American International Group (AIG)'s CEO for all of three months has to find a way to raise cash fast as much as $75 billion after being zapped with a handful of credit rating downgrades. The downgrades make it tougher for the insurance giant to issue debt and win back investor confidence, a move that places the company on the brink of collapse.
Willumstad came to AIG in 2006 after working at Citigroup for almost 20 years. He assumed the top position when Martin Sullivan, the successor to the ousted Hank Greenberg, was ousted himself in June. Willumstad promised to turn things around, even calling on Greenberg for guidance. But the mammoth life and property insurance provider has been hurting for cash, having lost more than $18 billion in the past nine months. Its underwriting of complex debt securities or credit default swaps, which are used to back mortgages, is an underlying reason why the company has tanked during the housing crisis. On Monday, New York Governor David Paterson tried to offer a lifeline by letting AIG take $20 billion in assets from its subsidiary businesses as collateral so it could keep its daily operations going. The Federal Reserve reached out to Goldman Sachs and JPMorgan Chase, hoping to convince them to extend as much as $70 to $75 billion in loans to AIG. But, in the end the Fed itself decided to rescue AIG with a bridge loan, revoking it's no bail-out stance.
By Kristina Dell
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