AIG And the GAO Report

On today's Business Times, there was an article on how AIG shares soared on Monday, 22nd Sept 2009. AIG shares leap on bailout revamp talk

• WASHINGTON: Shares of American International Group Inc (AIG) jumped more than 20 per cent on Monday after the head of the House Committee on Oversight and Government Reform said that panel will examine a plan to reduce the company's massive bailout package.
  
  The stock surge occurred despite a report from congressional investigators that cast doubt on whether efforts by AIG to restructure its operations and fully repay the government the billions it received will ever prove successful.
  
  Rep. Edolphus Towns, chairman of the House committee, will have that panel study a plan by AIG's former CEO Maurice "Hank" Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
  
  Towns, who has not spoken to the Treasury Department about the plan, met with Greenberg last week, the spokeswoman said.
  
  Greenberg was ousted as CEO in 2005 amid an accounting scandal. He still holds millions of shares of AIG stock through a privately held investment company called CV Starr & Co.
  
  Standard & Poor's equity analyst Catherine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
  
  Seifert raised her price target on the stock to US$45 from US$30 (US$1 = RM3.48).
  
  AIG shares have been extremely volatile in recent months as investors bet on whether the New York-based company will be able to pay off its government debts and fully recover from the economic downturn. Its shares jumped US$8.49, or 21.3 percent, to US$48.40 on Monday.
  
  In a taxpayer-funded bailout, the Federal Reserve and Treasury Department have provided US$182.3 billion to the insurance giant. The Government Accountability Office said that as of early September, AIG's outstanding balance of aid was US$120.7 billion.
  
  The GAO, in a report released Monday, found "some progress in AIG's ability to repay the federal assistance." But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
  
  The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain." - AP

AIG soared more than 20% despite report from GAO casting a shadow of doubt on AIG's restructure program and its ability to pay back the billions owed to the government.

Now as highlighted by TT, here's another article posted on Straitstime.com, AIG owes $174b: GAO

• WASHINGTON - US INSURANCE giant AIG, partly nationalised a year ago to avert a collapse authorities said would destabilise the global financial system, needs to repay nearly US$121 billion (S$174 billion) in taxpayer aid, an official report said on Monday.
  
  The Government Accountability Office, an investigative arm of Congress, said the ultimate success of AIG's restructuring and repayment efforts remains uncertain,' in a report on the US$700 billion Troubled Asset Relief Program.
  
  The GAO said that American International Group, which received by far the biggest federal bailout, had shown some progress in its ability to repay the federal assistance.
  
  But that 'improvement in the stability of AIG's business depends on the long-term health of the company, market conditions, and continued government support,' the report said.
  
  AIG was on the brink of bankruptcy in September 2008 when the government offered a financial lifeline in exchange for an 80 per cent stake in the company, deeming the insurer, deeply intertwined in the global market, too big to be allowed to fail.
  
  The company was in trouble after backing trillions of dollars in risky financial products amid a US home mortgage meltdown that triggered a global financial crisis.
  
  The AIG bailout was the biggest in a series of government rescues launched to battle a global financial meltdown.
  
  'To address systemic risk that could result if AIG were to fail, the Federal Reserve and Treasury made over US$182 billion available to assist AIG between September 2008 and April 2009. As of Sept 2, 2009, AIG's outstanding balance of assistance was US$120 billion,' the GAO said.
  
  The Fed and the Treasury routinely monitor AIG's operations and follow the company's restructuring, which has included the sale of assets to raise cash.
  
  'While these efforts are being made, the government remains exposed to risks, including credit risk and investment risk, which could result in the Federal Reserve and Treasury not being repaid in full,' the GAO said.
  
  The congressional watchdog said it would continue to review and report on the monitoring efforts of the central bank and the Treasury 'to determine the likelihood of AIG repaying the government's assistance in full and the government recouping its investment.' -- AFP

Yeah, and the stock soared.

Anything wrong with the financial markets?

Anything?

The stock soared! What else mattered? Life is just sooooooooooooo good.