AIG Gets a Bailout

(Newser) - According to the computer models, credit default swaps almost couldn’t fail. They were the latest derivative contract in 1998, and AIG Financial Products decided to get on board, the Washington Post reports, in the second part of its series on the insurer’s self-destruction. When AIG struck its first default swap deal, no one realized it was a turning point that would doom the company; the computers said the deal was 99.85% safe. More »

(Newser) - The roots of the current financial crisis can be traced back to a series of lunches and late-night dinners between two relatively unknown junk-bond traders 20 years ago. Howard Sosin and Randy Rackson had a plan to change the way the financial world did business, provided they could find a patron with a AAA credit rating to try it on. They found one in AIG, the Washington Post reports in the first part of an investigation into the insurer’s fall. More »

(Newser) - At least there's one market that's booming in New York—the market for pills for your sleeplessness, anxiety, and depression, Crain’s New York Business reports. The meltdown in the financial industry has caused a surge in prescriptions: In September, as Lehman Brothers was collapsing, and AIG and Merrill Lynch were being rescued, sleep-aid prescriptions jumped 11% and anti-anxiety and anti-depressant drug prescriptions climbed 9% compared to a year before. More »

(Newser) - Insurance giant AIG, already the recipient of a $150 billion government bailout to cover soured credit-default swaps, now admits it owes some $10 billion more for speculative trades it made with its own money, reports the Wall Street Journal . Those deals aren’t covered by the bailout, leaving the struggling insurer looking for ways to cover its losses. More »

(Newser) - As Congress continues to bail out corporate America, CEOs are canceling bonuses and cutting pay for their top executives—but no one has come close to AIG top executive Edward Liddy, reports the New York Post . The CEO, who took over the troubled insurance company in September, will take home a $1 salary next year and may not see a bonus until 2010.  More »

(Newser) - Markets surged yesterday when Barack Obama announced that Timothy Geithner would become treasury secretary as part of an all-star economic team. But Wall Street actually harbors some skepticism about Geithner, writes Andrew Sorkin in the New York Times . As chair of the New York Fed, Geithner was the point man during the critical days when Lehman Brothers collapsed, which many on Wall Street say exacerbated the crisis. More »

(Newser) - With nearly half of the $700 billion bailout committed, a growing array of distressed companies is lobbying the government, the Wall Street Journal reports, increasing the likelihood the Treasury will ask Congress for the rest of the bailout cash soon. But varied interests among legislators and emerging unemployment risks could turn up the pressure to spread those funds beyond financial firms. More »

(Newser) - The $123 billion the US pledged to foundering insurance giant AIG will grow to at least $150 billion, reports the Wall Street Journal , as the company continues to hemorrhage money. AIG, which today reported a loss of $24.5 billion in its most recent quarter, will get more cash and lower rates; the federal government will get a $40 billion stake. More »