Comments on: Explaining the AIG exit

By: FifthDecade

FifthDecade — Wed, 06 Oct 2010 02:28:01 +0000

Excellent article, very easy to follow. Informative and balanced.

By: leg

leg — Tue, 05 Oct 2010 21:34:58 +0000

So, in the end, was AIGFP having a liquidity problem or were they losing billions of dollars? If the Treasury is actually going to end up making money, it sounds like AIGFP couldn’t have possibly lost as many billions of dollars as it sounded like they did.

Not that it would be OK if the only thing hurting AIGFP was a lack of liquidity: they still made insane trades.

By: KidDynamite

KidDynamite — Tue, 05 Oct 2010 21:17:24 +0000

Felix – great writeup. I am working on a similar piece as we speak. one thing that jumped out which I interpreted differently than you did:

with respect to the inv grade rating – it’s not that Treasury had to be able to pretend that it didn’t HAVE to sell the assets, it’s that they couldn’t sell the assets without an IG rating – an insurance company that’s not IG isn’t worth much of anything at all.

By: klhoughton

klhoughton — Tue, 05 Oct 2010 20:50:00 +0000

Hey, there are several zero-coupon perpetualss in the market. (Yes, this is not the first time I have mentioned this.)

The key is that it is Preferred Stock. It’s not pari passu with other equity obligations. The priority in itself has to be worth something, which is why KD et al. think of it as not being equivalent to a zero-coupon perp.

By: AnonymousChef

AnonymousChef — Tue, 05 Oct 2010 20:20:04 +0000

Very interesting. Thanks for jumping into this, Felix.

By: alea

alea — Tue, 05 Oct 2010 19:56:06 +0000

Good piece.