Today, is a day of reckoning for the largest insurance company in the United States, AIG, (American International Group), has to raise enough cash to continue to operate on a day to day basis. Reports are, that the company needs some forty billion dollars, to stem it's problems. The Governor of New York, David Paterson, has relaxed the insurance rules of New York state for the company, so that it will have twenty billion dollars of the funds needed. AIG officials have been meeting with Federal Reserve officials, to try to obtain the balance of the forty billion dollars needed, to shore up the company. A forty billion dollar, bridge loan had been originally requested, from the Fed, which is reportedly not inclined to lend the company the money. If, again, if, this company fails, the ground will figuratively shake, as this is the company, which backs up those mortgage and investment companies, which are mired in the sub-prime mortgage and credit crisises. This is a retail company which touches all phases of the economy, relative to insurance. They have a reported one-hundred and thirty offices, one-hundred and sixteen thousand employees, and seventy-four million customers. The credit rating, of the company has been downgraded and the stock value is plummenting, much like the stock of Lehman Brothers, which just declared bankruptcy. It is reported that if AIG does not get the money it needs by the end of the day, it will file bankruptcy tomorrow. A former Federal Reserve member out of Dallas, Texas, stated on CNBC this morning, that the Federal Reserve could not be seen, lending money to an insurance company, but it could give the money to a bank, which would in turn, lend it to AIG. Interested parties in the United States, will no doubt be waiting for the decision, which will be crucial, as to whether another major financial concern will file for bankkruptcy, in the same week. The Dow Jones plunged 504 points on Monday, as did many foreign markets recede. It is unthinkable, what the effect would be tomorrow, if AIG went completely down. AIG's stock value, is in the range of three dollars plus. Latest news, is that that rescue package, that the company needs, may not be available today, as a result, if that does not change, the company may go bankrupt. The retired chairman of AIG, said on CNBC, that if the company files bankruptcy, it will be systemic.
Barclay's may take over some of the profitable units of Lehman Brothers, which were not included in the bankruptcy filing.
Goldman Sachs and Morgan Stanley, the last two standing, independent finacial investment companies, may not be able to coninue in their current form, according to some analysts.
The Federal Reserve has infused the banking system, with fifty billion dollars in liquidity, to shore up the banking system in the United States, another infusion is expected this afternoon. Foreign banking systems such as Japan, Sweden, India and England have also added liguidity, in a global effort, to stem concerns and provide case to their banking systems.
The Federal Reserve meets today to decide, if they will cut interest rates further, the rate stands at 2.0%, there is a thought that they will cut 1/4% today, as cash needs to be made more available in the market, but that could make investors and lay people think things are worse than they are, which could be valid, but could further cause, an erosion in consumer confidence.
An analyst on CNBC stated today, that we are in a finacial hurricane,
which is a category five. But, if people can look long term into the future, and hold on, the markets will eventually stablize.
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