Can someone PLEASE explain to me how the Federal Reserve bought an 80% stake in AIG?

Quote from The Kin:

1) So AIG has a market cap of $7 billion.
2) The federal reserve acts as a "white knight" and buys an 80% stake in the company in exchange for an $85 billion loan.
3) 2.69 billion shares outstanding before. 13.45 billion shares after.
4) Federal Reserve bought shares. For every 1 share bought, the federal reserve loaned $7.90. I wonder what the interest rate is?
5) Since this is a loan which must be repaid and not a capital infusion (or is it), how does this change the balance sheet of AIG. Sure it can now meet its CDO obligations today, but it still has negative equity and will likely for time to come.

Where is Paul Volcker? Surely this arrangement exceeds the Federal Reserve's legal authority. The Fed has the right to do an emergency loan to a non-depository institution at rate equal to the discount window if no other financing is available and failure of the institution could harm the economy. But the Fed can't buy these bullshit shares causing mass dilution for existing shareholders of the company and effectively controlling it. Let the treasury do that nonsense. This is not a role for the Fed. Jim Bunning and Ron Paul must be like, "HOLY SHIT. THEY DID WHAT?!?"
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The Fed is a private bank.

so we have one private bank bailing out another private bank.

or, thanks to Bush, conservative socialism at its best.



Privatize the profits, Socialize the losses.



Good 'ol boys watching each others back.
 
Try to figure out who own the 12 reserve banks. Good luck!

Quote from arealpissedgoy:

The Fed is a private bank.

so we have one private bank bailing out another private bank.

or, thanks to Bush, conservative socialism at its best.



Privatize the profits, Socialize the losses.



Good 'ol boys watching each others back.
More...
 
Yahoo! Finance has updated the top holders of AIG now

TOP INSTITUTIONAL HOLDERS


Holder---------------- Shares--------- %
Federal Reserve --10,763,032,322 79.99
FMR LLC-------------- 160,817,676 2.38
AXA --------------------132,593,871 2.13
DODGE & COX INC ---114,148,972 1.85
STATE STREET CORP--96,320,952 1.58
Barclays-----------------94,039,496 1.20

When this Fed Reserve's Rescue fails, it will look something like this:

Holder---------------- Shares--------- %
Treasury Dep.------69,450,300,202 79.99
Federal Reserve --10,763,032,322 19.20
FMR LLC---------------- 160,817,676 0.18
AXA ----------------------132,593,871 0.13
DODGE & COX INC ---114,148,972 0.07
STATE STREET CORP--96,320,952 0.05
Barclays-----------------94,039,496 0.04

Then the government will use more bullshit:

Holder---------------- Shares--------- %
Freddie Mac-------263,023,323,232 79.99
Treasury Dep.------69,450,300,202 19.29
Federal Reserve --10,763,032,322 0.60
FMR LLC---------------- 160,817,676 0.02
AXA ----------------------132,593,871 0.02
DODGE & COX INC ---114,148,972 0.01
STATE STREET CORP--96,320,952 0.00
Barclays-----------------94,039,496 0.00
 
aig will be sold for pieces, so the fed can gets its money back....

Aig will probably not be around next year.

Quote from The Kin:

Yahoo! Finance has updated the top holders of AIG now

TOP INSTITUTIONAL HOLDERS


Holder---------------- Shares--------- %
Federal Reserve --10,763,032,322 79.99
FMR LLC-------------- 160,817,676 2.38
AXA --------------------132,593,871 2.13
DODGE & COX INC ---114,148,972 1.85
STATE STREET CORP--96,320,952 1.58
Barclays-----------------94,039,496 1.20

When this Fed Reserve's Rescue fails, it will look something like this:

Holder---------------- Shares--------- %
Treasury Dep.------69,450,300,202 79.99
Federal Reserve --10,763,032,322 19.20
FMR LLC---------------- 160,817,676 0.18
AXA ----------------------132,593,871 0.13
DODGE & COX INC ---114,148,972 0.07
STATE STREET CORP--96,320,952 0.05
Barclays-----------------94,039,496 0.04

Then the government will use more bullshit:

Holder---------------- Shares--------- %
Freddie Mac-------263,023,323,232 79.99
Treasury Dep.------69,450,300,202 19.29
Federal Reserve --10,763,032,322 0.60
FMR LLC---------------- 160,817,676 0.02
AXA ----------------------132,593,871 0.02
DODGE & COX INC ---114,148,972 0.01
STATE STREET CORP--96,320,952 0.00
Barclays-----------------94,039,496 0.00
More...
 
Release Date: September 16, 2008

For release at 9:00 p.m. EDT

The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.



It's nice to see the Fed has taxpaters interests as a primary concern... I also spotted a mistake in the press release. They did not quote the section in the federal reserve act which gives them the authority for the U.S. Government to receive a 79.9% equity interest in a private company.
 
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