Last month, the US gov't announced that it was lending US$85billion to AIG (American International Group Inc.) in exchange for an 80% equity stake in AIG. The gov't has also increased its credit to AIG by another US$38billion. The Fed is in the process of also appointing trustees to oversee the US gov't's stake.
There have been mixed reactions in the marketplace regarding the US gov't taking an ownership interest AIG, the nations largest insurance company. AIG subsidiary, AIG United Guaranty, provides mortgage default insurance to lenders, including financial institutions in Canada since 2006. Canada Mortgage and Housing Corporation (CMHC), a corporation owned by the Canadian gov't, also provides mortgage default insurance to financial institutions in Canada and has been doing so successfully since 1954. Even though AIG has a broader portfolio is businesses and type of insurances products, CMHC has managed to operate well in the marketplace under Canadian gov't control. Hopefully AIG, now under US gov't control, will be able to stablize and be able to do the same.
I am of the belief that, long term, it was a wise move by the US gov't to take control of AIG, with a focus towards stabilizing the world financial system. This Insurer, along with Freddie and Fannie, provides the US gov't with a vehicle to convey that message and back up the banks, while minimizing the amount of dollars they would have otherwise had to injection into the system (well beyond the $700billion already planned) if they had stood back and watched those companies collapse.
Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
Each VERICO Broker is an independent owner operator.
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