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Credit Crunch Ending? Somebody Forgot to Tell AIG

Posted May 09, 2008 11:32am EDT by Aaron Task in Investing, Recession, Banking

Wall Street titans keep saying the credit crisis is ending, but the headlines from financial firms say otherwise.

Thursday evening, AIG became the latest firm to produce shockingly bad results, posting a first-quarter loss of $7.81 billion and saying it will seek to raise $12.5 billion to shore up its balance sheet.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," AIG CEO Martin Sullivan said in a statement.

Meanwhile, Citigroup announced plans to sell $400 billion of "non-core" assets at its analyst meeting this morning.

AIG's Sullivan and Citi's CEO Vikram Pandit are relatively new in their jobs and appear to be following the classic script: Take big losses early in your tenure, blame the prior regime, and set yourself up to look like a hero if/when the cycle turns.

The playbook also calls for slashing jobs, which is part of Wall Street's normal "boom-bust" cycle. The problem is the financial services industry has become a much bigger part of the U.S. economy in recent decades, meaning what's bad for Wall Street is also bad for Main Street.

15 Comments

lawrences
lawrences - Friday May 09, 2008 11:44AM EDT

crime pays

Jerry
Jerry - Friday May 09, 2008 12:06PM EDT

The problems will continue until the Stockholders, and only the Stockholders, by a majority recorded vote, approve compensation packages; including salaries, bonuses, and all benefits for the top officials, boardmembers, CEO, etc. annually by recorded vote. The stockholders are the ones at risk, and they should be the ones to reap dividends; not a chosen few who are stealing the public companies blind with little risk or liability.

rayzpoon
rayzpoon - Friday May 09, 2008 12:09PM EDT

....................things that we thought as honorable were wolves in sheeps skin......trust nothing!!!!!!!......buy gold!....but make sure it's real!

Bill
Bill - Friday May 09, 2008 12:13PM EDT

GET RID OF BLODGETT! THE FUCKIN' CROOK!

northerncross
northerncross - Friday May 09, 2008 12:17PM EDT

Am I the only one that wonders why Yahoo has chosen Henry Blodgett or all people to mock the management of other firms? Certainly it is right to question AIG management and others; however, why this man, who himself sold billions of worthless stock and lined his own pocket in the very same way that he now decries? Are there no other wise men of age and character to provide insight and comment? (btw, besides having very suspect judgement and character, He barely looks 40). Perhaps when we hear and see him comment on Yahoo's situation with MSFT, Yahoo! management see it is time for a change.......

John
John - Friday May 09, 2008 12:27PM EDT

I have an Ex who worked for AIG and at that time I did some reading on Maury Greenberg - he's an evil man, a zionist who's part of the Neo-con Bushy cabal, and he wouldn't leave the Board of Directors until he was pried away from it with a crowbar, at age 89. He's the very picture of "Montgomery Burns". I hope AIG goes under. A new face at the top won't clean up this company.

Yahoo! Finance User
Yahoo! Finance User - Friday May 09, 2008 12:32PM EDT

The statement was a forward looking statement. Earnings releases are backwards looking. I'm not sure I agree either that "the credit crisis is ending". Nevertheless, forward-looking indicators can indeed say something completely different from past looking indicators. You all are a bunch of goofballs, you know that?!

Yahoo! Finance User
Yahoo! Finance User - Friday May 09, 2008 01:25PM EDT

How much are those guys getting paid? Either they are very dump or they think we are very dump. Show us some evidences. How many other skeletons are hidden away in the cupboards of those banks? Maybe Citigroup is trying to sell their skeletons to medical students to raise the $400 billion. “Buy two sinks and we will throw in the skeleton of Chucky for free”.

David
David - Friday May 09, 2008 01:48PM EDT

The greedy fat cats will be the downfall of the US.

pbuchta
pbuchta - Friday May 09, 2008 02:19PM EDT

Hey. Privatized Gain, Socialized risk. What's there not to like from Wall Street's perspective. I say close AIG down for their bad fiscal management.

pbuchta
pbuchta - Friday May 09, 2008 02:20PM EDT

Hey. Privatized Gain, Socialized risk. What's there not to like from Wall Street's perspective. I say close AIG down for their bad fiscal management.

Griz
Griz - Friday May 09, 2008 03:05PM EDT

I love these guys... Straight talkers.

Paul H.
Paul H. - Friday May 09, 2008 03:28PM EDT

Bail out AIG and every other financial firm with more taxpayer money and a revolving credit line from the Fed. We can't let these guys fail.

G.P
G.P - Friday May 09, 2008 04:44PM EDT

Henry, Aaron - you guys are great. This video blog is fantastic. You guys are so straight on your talk. I'm so glad you guys are talking the truth and not the bull*hit coming out of most reporters. Keep up the good work

John
John - Tuesday May 13, 2008 12:28AM EDT

and here's more proof that if you look in the dictionary under the definition of EVIL, you'll see Maurice Greenberg's photograph. http://biz.yahoo.com/ap/080512/american_international_group_shareholder.html I take back what I said about Montgomery Burns - Monty Burns couldn't hold a candle to Maurice Greenberg.

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