AIG has 8 weeks of cash left

At the rate troubled insurance giant AIG is bleeding cash, there are only about 8 weeks left before the well runs dry, according to Mark Tucker, CEO of Prudential PLC.

The difficult situation is exacerbated by the general turmoil in the financial markets as willing bidders for AIG assets are waiting on the sideline.

And what about the original $85 billion bailout fund?

“AIG is using the funds primarily for collateral obligations for the credit default swap portfolio and general corporate funding.” The additional $37.8 billion facility is being used by the securities lending program that AIG operates as part of fulfilling the normal cash needs of the life insurance companies.

As the credit markets are trying to free up liquidity, the fear of a general worldwide recession is growing and adding to the downward pressure on the world’s stock markets. This is hurting AIG by reducing values of collateral that AIG is shoring up with Fed cash. At the same time, the value of investment-grade bonds is dropping, reducing the ability of AIG to raise cash, even from the Fed. This is putting severe pressure on AIG’s ability to operate freely. …

AIG’s Joe Norton would not disclose the date that AIG will release the 3rd Quarter earnings report. If AIG announces that the results will be published on Nov. 4 or 5, perhaps taking a leaf from the political handbook, it could be seen as a sign of extremely bad news that could be covered overlooked by the excitement of the presidential election.

Global de-leveraging continues unabated.

Get those winter gardens in.

Bailout Bill to Nowhere: Why we’re still not out of the woods

The $700+ billion bailout bill has passed through Congress and been signed by the President. The debate, the stock market volatility, and the lack of cogent reporting of events has left many of us wondering what in the world we have just witnessed.

MM calls it “Crap Sandwich 2.0.” In fact, she live-blogged the House debate.

While our government pats itself on the back for avoiding financial Armageddon, I wonder if they realize that the drama of the past few weeks is only the first layer to be peeled from this onion.

The next layer will begin to be pulled away next Monday, as settlement of credit derivative trades involving Fannie Mae and Freddie Mac are unwound.

On Friday, the Lehman auction is scheduled.  WaMu follows one week later.  That is, if anyone is left standing.

How many billions will have to come off the balance sheets at settlement? As interesting and unsettling as the past few weeks have been, we haven’t seen anything yet.

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