AIG Losses Increase, Bailout Expands

AIG losses increase…
AIG bailout expands…

Taxpayers are likely to lose more.

Any automotive bailout is likely to follow a similar path. That is to say, the orginal bailout will be for some obscene amount and continued losses will then result in the expansion of those bailouts.

AIG Gets Expanded Bailout, Posts $24.5 Billion Loss (Update1): “American International Group Inc., the insurer bailed out by the U.S., got an expanded government rescue package valued at more than $150 billion after posting a fourth straight quarterly loss.

The U.S. will reduce the original $85 billion loan that saved New York-based AIG in September to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, according to the Federal Reserve. The insurer lost a record $24.5 billion, or $9.05 a share in the period ended Sept. 30, compared with profit of $3.09 billion, or $1.19, a year earlier, AIG said in a regulatory filing today.

The changes in the loan may give Chief Executive Officer Edward Liddy more time to salvage AIG, which needed U.S. help to escape bankruptcy after losses tied to home loans. Liddy's plan to repay the original loan by selling units stalled as plunging financial markets cut into their value and forced potential buyers to shore up their own balance sheets.

“It makes a lot of sense to renegotiate the terms,” said Andrew Kligerman, a New York-based analyst at UBS AG, in an interview before the disclosure. By giving AIG more time to sell units, the government “has a better opportunity to recover its capital,” he said.”