Equity = stock. This is 80% of the company handed over in real, voting shares. AIG has been nationalized.
AIG produces the shares by minting new ones. So if there were, say, 20,000 shares of AIG before this deal, there are now 100,000, of which 80,000 belong to the Fed. That's where the 'shareholder dilution" comes in, becaue the existing shareholders own a lot less of AIG now even though they didn't sell their shares. Yes, companies can do this. It's scary, but not really as scary as it sounds, because when a company mints new shares it gets paid for them and the company as a whole is bigger and worth more as a result. Strictly speaking, the Fed didn't pay for its shares, but since AIG's value was on the verge of being 0.00 without the Fed's loan, this isn't as evil to them as it sounds.
Fair enough -- while it's technically accurate, "nationalized because it was no longer viable on its own and the feds were the only ones willing to take it" is a far cry from "nationalized by gov't fiat because the gov't wanted control and despised private ownership".
A far, far cry.
Still, don't really want my government doing it either way. :/
I fear I have other things to say about the mortgage market that you would not agree with either, dear sir.
I'm speaking from cynicism and not from any real knowledge on this, but can you give me examples of any "loans" from the US government to a big industry that ever were paid back?
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AIG produces the shares by minting new ones. So if there were, say, 20,000 shares of AIG before this deal, there are now 100,000, of which 80,000 belong to the Fed. That's where the 'shareholder dilution" comes in, becaue the existing shareholders own a lot less of AIG now even though they didn't sell their shares. Yes, companies can do this. It's scary, but not really as scary as it sounds, because when a company mints new shares it gets paid for them and the company as a whole is bigger and worth more as a result. Strictly speaking, the Fed didn't pay for its shares, but since AIG's value was on the verge of being 0.00 without the Fed's loan, this isn't as evil to them as it sounds.
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But I'm in much better agreement with your writing above this time.
===|==============/ Level Head
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A far, far cry.
Still, don't really want my government doing it either way. :/
I fear I have other things to say about the mortgage market that you would not agree with either, dear sir.
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