What the gov’t wants to do about AIG

Marketplace Staff Sep 29, 2010
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What the gov’t wants to do about AIG

Marketplace Staff Sep 29, 2010
HTML EMBED:
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TEXT OF INTERVIEW

BILL RADKE: Let’s say good morning to economist Richard DeKaser of Woodley Park Research, joining us live from Washington, D.C. Good morning, Richard.

RICHARD DEKASER: Good morning, Bill.

RADKE: Government officials are meeting today with the board of AIG to figure out how to extricate the taxpayer from that bailed-out company. Richard, what’s the government’s goal here?

DEKASER: Well I think there are actually two goals, Bill. In the most general sense, it is to get out of the private sector. AIG was the poster-child for bailouts, being by far the most expensive bailout of 2008. Totaling about $120 billion when you fold in Treasury and Federal Reserve support across the board. So I think number one mission is to try and step away from this huge involvement in the private sector of the economy. More specifically, however, the government’s trying to do so in a way that maximizes return for the American taxpayer. There’s this issue about how they convert their preferred shares to common shares and it’s all open for negotiation. If the government targets too low a conversion price, well then the American taxpayer loses out. But it’s better for AIG, its investors and its prospects going forward and vice versa. So I’m convinced they are very busily trying to determine what is a fair value for AIG’s common shares and that’s a very tough job.

RADKE: It’s a tough decision. Is it a quick decision? Is it something the government does and gets out of pretty quickly?

DEKASER: No, I don’t think so. Rumors are they are talking about this first transaction taking place in the first half of 2011. And that’s only the beginning of what’s likely to be a series of issuances, probably taking a number of years. So whatever’s going to happen, isn’t going to happen quickly.

RADKE: Right. Just an important meeting today a little part of that. Ricard DeKaser at Woodley Park Research, thank you.

DEKASER: My pleasure.

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