UPDATE: AIG’s former CEO Hank Greenberg went on CNBC this morning to beg the government for a bridge loan. He tried to differentiate the company from Lehman, Fannie, Freddie, et al, by arguing that failure would be catastrophic (and un-American). He also said the company’s subisdiaries are healthy, so the company is “not insolvent.” Here is the full transcript from CNBC.
YESTERDAY: Why did Lehman Brothers (LEH) go to zero? Because, among other reasons, the firm’s management never fully realised what a pickle they were in and passed on multiple possible solutions over the past several months because they didn’t want to sell assets or share too cheap. Oops.
And now comes news that the next major firm headed for disaster, AIG (AIG), did exactly the same thing. Yesterday!
WSJ: During a weekend scramble to shore up its finances, AIG turned down a capital infusion from a group of private-equity firms led by J.C. Flowers & Co. because an option tied to the offer would have effectively given them control of the company, an 89-year-old giant that does business in nearly every corner of the world.
The proposed option would have allowed the firms to acquire AIG for $8 billion under certain conditions. That price is just one-fourth of AIG’s current market value.
J.C. Flowers didn’t respond to messages seeking comment.
When AIG’s board rejected the capital infusion, the company’s recently appointed chairman and chief executive, Robert Willumstad, took the extraordinary step of reaching out to the Federal Reserve for help. Mr. Willumstad asked New York Federal Reserve President Timothy Geithner if the Fed could backstop some asset sales.
Translation: Instead of selling our shares too cheaply, we’d rather have taxpayers bail us out.
Well, now AIG’s down another 56% and has a $12 billion market cap–only $4 billion above the level that management found so intolerable in the JC Flowers deal. And management has run begging to Washington.
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