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A look at what's up at AIG
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TEXT OF STORY
Scott Jagow: Shares of insurance company AIG are getting crushed. They're down 40 percent this morning. AIG is in trouble too, just like Lehman and Merrill Lynch. We're joined by our New York bureau chief Amy Scott. Amy, why is an insurance company tied up in this Wall Street mess?
Amy Scott: Right, well, Lehman, Merrill, Washington Mutual, AIG -- what all of these firms have in common is investments tied to risky mortgages. Now AIG is an insurer, but it sold contracts to protect bond investors against losses from subprime and other risky investments. And as those investments have lost value, AIG has lost a ton of money.
Jagow: So what is AIG going to do to try to save itself.
Scott: Well, you know, it's facing a potential downgrade by the major credit-rating agencies, which could be disastrous for the company. So AIG is working on a plan to raise money and sell some assets. The company is reportedly seeking help from the Federal Reserve, possibly in the form of a loan. It would be very unusual for an insurance company to get that kind of help from the Fed.
Jagow: Yeah.
Scott: But I think it says a lot about our complex financial system where arguably if AIG ran into trouble it could affect the whole system.
Jagow: And the Fed ,even though it backed off the Lehman situation, it isn't disappearing. The Fed is considering some more action. What is it up to right now.
Scott: Fed officials were working around the clock this weekend. They're taking some additional steps to calm the markets by saying that the Fed will accept a broader array of securities as collateral for its loans. Officials are also working with the global consortium of banks, which announced a $70 billion pool of money to lend to troubled institutions. And, of course, the Fed meets tomorrow to set interest rate policy. Now, analysts are expecting the committee to keep short-term rates steady at 2 percent, but in the face of this crisis on Wall Street, it is possible we might see another rate cut in the coming weeks.
Jagow: Wow. All right, Amy Scott in New York. Thank you, Amy.
Scott: Thanks, Scott.
I own an annuity held at AIG Life. Had it for 15 years - a "safe" retirement investment. Not an enormous amount in the scale of what's going on today, but $10,000 is a very significant amount for me. Maybe you can help us little
"common folk" figure out how to begin to withdraw our money from an organization that no longer answers their phone and has taken down their website. There seems to be no way to contact AIG. Can we do anything other than watch our retirement funds disappear into some CEO's golden parachute?
