The American International Building in Lower Manhattan, New York City.
The American International Building in Lower Manhattan, New York City. - 
Listen To The Story


Kai Ryssdal: We will begin today with AIG because, well, just because. Because taxpayers are already on the hook for $150 billion worth of loans and guarantees. Because early word is that quarterly losses -- that is, for just 3 months -- could top $60 billion. And because at some point you just have to ask -- Where'd all the money go?

From Washington, Marketplace's Steve Henn reports.

STEVE HENN: How could any company lose $60 billion in just three months?

DON VICKERY: I guess I would describe them as a luxury ocean liner that is riddled with holes. There are so many places they are taking in water. You know, cumulatively the losses could just be enormous.

Don Vickery is a forensic accountant and co-founder of Gradient Analytics. He believes when it's all over AIG could lose $250 billion in this crisis.

VICKERY: To be honest, though, I don't expect them to report the full extent of losses because the consequences of doing so are pretty dire.

You may know AIG as a car or life insurer -- but it got into trouble selling credit default swaps on bundles of sub-prime mortgages. These are like insurance policies for banks. So if folks stopped paying their loans -- AIG had to pay the bank. But that's not all AIG insured.

VICKERY: Mezzanine debt -- with corporate loans in Europe -- residential loans held by European banks.

Vickery says as the global economy gets worse more of these loans are defaulting and AIG's losses continue to mount.

Gary Ransom, analyst at Fox Pitt Kelton: If the news we heard is true, it's very bad.

The new deal would reportedly let AIG conserve more of its to cash and stave off a collapse -- at least for now.

In Washington I'm Steve Henn for Marketplace.