AP source: GM to repay government loan before June

Let's wait and see what kind of price GM shares can fetch on the open market. But the whole TARP program is looking less and less like the disaster a lot people here claimed it would be.

 

Toyota's disaster has been GM's gain.

 

Count me among the surprised so far, but couldn't we have another toxic shoe that's yet to drop? Trying to be realistic, not gloomy necessarily.

And no (to the OP), despite the elevated rhetoric, I never thought GM was nationalized. It was just something along the lines of: "until you repay this huge loan, we get to have a say in some of your key executive decisions." I do think that's distinct from "we purchased you and will run your business now." ... But maybe you were being sarcastic.

 

Having the extra cash when they go public is nice, but they would also show a liability and be paying interest on the debt. Plus, it would give them the stigma of still being supported by the government, even though it's just more of a traditional loan.

So if they have a surplus of cash, I think it could make sense to get that piece of the puzzle out of the way. I don't know enough about how IPOs are looked at and valued to say if that would be the case or not, though.

 

Article is 2 weeks old, but....

AIG Less Reliant on U.S., on Path to Repaying Bailout, CEO Says

By Jamie McGee


April 2 (Bloomberg) -- American International Group Inc. Chief Executive Officer Robert Benmosche said the insurer is becoming less reliant on U.S. aid as it sells units, borrows from debt markets and strengthens operations it intends to keep.

The bailed out insurer is “now on a path” to repaying the loans included in its $182.3 billion rescue package, Benmosche said in an interview yesterday. The company will first pay off the $25.3 billion it owes the Federal Reserve before deciding how to raise the cash it needs to end its separate arrangement with the U.S. Treasury that includes a draw on a second credit line of more than $40 billion.

AIG reached agreements to sell its international life- insurance units for more than $50 billion in the first quarter, and its plane-leasing arm issued unsecured debt for the first time since May 2008. Standard & Poor’s said yesterday results were improving at AIG’s remaining units and that the insurer may recover from the junk status assigned to its stand-alone credit by yearend.

“We are well on our way to paying back the Federal Reserve” with the sales of American Life Insurance Co. and AIA Group Ltd. to MetLife Inc. and Prudential Plc, Benmosche said. “We are beginning to show the appropriate returns you’d expect of a company of our stature.”

Chartis, AIG’s U.S. and overseas property-casualty unit, competes against Travelers Co. and Ace Ltd., and has been able to retain clients amid the federal bailout, Benmosche said. About 75 percent of insurance buyers using AIG said they planned to stay with the insurer compared with 41 percent six months earlier, Jay Gelb, a Barclays Plc analyst in New York, said in a Dec. 14 research note.

‘Much Better’

“Client retention has gotten much better,” Benmosche said in the interview. “Employee retention has gotten much better.”

Benmosche cited Citigroup Inc.’s conversion of preferred to common shares as one possible strategy AIG could use to exit its involvement with the U.S. The Treasury will dispose of its 7.7 billion common shares of New York-based Citigroup over the course of 2010 using a “pre-arranged written trading plan,” the agency said this week. The U.S. also holds AIG preferred shares.

AIG’s more immediate focus is on completing the sales of the life insurance units, increasing profits at its remaining businesses and improving operating returns, Benmosche said. The sales of the life units will close by year-end, the companies have said.

“Then, we’ve got to begin to look at what are the alternatives we have to raise sufficient money so that we can pay back the TARP,” he said. “Let’s get 2010 done, get the transactions done, decide what we need to sell in terms of the securities we are taking on and then we get to discuss what is the best way for Treasury to be paid back in full.”

Slow Hand

AIG needed the bailout in 2008 after losses on bets tied to U.S. home loans. When Benmosche took over in August 2009, he said he wouldn’t be rushed into selling assets at unfavorable prices. Still, AIG has reduced bets in the derivatives business blamed for pushing the insurer to the brink of collapse and said its Financial Products subsidiary would be closed by year-end with as much as $400 billion in bets retained.

“We wanted to sell from a position of strength instead of a position of weakness,” Benmosche said. “We got the operating performance where we wanted.”

The stand-alone rating assigned by S&P reflects the New York-based insurer’s creditworthiness absent government support. The ratings company raised AIG to BB from BB- yesterday, and said in a statement it may increase it two additional levels to investment grade if the sales of AIA and Alico are completed.

The rating increase reflects “the company’s continued momentum in re-establishing its multiline insurance market presence” and the success that units had in borrowing from sources other than the U.S. government, S&P said.

Junk bonds are high-yield securities graded below BBB- by Standard & Poor’s or Fitch, and Baa3 by Moody’s. The insurer’s actual A-/A-1 counterparty credit ratings are contingent on the federal backing and were unchanged.

OBAMA IS A SOCIALIST!!!!!!!!!111

 

Whatever money gets paid back needs to go to paying down the national debt.

Won't happen, but it should.

DD

 

This is one huge political mistake that the Dems are making, IMO. They are being blamed for "bailout nation", and running away from it isn't going to change that. They actually should be embracing it. They should be arguing that they saved the economy and saved millions of jobs at no cost to the taxpayer - possibly at a profit - while the GOP wanted to risk another depression just to score political points. The Dems should be making this about them making the tough, ugly decisions while the GOP ran from the responsibility of governing.

Instead, they are just ceding the issue to the GOP.

 

agreed

 

Agreed x 2. Every now and then I see one of those "Obama lied, the economy died" bumper stickers and I'm like, "wtf!?"

 

word.

 

Nail, meet the hammer known as "Major."

I tried to rep you for this one, but alas I need to spread the lettuce.

 

Maybe they think the tea-bagger argument is too STUPID to merit a counter-argument.

I tend to agree with them.

 

It was Bush and Paulson started the bailout process and handed off to Obama. would be a little tough for the Dems to claims it as their own. Bush era GOP and post Bush GOP are two different animals now, be interesting to see the direction the Dems take.

 

Bush/Paulson definitely initiated it. But during the vote and the campaign, Obama was strongly for it; McCain was kind of lukewarm. During the vote itself, it was Dems that voted for it and Republicans that voted against it. During the infancy of the tea parties, it was the GOP that was saying that Dems were bailing everyone out and arguing that we should just be letting everyone fail.

Realistically, it just has to do with who was in power - part of governing is making those decisions, and it just happened to be Dems in Congress and Bush in the White House; if the GOP was in charge, I have no doubt the GOP would have supported it and Dems would have opposed it all. But at the end of the day, Dems are the ones that are stuck with being labeled as responsible for it all. So they should embrace that and argue that they are leaders and show it an example of "government gone right".

 

The shovelling of money to banks, insurance companies and big auto was so distasteful to so many people, that I'm not so sure it's a politically savy move to grandstand your enthusiasm for the strategy.

The apparent success of the program, and the repayment of much of the money will disarm the attacks against it -- but, I think, it's the sort of program you reluctantly take credit for as something you did because you had to do it -- rather then something you embrace as a plan you were passionate about.

 

I agree with this. It's a little dangerous to brag that you kept the fat-cats in business, even if you did save the economy as a result. Especially if they now want to pass financial regulation reform by casting a Wall Street-Main Street conflict.

 

But the point is that, right now, everyone already thinks that Dems did that - they don't see the benefit to them. Dems could/should argue:

1. This benefited main street at no cost to main street
2. They made the banks pay for their bailout, by paying 20%+ interest rates like they charge consumers

The point is that, right now, people think Dems bailed out Wall Street. The Dems should embrace the bailout and argue that it saved Main Street, at the expense of Wall Street. As long as they run away from it though, they just reinforce the impression that they just saved the fatcats.

 

I can't agree. I think in the public imagination, the news of the bonuses paid is likely much weightier than the impacts the measure had on the government balance sheet, the economy, unemployment, etc. I think the target audience is offended these anonymous Wall St people not only kept their jobs, but got bonuses. I think they want those who started the mess to suffer.

I agree with you that highlighting the benefits reaped from TARP would be smart. I think that would go a long way toward blunting criticism of bailing the banks out. But, I also think it is a very fine line to walk and you don't want to veer too far that way and let anyone think that TARP was anything other than a necessary evil. Perhaps we're only disagreeing on degree.