AIG (AIG) Wants The 1,000th Change In Its Government Loan Rules

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The management at AIG (AIG) is extremely clever. Every time it runs into trouble paying back the $144 billion credit facilities provided by the federal government, it asks for a change in the terms of the borrowing agreements.

AIG has now come back to Fed saying that it cannot sell the assets it needs to dump to get cash to pay back its loans. Its proposed solution is to dispose of assets in exchange for stock and other non-cash assets. That might attract more buyers for the divisions it is hoping to sell. In a bad credit market, interested parties are having trouble coming up with cash.

The idea may work, but it leaves the government, and by extension the taxpayer, with more paper which may have falling value as the financial crisis spreads. AIG can show that it is making progress by selling off operations, but in reality it is trading them for assets which have dubious futures.

Better for AIG to hold those assets until it has cash buyers. The process may get spread out, but the Fed will not be stiffed. According to The Wall Street Journal, "Though AIG has several years to repay the loan, it is trying to complete the process to free itself from the interest payments associated with the credit and to avoid deterioration in the value of its assets." In other words, the firm wants to take junk in order to cut its financial obligations.

Tough luck. Show us the money.

Douglas A. McIntyre