as authorized by the US Federal Reserve, creates Maiden Lane II LLC and Maiden Lane III LLC to fund the purchase of certain multi-sector collateralized debt obligations (CDOs) from certain AIG Financial Products Corporation (AIGFP) counterparts. The Asset Portfolio purchase will be made in two stages, with Maiden Lane II LLC lending AIG $26.8 billion on November 25, 2008, and Maiden Lane III LLC lending AIGFP and its counterparties $2.5 billion on December 18, 2008 (see March, 2008). [Federal Reserve Bank of New York, 11/10/2008]

Entity Tags: Federal Reserve Bank of New York, AIG (American International Group, Inc.), US Federal Reserve, Maiden Lane II, Maiden Lane III

Category Tags: Bailouts and Other Government Aid, USA, AIG, Failing Companies

The terms of the bailout given to troubled insurance giant AIG are modified, following calls from the insurer (see October 22, 2008 and November 7, 2008). The conditions of the government bailout were set in September (see September 16, 2008), but the interest rate is now lowered and the term is extended from two years to three. In addition, the rescue package grows to $150 billion, including a $60 billion loan, a $40 billion capital investment, and about $50 billion to buy mortgage-linked assets owned by AIG or guaranteed by it through credit default swaps. AIG also announces a record loss (see July-September 2008). [Bloomberg, 3/5/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently bailed-out insurance giant AIG sets the salary of its Chief Executive Officer Edward Liddy at $1 for 2008/9. It also freezes pay and scraps bonuses for its seven most senior executives. [Bloomberg, 3/5/2009] In addition, 50 more AIG executives will be locked out of pay rises in 2009. [Reuters, 4/17/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently bailed-out insurer AIG agrees to sell a bank unit serving clients in Asia and the Middle East for about $250 million. [Bloomberg, 3/5/2009] This is part of a program to sell business units in order to repay the government (see September 18, 2008).

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The recently bailed-out insurer AIG and the US government say they have reached an agreement on toxic mortgage debt held by the company. The agreement will clear AIG of its obligations on about $53.5 billion in such debt. [Reuters, 4/17/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Edward Liddy, chief executive officer of recently bailed-out insurer AIG, pledges to repay taxpayers “every single penny we owe them.” The company currently has around $150 billion of the taxpayers’ money (see November 10, 2008). However, Liddy adds that the company will get the money by selling business units, and the timetable of such sales could change. AIG shares close at $1.73. [Bloomberg, 3/5/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently bailed-out insurer AIG agrees to sell one of its insurance subsidiaries, Hartford Steam Boiler, for $742 million. However, this is about a third less than it paid for the unit eight years ago. [Bloomberg, 3/5/2009] The unit is purchased by the German reinsurer Munich Re, which wants to expand its US business. [Reuters, 4/17/2009] This sale is part of a program to sell business units in order to repay AIG’s bailout loans to the government (see September 18, 2008).

Entity Tags: AIG (American International Group, Inc.), Hartford Steam Boiler, Munich Re

Category Tags: Failing Companies, USA, AIG

The rating of a plane leasing unit owned by recently bailed-out insurer AIG is downgraded by Standard & Poor’s. This prompts the US government to cut lending to the business through a bailout program for commercial paper. [Bloomberg, 3/5/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Bailouts and Other Government Aid, Failing Companies, USA, AIG

Recently bailed-out insurer AIG says that it is looking for a buyer for a fund management unit. This is part of a program to sell business units in order to repay the government (see September 18, 2008). The fund manager operates 15 funds that had more than $12.4 billion in assets under management as of September 30, 2008. Bank of America and Merrill Lynch are helping AIG to find a buyer. [Reuters, 4/17/2009]

Entity Tags: Merrill Lynch, Bank of America, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Recently bailed-out insurer AIG says that it has sold interests in two contracts tied to natural gas and oil for $60.5 million. This brings the total amount raised through a program of sales to repay the bailout money to the government (see September 18, 2008) to $2.4 billion. AIG shares close at 85 cents. [Bloomberg, 3/5/2009]

Entity Tags: AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Citigroup logo.Citigroup logo. [Source: Citigroup]The latest government bailout gives Citigroup bond holders excellent terms and doesn’t provide the bank with new money. Instead, Citigroup cut expenses with the elimination of preferred stock dividends, and also converted shares into common equity at an above-market-value of $3.25, positioning itself to take the first hit if it encounters additional losses. Analysts are predicting that the company’s losses will continue to increase. Since the beginning of 2009, Citigroup’s stock has fallen 78 percent. “Debt holders could eventually be required to participate in further government-led restructuring actions,” Standard and Poor’s says. [Bloomberg, 3/2/2009] Citigroup CEO Vikram Pandit tells investors that increasing the bank’s “tangible” common equity from $29.7 billion to as much as $81 billion should “take confidence issues off the table,” about the bank’s loss absorption ability. The bank lost $27.7 billion in 2008, and is predicted to lose $1.24 billion during the first six months of 2009. “There’s no difference here,” says Christopher Whalen, co-founder of Institutional Risk Analytics, a Torrance, California risk-advisory firm. “It won’t fix revenue, and you’re still going to see loss rates.” Whalen says that the government’s efforts are mainly protecting other financial institutions and foreign goverments that are Citigroup bonds holders. “The taxpayer is funding the operating loss and protecting the bondholders,” Whalen notes. “The subsidy for the banks will become one of the biggest lines in Washington’s budget.”
Government Should Organize Citigroup, AIG Bondholders - Whalen also says it would be better if the government organized Citigroup and insurer American International Group Inc. bondholders, since the insurer received a $150 billion US bailout, and also made a deal with the government to convert some of its debt to equity. US government investment fell by more than 50 percent, and the government plans to convert up to $25 billion of its preferred stock to common shares, gaining a 36 percent stake in the bank. At Friday’s closing price of $1.50, government investment is worth approximately $11.5 billion. The bank itself has a stock market value of $8.2 billion as of market closing on February 27.
Analyst: Investors Should Avoid Citigroup Shares - Richard Ramsden, head of a group of analysts at Goldman Sachs Group, recommends that investors avoid investing in Citigroup shares: “It is unclear whether this is the last round of capital restructuring, which means that existing equity may be further diluted in the future.” The bank’s move to convert preferred shares to common equity led Moody’s Investors Service to adjust its senior debt rating for the bank from A3 to A2. Standard and Poor’s also changed its outlook on the bank’s debt from negative to stable. “Citi will face a tough credit cycle in the next two years, which will likely result in weak and volatile earnings,” S&P analyst Scott Sprinzen says. “We cannot rule out the possibility that further government support may prove necessary.” With the first two Citigroup rescue bailouts, the US Treasury bought $45 billion of preferred stock, and the Federal Reserve and FDIC guaranteed the bank against all but $29 billion of losses on a $301 billion portfolio of assets. With the third bailout, the Treasury, the Government of Singapore Investment Corporation, Saudi Prince Alwaleed bin Talal, and other preferred stockholders, agreed to take common stock at $3.25 a share, giving up dividends. The chairman of the House Ways and Means Committee, Charles Rangel (D-NY), says: “The administration and the past administration have tried so many different ways that we can only hope and pray that this time they get it right. It seems like with the banks it is a never-ending thing.” [Bloomberg, 2/28/2009]
Third US Rescue Forces Citigroup Board Changes - The Obama administration demonstrated its willingness to force changes on executives at top banks that receive taxpayer-funded rescue packages by pressing Citigroup to reorganize its 15-member board with new, more independent members. The move sends a message to Wall Street that there are consequences when taxpayer dollars are used to save them. “The government is the new boss, and the new executive committee is no longer on Park Avenue,” says Michael Holland who, as chairman and founder of New York’s Holland & Co., manages nearly $4 billion in investments. [Bloomberg, 3/2/2009]

Entity Tags: Government of Singapore Investment Corporation, Christopher Whalen, Charles Rangel, Alwaleed bin Talal, AIG (American International Group, Inc.), Federal Deposit Insurance Corporation, Vikram Pandit, US Department of the Treasury, Citigroup, Richard Ramsden, Moody’s Investors Service, Standard & Poor’s, Michael Holland, Institutional Risk Analytics, Scott Sprinzen, US Federal Reserve

Category Tags: Bailouts and Other Government Aid, USA, AIG, Failing Companies, Obama Policies and Actions

On the same day AIG announces the biggest loss ever in corporate history (see October-November 2008), the bailout of the troubled insurer is again increased and its terms eased. First, the US Treasury and Federal Reserve announce a plan to spend up to $30 billion more on preferred shares. However, the Treasury says the dividend on preferred stock, previously 10 percent, might fall. In addition, the bailout’s terms and conditions are altered to give the insurer a billion-dollar-a-year break on interest and dividend payments. [Bloomberg, 3/5/2009; Reuters, 4/17/2009] The size of the bailout, initially $85 billion, has now more than doubled, and the terms have been eased repeatedly (see September 16, 2008, October 8, 2008, and November 10, 2008).

Entity Tags: US Federal Reserve, AIG (American International Group, Inc.), US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, Failing Companies, USA, AIG

US Federal Reserve Chairman Ben Bernanke tells a Senate committee that having to rescue the insurer AIG made him “more angry” than any other episode during the financial crisis. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial products division,” Bernanke says. “This was a hedge fund basically that was attached to a large and stable insurance company.” In addition, on this day stock in AIG closes at 43 cents. [Bloomberg, 3/5/2009]

Entity Tags: US Federal Reserve, Ben Bernanke, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

Having received over $170 billion in taxpayer bailout funds in the last five months, troubled insurance giant American International Group (AIG) pays executives nearly $200 million in bonuses. The largest are bonus payouts that cover AIG Financial Products executives who sold risky credit default swap contracts that caused huge losses for the insurer (see September 16, 2008). Despite a request by US Treasury Secretary Timothy Geithner for the insurance conglomerate to curtail future bonus pay—and AIG’s agreement to do so—the global insurer cuts bonus checks on Sunday, March 15, 2009, in order to meet a bonus payment agreement deadline. The Treasury Department has publicly acknowledged that the government does not have the legal authority to block current bonus payments, although AIG stated in early March that it suffered its largest corporate loss in history, when it reported fourth quarter 2008 losses of $61.7 billion.
Treasury Tried to Prevent Payments - An anonymous Obama administration official says that on March 11 Geithner called AIG Chairman Edward Liddy demanding that the CEO renegotiate the insurer’s present bonus structure. In a letter, Liddy informed Geithner that outside lawyers had advised AIG that the company could face lawsuits, should they not make the contractually obligated payments. “AIG’s hands are tied,” Liddy wrote, although acknowledging that, with the company’s fiduciary situation, he found it “distasteful and difficult” to approve and pay the bonuses. He wrote that the early 2008 bonus payments agreement was entered into prior to the company being forced last fall to obtain the first taxpayer bailout because of the company’s severe financial distress.
Some Monies Already Paid Out - A white paper generated by AIG asserted that the firm had already distributed $55 million in “retention pay” to nearly 400 AIG Financial Products employees. According to the white paper, the global entity “will labor to reduce 2009 bonus payment amounts,” trimming payouts by at least 30 percent this year. [Associated Press, 3/15/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.), Timothy Geithner, US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, USA, AIG, Failing Companies

Troubled insurer AIG discloses that several US and European banks have been beneficiaries of the government’s bailout of the insurance company (see September 17-October 7, 2008). It announces that more than $90 billion was paid to various banks between the September bailout and the end of 2008. The banks include Goldman Sachs, Société Générale, Deutsche Bank, Barclays, Merrill Lynch, and Bank of America. Goldman Sachs, which received $12.9 billion between mid-September and the end of December—making it the largest beneficiary, will later say it did nothing wrong by accepting payments to close out trades before and after the insurer was rescued. [Reuters, 4/17/2009]

Entity Tags: Barclays Bank, Bank of America, Société Générale, Goldman Sachs, AIG (American International Group, Inc.), Deutsche Bank, Merrill Lynch

Category Tags: Failing Companies, USA, AIG

US President Barack Obama attacks the payment of over $200 million in bonuses to top AIG employees (see March 15, 2009). As the company is being propped up by the government using public money (see September 16, 2008, October 8, 2008, and November 10, 2008), Obama calls the bonuses an “inappropriate use of taxpayer funds.” [Reuters, 4/17/2009]

Entity Tags: Barack Obama, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG, Obama Policies and Actions

Edward Liddy, chief executive officer of troubled insurer AIG, asks employees to repay part of their bonuses. The bonuses were to be paid out in late 2008 and earlier this month, but there has been a public outcry over them, due to the billions of dollars taxpayers have spent rescuing the company (see September 16, 2008 and March 15, 2009). According to Liddy, employees receiving more than $100,000 in bonuses should repay at least half. [Reuters, 4/17/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The US House of Representatives passes a bill imposing a 90 percent tax on bonuses paid to AIG executives. The bonuses were set to be paid in December 2008 and earlier in the month, but there has been a public outcry against them, as the company had to be bailed out by the taxpayer six months ago (see September 16, 2008 and March 15, 2009). [Reuters, 4/17/2009] However, President Obama soon challenges the bill’s legality, saying: “I think that as a general proposition, you don’t wanna be passing laws that are just targeting a handful of individuals. You wanna pass laws that have some broad applicability. And as a general proposition, I think you certainly don’t wanna use the tax code to punish people.” The Democratic leadership in the Senate then says that it will wait and see what happens, instead of immediately acting on the bill forwarded by the House of Representatives. This effectively shelves the bill, although several of the executives give their bonuses back anyway (see March 24, 2009). [Politics Daily, 3/24/2009]

Entity Tags: Barack Obama, US Congress, AIG (American International Group, Inc.)

Category Tags: AIG, Failing Companies, USA, Obama Policies and Actions

Fifteen of the top 20 beneficiaries of bonuses at troubled insurer AIG have given the payments back, says New York Attorney General Andrew Cuomo. The bonuses were to be paid out at the end of 2008 and earlier this month, but there was a public outcry over them as the taxpayer had spent about $180 bailing the company out (see September 16, 2008, March 15, 2009, March 18, 2009, and March 19, 2009). [Reuters, 4/17/2009]

Entity Tags: Andrew Cuomo, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

In a speech to the Tulsa Chamber of Commerce, Federal Reserve Bank of Kansas City President Thomas Hoenig declares that US banks’ ability to remain viable during a deeper recession—while undergoing federal government stress tests—demonstrates that most don’t need more taxpayer money. “Although the United States has several thousand banks, only 19 have more than $100 billion of assets,” Hoenig says. “After supervising authorities evaluate their condition, it is likely that few would require further government intervention.” Designed to demonstrate how much extra capital banks may need to survive a deeper economic downturn, the stress tests are to conclude by April 30, 2009, with the 19 biggest banks’ test results to be disseminated to President Barack Obama in meetings with his economic team. Hoenig reiterates his view that the government shouldn’t prop up failing financial institutions but take them over temporarily and wind them down, as with the 1984 takeover of Continental Illinois National Bank & Trust Co. “I encourage Congress to enact a new resolution process for systematically important firms,” he says. “There has been much talk lately about a new resolution process for systemically important firms that Congress could enact, and implement it as quickly as possible, but we do not have to wait for new authority. We can act immediately, using essentially the same steps we used for Continental. An extremely large firm that has failed would have to be temporarily operated as a conservatorship or a bridge organization and then reprivatized as quickly as is economically feasible. We cannot simply add more capital without a change in the firm’s ownership and management and expect different outcomes.” Hoenig declares that calling a firm “too big to fail” is a “misstatement” because a bank deemed insolvent “has failed.” “I believe that failure is an option,” he says. After the government’s fourth rescue of American International Group Inc. (AIG), Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke called for new powers to take over and sell off failing financial companies, and also called for stronger regulation to constrict risks that might endanger the financial system. The Federal Deposit Insurance Corporation has the authority to take over failing firms, and dispose of their assets, but no such authority exists for non-banking financial firms such as a hedge fund or AIG, which have extensive links throughout the banking system. During a Q&A after his speech, Hoenig tells the audience that the Fed must be prepared to make a timely removal of its stimulus to deter a period of high inflation that could be likened to that of the early 1980s. “You cannot wait until you know for sure the economy is recovering,” Hoenig says, adding that “employment growth tends to lag” and may not be the best indicator of recovery. “We will watch every indicator of data that suggests we have a recovery under way.” He also says that if the US manages its economy well, the US dollar should remain the world’s reserve currency. “It is a matter of running your economy properly,” he says. “When the US does that, and I think we will, I think we will remain the largest, most successful reserve currency on the face of the earth.” [Bloomberg, 4/9/2009]

Entity Tags: Federal Deposit Insurance Corporation, AIG (American International Group, Inc.), Ben Bernanke, US Federal Reserve, Thomas Hoenig, Timothy Geithner, US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, AIG, Failing Companies

The insurer AIG, bailed out by the US government the previous year (see September 16, 2008), is in talks with the US Federal Reserve over extra credit, according to the Financial Times. The negotiations concern a $5 billion credit line that could be used to facilitate the sale of the company’s aircraft leasing business. [Reuters, 4/17/2009]

Entity Tags: US Federal Reserve, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The insurance company AIG sells its US auto insurance unit to Zurich Financial Services AG for $1.9 billion. This will make the Swiss company the third largest US personal line insurer. [Reuters, 4/17/2009] This sale is part of an AIG program to sell business units in order to repay bailout loans to the government (see September 18, 2008).

Entity Tags: Zurich Financial Services AG, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

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