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All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG.
The problem is that the government's ownership stake cannot exceed its current 79.9 percent, leaving officials to try and find a creative way to transfer value to the US in exchange for AIG reducing its debt so that it can then borrow more from the government to meet its collateral calls.
American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.
AIG has borrowed roughly $40 billion from a $60 billion credit facility provided it by the Federal Reserve Bank of New York. If it can find a way to pay that down by swapping equity, it hopes to take it back up to a level that will allow it to meet its collateral and capital calls.
AIG's board is scheduled to meet this Sunday night in hopes of hammering out an agreement with the government. But in case it can't, AIG's lawyers at Weill Gotschal are preparing for the possibility of bankruptcy.
That seems unlikely, but last November, the government took control of many of AIG's credit default swaps and so a bankruptcy of the holding company might not pose the systemic risk it once did.
AIG officials have not offered comment, though a source told Reuters that the company has no plans to file for bankruptcy. Officials at the Federal Reserve Bank of New York have not returned calls.
Originally posted by David9176
What is the general opinion of the people you talk with on the market ticker forums?
Do they all feel the SHTF soon? What is the general consensus on that..if you know?
Any specifics you looking for that I didn't touch on?
It's not so much that the US is going to implode, that seems set in stone now - it's what comes afterwards - will we go Mad Max? Or will we end up with a new "Hitler"? Or will we all learn to speak Chinese to get our soup in the soup lines.