It’s a beautiful night in New York. An hour ago I was strolling in Times Square after going to the theater.
A full moon was hanging right over the Empire State Building. You’d never know that beneath the veneer, Gotham City was in the grips of a crisis that may have far reaching implications.
But in boardrooms across the city, there was high financial drama today as key financial firms made desperate attempts to keep themselves afloat.
Among the firms endangered: AIG (the American International Group), one of the world’s leading insurers and a major player in the California workers’ comp insurance market.
Tonight the New York Times reports that AIG is seeking a $40 billion bridge loan from the Federal Reserve. AIG may be facing a ratings downgrade that would reflect the company’s frail financial health and further doom its future.
AIG executives are said to have spent the weekend trying to figure out ways to get a capital infusion by selling assets or getting assistance from buyout firms. At least one report said that AIG officers were meeting with regulators to see if they could transfer capital from some AIG subsidiaries to the AIG holding company.
The folks at the California Insurance Guarantee Association had better perk up their ears. It’s not clear how all of this will play out. CIGA would be required to pay off claims if AIG failed completely. That would be a whopper.
I look forward to hearing what California Insurance Commissioner Steve Poizner says about all of this. AIG is a major player in other lines of insurance in California in addition to comp.
Defense attorney firms could see payments of their AIG receivables frozen.
Perhaps the Federal Reserve will come to the rescue. But how many firms can the taxpayer be expected to guarantee (or bail out)?
If AIG fails, perhaps the company will be sold and profitable units such as workers’ compensation absorbed by other carriers or financial behemoths. Every day over the next week is likely to bring some more drama to this story.
(you can subscribe to the blog by clicking on one of the RSS reader buttons on the lower right column under “Most Recent Entries”)
Category: Political developments