By Dividend.com Staff
December 10th, 2008
American International Group (AIG) has just disclosed it owes some Wall Street firms $10 billion from trades that went bad.
The loss stems from speculative investments in mortgage and corporate debt assets. The Wall Street Journal is reporting the trades were engineered by the insurer’s financial products unit since the original bailout package was announced. The company has responded by saying the exposure had been fully disclosed and comprised about $10 billion of AIG’s $71.6 billion exposure to derivative contracts on collateralized debt obligations.
The Bottom Line
It seems like every announcement from AIG pertains to some sort of funding shortfall, or about the need to tap a bit more of the TARP. This latest news comes after the government said it would provide a $150 billion rescue package to AIG to help it remain in business amid the worsening credit crisis. We would avoid the temptation of the under $2 shares of AIG, as we have not seen much evidence to this point that the bailout is accomplishing anything.