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Log inFed rescues AIG, Barclays buys Lehman U.S. unit
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Fed rescues AIG, Barclays buys Lehman U.S. unit
by Outspoken on Wed Sep 17, 2008 5:45 am
Fed rescues AIG, Barclays buys Lehman U.S. unit
By Tony Munroe
Reuters News Service
HONG KONG (Reuters) - U.S. authorities engineered an $85 billion rescue of insurance giant American International Group Inc (AIG.N), staving off bankruptcy and bringing a measure of calm to shell-shocked global markets.
The bailout, made amid a cataclysmic week for the financial sector, marks a reversal of Washington's vow not to step in and calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.
It came just two days after U.S. authorities refused to rescue investment bank Lehman Brothers Holdings Inc (LEH.N) (LEH.P), forcing it into bankruptcy court despite pleas from Wall Street's chiefs.
AIG's lifeline bought time for investors to digest an unprecedented run of events that has altered the shape of Wall Street, but did little ease a funding squeeze caused by the turmoil.
Asian stocks were mostly higher after Tuesday's dramatic selldown, with Tokyo's Nikkei index (.N225) up 1.2 percent and the MSCI Asia-Pacific ex-Japan stocks index up 0.9 percent. Oil rose more than $3 a barrel, and major European markets were expected to open as much as 2.1 percent higher.
"Thank God," exclaimed Daniel Fuss, an influential bond manager who oversees more than $100 billion at Loomis, Sayles & Co in Boston. "AIG is interwoven with so many people and touches many companies around the world. This is a huge relief to many parts of the financial markets."
The Fed stepped in amid worries that a collapse of AIG could cause far-reaching damage to the global financial system, although some market players argued that the government's move brings just a short-term respite and could do long-term harm.
"What the U.S. government is doing is basically delaying the recovery of the economy really by keeping AIG alive and by going back to the printing press to issue more U.S. dollars, which long term should be negative to the U.S. dollar," said Ronald Chan, chief investment offer for Asian equities with Fortis Investments in Hong Kong, where he oversees about $1.5 billion.
"Short-term, I think the systemic risk issue has been reduced on the fact that the Fed is seen to be coming out to save the market, but the recovery is going to be prolonged," he said.
Around the time the AIG deal was announced, British bank Barclays Plc (BARC.L) gave Wall Street another boost: It agreed to buy several parts of Lehman, the Wall Street investment bank that went bankrupt on Monday, for $1.75 billion.
http://news.yahoo.com/s/nm/20080917/bs_nm/financial_dc;_ylt=AkIC2dDahFW1cHMf.6GuKSes0NUE
By Tony Munroe
Reuters News Service
HONG KONG (Reuters) - U.S. authorities engineered an $85 billion rescue of insurance giant American International Group Inc (AIG.N), staving off bankruptcy and bringing a measure of calm to shell-shocked global markets.
The bailout, made amid a cataclysmic week for the financial sector, marks a reversal of Washington's vow not to step in and calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.
It came just two days after U.S. authorities refused to rescue investment bank Lehman Brothers Holdings Inc (LEH.N) (LEH.P), forcing it into bankruptcy court despite pleas from Wall Street's chiefs.
AIG's lifeline bought time for investors to digest an unprecedented run of events that has altered the shape of Wall Street, but did little ease a funding squeeze caused by the turmoil.
Asian stocks were mostly higher after Tuesday's dramatic selldown, with Tokyo's Nikkei index (.N225) up 1.2 percent and the MSCI Asia-Pacific ex-Japan stocks index up 0.9 percent. Oil rose more than $3 a barrel, and major European markets were expected to open as much as 2.1 percent higher.
"Thank God," exclaimed Daniel Fuss, an influential bond manager who oversees more than $100 billion at Loomis, Sayles & Co in Boston. "AIG is interwoven with so many people and touches many companies around the world. This is a huge relief to many parts of the financial markets."
The Fed stepped in amid worries that a collapse of AIG could cause far-reaching damage to the global financial system, although some market players argued that the government's move brings just a short-term respite and could do long-term harm.
"What the U.S. government is doing is basically delaying the recovery of the economy really by keeping AIG alive and by going back to the printing press to issue more U.S. dollars, which long term should be negative to the U.S. dollar," said Ronald Chan, chief investment offer for Asian equities with Fortis Investments in Hong Kong, where he oversees about $1.5 billion.
"Short-term, I think the systemic risk issue has been reduced on the fact that the Fed is seen to be coming out to save the market, but the recovery is going to be prolonged," he said.
Around the time the AIG deal was announced, British bank Barclays Plc (BARC.L) gave Wall Street another boost: It agreed to buy several parts of Lehman, the Wall Street investment bank that went bankrupt on Monday, for $1.75 billion.
http://news.yahoo.com/s/nm/20080917/bs_nm/financial_dc;_ylt=AkIC2dDahFW1cHMf.6GuKSes0NUE
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