Mere days after AIG's staggeringly poor
fourth quarter numbers dropped, taxpayers were cheered by news
of a profitable deal: Prudential will buy AIG's
super-profitable Asian life-insurance business for $35.5 billion. But
will this windfall translate into repayments on the $182.3
billion loaned by TARP? That's just not clear.
- 'Finally, a Pay Day for U.S. Taxpayers' 24/7 Wall St.'s Douglas McIntyre hails the deal, arguing that "taxpayers could ask why AIG has not been more dutiful in selling some of its other assets."
- Not So Much: 3 Reasons Not to Get Optimistic "Yesterday's AIG sale won't even go to TARP," writes Nomi Prins
at The Daily Beast. "Study the money trail, and it's clear that
repayments come through a revolving bailout door that allows firms to
pay back one federal perk (TARP) with another one (say, a cheap Fed
loan...)." When AIG says it's paying back "taxpayers," it means the
Fed. Second, says Prins, there's plenty of time for the deal to "sour."
Finally, even if the deal goes through, $70 billion in taxpayer money
remains to be repaid, with AIG still losing money through business. The
company may need to spend on itself before it repays loans.
- Actually, Some of This Money May Go to Goldman Yes, Goldman Sachs--the populist bête noire. Michael Corkery of The Wall Street Journal points out that they were advising AIG through this deal (The New York Times
lists other advisers), and that they usually extract a heavy fee for such a
service. Given Goldman's new "attentiveness... to optics," though, he
acknowledges it's possible they'll lower the bill.
- Short-Term Gain, Long-Term Loss? The Atlantic's Daniel Indiviglio
sees the attraction of the extra $35.5 billion. But if AIG is selling
off its profitable units, it suggests the company is essentially
closing down. That's not necessarily a bad move: "If the damage to
AIG's brand is too great for the firm to continue, then it might as
well close up shop and sell off units as quickly and effectively as
possible. I just worry that, even if it successfully sells every
division, it wouldn't get near the $180 billion amount it owes."
- Then Again, Deal Could Fall Through Business Insider's Gregory White observes that the deal, already expensive for buyer Prudential, could get even more so if the pound continues to fall.
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