If you’re still confused about what caused the financial meltdown, you’re not alone. It was a complicated mess to say the least. But now the terms of the taxpayer funded bailout provided to one of the key players, American International Group, Inc. (AIG), are being scrutinized by a Congressional panel that’s reviewing the government bailouts.
AIG is essentially a giant insurance company which underwrote many of those mortgage back securities that are at the heart of the financial meltdown. When those securities tanked, AIG was on the hook for billions of dollars. The fear was that if AIG defaulted, then the financial system would totally collapse. So the federal government stepped in and gave AIG more than $130 billion in an effort to stabilize the banking sector and AIG itself.
The Congressional Oversight Panel held a hearing this week to investigate the financial assistance provided to AIG (Stock Quote: AIG) under the Troubled Asset Relief Program. The outcome? It’s still unclear if AIG will be able to fully pay back the $132.3 billion in aid it received since its 2008 bailout, which was provided via The Treasury Department and by the Federal Reserve
While AIG Chief Executive Robert Benmosche stated that profits had increased and AIG was “on a clear path to repaying taxpayers,” other representatives called to testify were less optimistic about the company’s financial status.
“While our outlook on the company’s stand-alone credit profile is positive, we maintain our negative outlook on the company going forward,” Rodney Clark, Managing Director of Standard & Poor’s Insurance Ratings, said in the hearing. “The negative outlook reflects uncertainty with regard to legislative risk and its potential impact on the government’s ability to continue to provide extraordinary support to AIG, if needed.”
Clark explained that Standard & Poor’s current semi-favoriable”A-“rating of AIG was dependent of the existence of the federal funding.