This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

AIG Is Back Today, but What About Tomorrow?

NEW YORK ( TheStreet) -- In normal times a company like AIG (AIG - Get Report) is a money-making machine.

That's because insurance is a great business, and the product sells itself.

As an old college friend who later went to work for the company's property and casualty unit explained to me many years ago, it's basically a book-making operation.

When you buy insurance you bet that bad things will happen. The insurer is betting bad things won't. When the contract ends you lose your bet and the insurer keeps your money. When bad things do happen, they're supposed to pay out, but the odds are always with the house, and if they lose too many bets, they raise the odds on everyone.

Oh, and while the bet is on the bookie keeps your money and invests it for himself. Sweet.

Trouble is, AIG made some bad bets during the last decade. It insured collateralized debt obligations, or CDOs, guaranteeing the payments on tons of mortgages, rather than individual mortgage instruments. Rather than being pure bets, these were bets on bets the gambler facing them had no control over.

Lots of questionable mortgages got packaged into CDOs, and when those mortgages went bad, the entire economy collapsed, AIG along with it.

Former AIG CEO Maurice "Hank" Greenberg is still fighting charges that he caused the collapse. He blames Eliot Spitzer, then New York Attorney General, for having him fired in 2005, and says the bad CDOs were bought after he left. He's also in court over the 2008 bailout, saying it was an unconstitutional "taking" -- his Starr International Co. was AIG's largest shareholder at the time.

It's hard to write about AIG, even today, without talking about Greenberg and the bailout. It's all very Shakespearean. But regardless of how the law treats the case, and Federal Reserve chairman Ben Bernanke will be personally deposed to describe his part in it, the news today is it's in the past.

The new AIG story starts in 2009, when the government hired retired MetLife (MET) CEO Robert Benmosche to run the company. Benmosche simplified the operation, selling some big pieces of the firm in the process.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AIG $55.60 -0.09%
AAPL $129.36 0.21%
FB $79.61 -0.18%
GOOG $573.64 0.40%
TSLA $199.54 1.10%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs