AIG Devouring Money
Bailed-out (for now) insurer AIG is getting through it's emergency Fed funding package of $123 billion at an alarming rate.
Figures from the Fed show that $90 billion of the $123 billion available has already been drawn down.
How can a company claiming to be solvent in September could have developed such a big hole by October? Creative accounting?
Already it seems that $123 billion is not going to be enough to stop the rot at AIG. Edward Liddy, the insurance executive brought in by the government to restructure AIG, has already said that although he does not want to seek more money from the Fed, he may have to do so.
AIG has so far declined to elaborate on exactly what it has done with all this money. The company has outlined only broad categories: some is being used to shore up its securities-lending program, some to make good on its guaranteed investment contracts, some to pay for day-to-day operations and — of perhaps greatest interest to watchdogs — tens of billions of dollars to post collateral with other financial institutions, as required by AIG's many derivatives contracts.
We most certainly haven't heard the last of this one methinks. What does AIG stand for anyway? Accountant In Gaol?
AIG Block Trading Latest
It seems that the only block trades in ag contracts in relation to unwinding AIG positions were in the overnight session on Tuesday night.
Fewer than 50,000 contracts were listed, spread among corn, soybeans, soybean oil, wheat, live cattle and lean hogs, according to CME trading records.
There were no trades registered in the day session on Wednesday.
Exactly why the CME felt oblidged to allow such a relatively small number of contracts to be traded "off the market" is unclear.
AIG To Offload Grains Longs Off The Market - CME
CBOT owner CME has said it has allowed ailing AIG to offload some of its longs on grains & livestock markets via "block trades."
Block trades are held outside the public auction market. The idea being that a sudden large volume of sell or buy orders on the CBOT market could lead to violent price-swings, essentially limiting AIG's ability to operate effectively.
The emergency move appears to allow AIG, which was bailed out of potential bankruptcy on Tuesday by a $85 billion (47.5 billion pounds) Federal Reserve rescue package, to offload some of the positions it has built up by selling investment based on its co-owned Dow Jones-AIG Commodities Index, the second-largest of its type.
The DJ-AIG index of 19 major contracts had attracted investment of about $55 billion by the end of the second quarter, just before commodities markets tumbled by a third.
