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 American International Group Inc.'s (NYSE:AIG) shares shot up to around $45 apiece on reports that the insurer's rescue package could be revised a fourth time. Bloomberg reported that House Oversight and Government Reform Committee Rep. Edolphus Towns, D-N.Y., is pushing the Federal Reserve and Treasury Department to ease AIG's bailout under a proposal from former CEO Maurice "Hank" Greenberg. Greenberg's suggestion apparently includes restructuring federal loans, cutting the government's stake in the company, trimming the interest rate on loans and giving the firm more than four years to repay its debt and rebuild its business, according to the report. Greenberg, the former CEO who was forced out in 2005 amid an accounting scandal, has been pushing to rebuild the troubled insurer instead of liquidating it ever since the bailout last year, and Towns seems to be the first person in power to actually listen. However, Greenberg's motivation has less to do with benefiting the taxpayers and everything to do with his legacy. He helped build the insurer and was its largest shareholder before the government saved it. So if Towns is really considering backing Greenberg's proposal, you have to wonder why. As Barron's states: Greenberg obviously would benefit from a reduction in the insurer's credit obligtations. The more-pressing question is just why anybody with regulatory authority would want to be so accommodating to the company and to Greenberg. The development promised to further burnish the image of Greenberg, an image tarnished when he left AIG more than three years ago amid the investigation of the company's accounting practices. AIG, of course, subsequently suffered from a liquidity crisis, prompting the Federal Reserve to pump $85 billion into the company. The government has become the majority owner of the company. But Towns may not be the only one in power who is seriously discussing the future of AIG with Greenberg. There were even rumors that Greenberg is talking with AIG CEO Robert Benmosche about his strategy of "rebuilding" the insurer. So why turn to Greenberg? Because he knows how to run the company (or knew until that accounting scandal), and saving the company is obviously in his interest (he does have a legacy to rehabilitate and save after all). Plus, there have been a lot of inquiries concerning exactly how AIG will pay back the government while also mitigating its systemic risk throughout the financial system. AIG has been losing both business and employees since its bailout, and analysts have predicted that there won't be much of a company to run once the bailout is paid back. And if that's the case, how will taxpayers get the maximum return on their stake in the company? AIG has sold about $9.8 billion since its rescue last year. According to Bloomberg the current bailout includes.
For the latest on all of AIG's auctions check out The Deal's Pipeline (subscription required). Plus, AIG, is preparing to take both its American International Assurance Co. Ltd., or AIA, and its life insurance unit, American Life Insurance Co., or Alico, public. Even after these IPOs, which are supposedly scheduled to take place next year, the insurer is still looking at a big bill to pay back. - Maria Woehr Also see: AIG plays the price is right with asset sales AIG CEO Robert Benmosche, aka 'Bob The Builder'
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