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Impact of government AIG bailout on investors

In September 2008, the American International Group, AIG, the largest insurance company in the United States, collapsed under the weight of bad debts incurred from insuring mortgage-backed securities. Although the corporation made significant progress in addressing liquidity issues related to its financial products and its securities-lending activities, in the middle of continued financial market turmoil, it failed to preserve and maximize the value of its business practices for the benefit of its stakeholders. As a result, AIG reported the largest quarterly losses in U.S corporate history, $61.7 billion in Q4.

The Federal Reserve bailed out AIG with an $85 billion loan in exchange for a 79.9% equity stake. Three weeks later, AIG was granted $37.8 billion loan as liquidity for its securities-lending business. Even after these initial infusions, losses continued to mount and in November, the Treasury provided another $20.9 billion under a new program, summing up the total bailout package to $144 billion under three different credit line programs. In March 2009, the Federal government agreed on providing AIG another $30 billion with a fourth program raising the bailout bill to $174 billion. By July 2009, the bailout package had reached $182 billion.

At the same time, AIG became the target of extensive outrage as a result of the $165 million paid in bonuses to AIG senior management and traders that actually caused the collapse. Investors, taxpayers and the public in general were disgusted at the idea of the people who caused AIG’s collapse and financial distress to be rewarded as heroes.

The first immediate impact of AIG bailout is evident on investor confidence. In spite of the increased consumer spending and household income in the beginning of 2009, the AIG scandal overshadowed the markets. Considering that more than the US population owns stocks and other securities and with global capital markets reacting aggressively to AIG press releases and government bailout packages, the US economy and, consequently, the global economy, are affected by the governmental actions to help a corporate monster recover.

Besides, since October 2007 when the Dow was around 14,100 until today that is at 9,750, investors have lost 31 percent of their value. Even worse, in fourteen trading sessions, the Dow has toppled from 8,000 to below 7,000. At the same time, unemployment is at an all time high having affected nearly five million Americans, while productions levels continue to shrink and layoffs surpass any growth.

Technically what AIG was provided is a loan, but, in effect, it is a bailout because without that amount of money the company could have gone bankrupt. Now, AIG not only has to pay back the money, but taxpayers are also hooked with the company since they own, along with the U.S. government, 79.9% of it. The question about investors is how AIG can sell off its assets at a high price when capital markets are still in turmoil and there is not much liquidity in the markets? Wall Street is out of cash and investors are out of faith. So, in a way, AIG paying back its debt is a hope given that the company has a lot of debt in its liabilities. If the market explodes, taxpayers and the government are going to be on the hook for AIG.

Another thing that seems to be slightly misunderstood is the fact that AIG failure is not terrible only because the company was so big, but mostly because with AIG getting out of the picture for having backed mortgage-backed securities, the possibility of a domino effect is evident. Any business or individual that has been involved and has done business with AIG faces the reality of seeing own assets going under. And is such an unstable and weak financial environment this would a nightmare scenario.

The government AIG bailout shows the levels of corruption in corporate America. Before AIG, the common measurement of bonuses was a company’s profitability. If the business was profitable, management was compensated with a bonus. If the business was losing money, there was no bonus involved. After AIG, things got reversed.

On the other hand, there are people who think that government bailout to AIG helped US economy to overcome the depression. However, the experience of previous recessions has shown that the end comes only when inflated prices shrink to a level that allows the majority of people to enjoy fundamental goods of life such as housing, clothing and nourishment.

The U.S. government is on the hook for succeeding in saving AIG for the moment. But, those who will make sure this bailout works are the U.S. taxpayers. The systemic risk that AIG posed in the first place and continues to pose combined with the volatility of capital markets, the cost to the US economy and the governmental inaction does little to re-inspire investor confidence. Even worse, government AIG bailout is a straight attack on the common sense of people. Unfortunately, this will take a long time until it can be forgotten and translated into rising capital markets and attractive stock performances around the globe.

A freelance writer, top MBA graduate with Finance major, passionate about business, finance, history and music; this is pretty much me in a nutshell.

I provide high quality writing services since 2005 in the field of Business & Finance, Movie Reviews, Book Reviews, Health & Fitness, Internet and Relationships. I also have a very good knowledge of Politics and History.

My advanced familiarity with financial modeling, financial statement analysis, capital budgeting and market research has helped me a lot, not only to be a successful professional, but mostly to see life under a more creative and innovative perspective. Besides, having lived for two years in Chicago, IL and Boca Raton, FL and for quite some time in Paris, France has provided me with an international aspect and has enlarged the way I see and understand life.

I currently work as a financial and investment advisor at an international financial institution. Yet, my dream is to be able to make a living as a writer.

You may find me at:
http://christinapomonibusiness.blogspot.com/ http://christinapomonifinance.blogspot.com/ http://reviewsrevisited.blogspot.com/ http://thehistoryculturevenue.blogspot.com/

Article Source:http://www.articlesbase.com/investing-articles/impact-of-government-aig-bailout-on-investors-1357999.html

Canning at home is an easy way to preserve!

When you find yourself with more produce than you can easily use and you want to continue to influence the foods that your family eats, canning can provide an excelent solution. It can be very difficult and intimidating to get started in canning – there are so many new conceps, equipment and processes to learn. But once you’ve tried your hand in the art of canning, I’m willing to bet you’ll be hookedThe truths is, once you’ve gotten your feet wet, canning is an excrise and art that youll enjoy to the fullest!

An unexpected phone call from my sister catalized me into the world of canning many years ago! She ha just moved to a new house, and in the yard was a large cherry tree full of cherries ready to be picked. That’s when I realized that we had an issue to solve. There were so many of them that we couldn’t possibly use them all at once. So began my journey into the wonderfull world of canning.

At is most basic level, canning is nothing more than heating food to kill bacteria and then sealing it away from new germs and air. You’ll find your food lasts an amazingly long time when you can keep it away from it’s biggest enemies, air and bacteria! It never ceases to amaze me that you can keep perishable foods for so long without sacrificing flavor and texture.

In order to kill bacteria in food, the temperature must be brought up to a level according to the chemical makeup of the food. That sounds a lot more complex than it actually is! Foods that are high in acids can be heated to a much lower temperature than foods with low or no acidity. Foods that have quite a bit of acid, such as tomatoes, can be simply and easily canned using a basic process known as a water bath.

Many different fruits and vegitables like tomatoes have plenty of acidity and can kill bacteria around 212 degrees. Convieniently, this is also the temperature at which water boils, making the water bath a perfect technique. If there is not enough acidity in your foods, you will need to bring the foods up to higher temperature to ensure that no bacteria survivie. Temperatures above boiling in these situations require the addition of pressure. Now we’re talking about using a new tool – the pressure canner.

Either method will prove to be an exceptional way to preserve your foods for use months and years down the road. There is no feeling like poping open one of your homemade jelly jars in the middle of the cold winter and feeling a small part of the summer come rushing back. The next time you get an unexpected surprise of bountiful fruits or vegetibles, you’ll know just how to handle the problem.

It is true that canning seems tough and like a lot of work at first! The good news is that once you’ve jumped in and given it a try, you’ll easily be able to store away foods in an afternoon tha tyour family will enjoy for a long time! As I said earlier, it’s hard to beat the feeling of opening up a jar that you canned months ago!

Brenda has been living the homesteading life for many years. She has been a long time user of her Nutrimill Wheat Grinder

Article Source:http://www.articlesbase.com/food-and-beverage-articles/canning-at-home-is-an-easy-way-to-preserve-1686985.html