AIG, Private Equity and also Venture Capital

AIG: Maurice Greenberg’s part in today’s Wall Street Journal virtually provoked an attack of apoplexy. I’m not sure if I’ve gone through such a slanted, egotistical content in a long, long time. I’m pretty surprised that the WSJ will post such pandering rubbish. Still and all, we all recognize that the Big Mo managements mountains of AIG shares both directly as well as via his control of Curriculum Vitae Starr, therefore permit’s simply state that we understand where he is actually originating from. When he starts out along with the bailout-inconsistency disagreement, he sort of possessed my ear. When he went on to commend the Citigroup package deal while chastizing the AIG deal, I couldn’t help however call upward$ hit.

To day, the government has revealed every little thing however a consistent approach. It didn’t offer support to Lehman Brothers. It performed press for a much-publicized and also now renounced plan to obtain struggling possessions. The government likewise pushed for a vindictive plan for American International Group (AIG) that gains simply the company’s debt default swap counterparties. As well as it is actually now acquiring redeemable, nonvoting preferred stock in some of the nation’s largest financial institutions.

The authorities will certainly infuse $20 billion right into the provider and take action as a backer of 90% of reductions stemming coming from $306 billion in toxic resources. In yield, the authorities will get $27 billion of recommended shares paying out an 8% returns as well as warrants, offering the federal government a prospective equity enthusiasm in Citi of up to regarding 8%.

The government’s approach for Citi contrasts considerably from its own preliminary feedback to the first providers to experience liquidity dilemmas. Some of those providers was actually AIG, the business I led for many years.

The routine maintenance of the circumstances are going to result in the reduction of tens of countless projects, nail down billions of dollars of losses for pension plan funds that are actually substantial AIG shareholders, and also eliminate the cost savings of seniors and countless various other ordinary Americans. This is actually not what the more comprehensive economic situation necessities. It is actually a lose-lose proposition for everyone but AIG’s credit default swap counterparties, who are going to be made whole under the new deal.
The federal government needs to instead use the same concepts it is actually putting on Citigroup to make a win-win situation for AIG as well as its stakeholders. The federal government must deliver a federal government guaranty to comply with AIG’s counterparty security criteria, which have actually taken in the huge large number of the government-provided funding to time.

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