C M Y K A11
DAILY 03-02-10 MD SU A11 CMYK
TUESDAY, MARCH 2, 2010
KLMNO S
Economy & Business
A11
AIG to sell Asian insurance unit to help repay bailout
AIG by the numbers
The government committed
$180 billion to bail out AIG, of
serve. AIG separately received less money than the deal with index, a broader measure of the The central bank’s bailout
which more than half has been
Markets rise after
more than $47 billion from the Prudential, company and gov- market, jumped 1 percent and package to AIG came in two
dispensed. Proceeds from the
Treasury Department’s Troubled ernment officials said. moved into positive territory for parts: a $23.4 billion line of
sale of its Asian life insurance
deal that gives U.S. Assets Relief Program. “We decided that a sale to Pru- the year. credit and a $24.5 billion inter-
unit will go toward its debt to
stake in British buyer
The buyer, British insurer dential enables AIG to realize The sale of the Asian unit, est in American International
Prudential — not linked value on a faster track American International Assur- Assurance and Alico.
the government.
to the U.S. insurance to repay U.S. taxpay- ance, would generate more mon- Of the $35.5 billion from Pru-
AIG sold the unit to Prudential for
by David Cho firm Prudential Finan- ers,” AIG chief execu- ey for AIG than the sum from dential, AIG will use $16 billion
$35.5 billion, or $25 billion in cash
cial — agreed to pay $25 tive Robert Benmosche nearly two dozen divisions it has to pay back the Fed’s interest in
and $10.5 billion in stock and other
American International billion in cash and said in a statement. agreed to divest from since fall American International Assur-
securities.
Group agreed on Monday to off- $10.5 billion in stock Shares of AIG soared 2008. AIG is pressing to get a ance. Another $9 billion will be
load its prized Asian life insur- and other securities. nearly 10 percent at the multibillion-dollar deal for an- used to reimburse the Fed’s line $35.5 billion
ance business for $35.5 billion, Under the deal’s struc- opening bell before other major insurance unit of credit. AIG will eventually be
Stocks and
the troubled firm’s largest asset ture, the U.S. govern- closing the day up 4 known as American Life Insur- able to sell its $10.5 billion in
other
sale since it was bailed out by ment will have an inter- percent, at $25.78. The ance Co., or Alico. Proceeds from Prudential stock and securities,
Cash
securities
0 3. 6
0 .5
the federal government during est in Prudential’s for- Chief executive insurer’s stock hit a low that sale would also go to the which will be used to further re-
the height of the financial crisis. tunes through its Robert of $7 during the finan- Fed. pay the Fed’s line of credit.
$10.5 $9
$16 billion
News that AIG had pulled off massive stake in AIG. Benmosche said cial panic. The price AIG fetched for its AIG’s health has improved
billion billion
one of the largest insurance The sale generated the deal would Wall Street often Asian division affirms a decision steadily since the federal gov-
deals in history cheered Wall more for AIG than what ease AIG’s debt views big deals as a vote by the Fed to give the company ernment’s bailout, though it is
To federal To redeem preferred
Street and Washington, which some analysts had ex- to taxpayers. of confidence in the more time to sell its assets. Last still losing money. Last week, it
credit line interests held by
Federal Reserve
has dispensed more than half of pected. AIG had been global economy. And on year, AIG would have had to sell reported a $8.9 billion loss for
a $180 billion aid package to receiving weak bids for the divi- Monday, the Dow Jones indus- the unit during the recession to the last three months of 2009,
Stocks and other securities can’t be sold
immediately, but they will be used to pay
AIG. sion and was planning to spin it trial average rose 78.53 points, meet its debt obligations to the bringing its full-year results to a
down the federal credit line over time.
The firm plans to use the pro- off in an initial public offering or 0.8 percent, to 10,403.79, with central bank. Instead of cash, loss of $10.9 billion. In 2008, the
ceeds from the sale to pay down on the Hong Kong stock ex- much of the gain occurring right the Fed accepted an equity stake firm recorded a $99.3 billion
SOURCES: Bloomberg News, Associated Press
nearly three-fourths of the $48 change. That process could have after the sale was announced. in the Asian division as repay- loss. THE WASHINGTON POST
billion owed to the Federal Re- taken a long time and produced The Standard & Poor’s 500-stock ment. chod@washpost.com
Obama has rare chance to tilt Fed board
cially presidents of regional Fed tion.
banks, are likely to be more eager Some liberal economists argue
than Bernanke to raise interest that the president should quickly
rates and drain the money sup- appoint Fed governors who
fed from A1 in the past two years. A 40-year money out of the economy. ply, even at the risk of slowing would be inclined to leave rates
veteran of the central bank, he Decisions on that rate are the recovery. There are early low for longer to try to get
tory of the Fed,” said Diane was a close collaborator with made by the board, not the Fed- signs of those pressures emerg- growth going again, even if it
Swonk, chief economist at Mesi- Bernanke in a series of dramatic eral Open Market Committee, a ing, including a decision by Kan- comes at the cost of mild in-
row Financial. “You need some- actions that helped stabilize the bigger group that includes presi- sas City Fed President Thomas flation.
body who has credibility and can economy and have transformed dents of regional Fed banks and Hoenig to dissent at the last pol- At the same time, an appointee
defend the Fed’s independence the role of the Fed. makes most monetary policy de- icymaking meeting, preferring who is viewed as too soft on in-
in a way that doesn’t offend Con- In particular, he took the lead cisions. not to promise to leave rates low flation or too close to the admin-
gress. They need finesse on reg- last year overseeing the stress “The stakes are now higher for for an “extended period.” istration could cause problems.
ALAN DIAZ/ASSOCIATED PRESS
ulatory policy. There will be a lot tests of major banks that helped new governors,” said Vincent New Obama appointees could If financial markets doubt the
The automaker says it has on their plate.” restore confidence in the bank- Reinhart, a former senior Fed push the center of gravity of the Fed’s willingness to combat in-
resolved acceleration problems The White House has taken ing system and has led internal staffer who is a resident scholar committee in the president’s pre- flation, either because of ap-
by changing floor mats and preliminary steps to draw up efforts at the Fed to release more at the American Enterprise In- ferred direction. Fed watchers pointees’ economic views or be-
replacing sticky pedals. lists of candidates for the Fed details about its operations. He stitute. generally expect the president to cause of a perception that they
jobs, but no appointments are was a chief aide to then-Chair- At the moment, Fed officials favor appointees who would be want to boost growth in the run-
Toyot a
imminent, said sources who have man Alan Greenspan, serving as are unified behind a policy of ul- in line with Bernanke’s thinking up to the presidential election,
been in contact with the admin- director of the Fed’s division of tra-low interest rates to support or perhaps even more tilted interest rates could rise. That
istration. Fed watchers name monetary affairs from 1987 to the economy. But as the economy toward worrying about unem- would slow the economy.
problems
Council of Economic Advisers 2001, before President George W. improves, some officials, espe- ployment as opposed to infla- irwinn@washpost.com
Chairman Christina Romer and Bush named him a governor and
San Francisco Fed President Jan- then vice chairman.
to get 3rd
et Yellen as potential candidates With Kohn’s departure, Ber-
for vice chairman. nanke will be losing a vast
For the three openings, sourc- amount of institutional memory
hearing
es said, the president is seeking and a colleague who commands
one or two strong macroecono- respect across the Fed system.
IRA SPECIAL
mists — people well qualified to “The Federal Reserve and the
judge how the economy is evolv- country owe a tremendous debt
Top quality officer,
ing and how and when to make of gratitude to Don Kohn for his
monetary policy less supportive invaluable contributions over 40
engineer to face of growth — and one person with years of public service,” Ber-
Senate panel
a strong financial-markets back- nanke said in a statement.
60 MONTH IRA CD
ground. The financial crisis “On a personal note, I would
showed how breakdowns in ob- like to express my deep apprecia-
by Peter Whoriskey scure corners of the financial tion for Don’s friendship and
world can endanger the broader counsel during some very diffi-
Toyota’s chief quality officer economy, and the administration cult times,” Bernanke added.
APY*
and a top engineer will testify be- wants someone attuned to those The Fed is in particular need of
fore a Senate committee on Tues- risks. PhD economists at its highest
day in the third congressional Obama’s picks to the Fed so far ranks. Bernanke would be the
hearing on the automaker’s prob- have been governor Daniel K. Ta- only economist on the Fed board
3.50%
lems with unintended acceler- rullo, a banking law expert who if no new ones are in place before
ation in its cars. advised his campaign, and Ben S. Kohn’s departure. In addition to
* APY is Annual Percentage Yield. A penalty may be imposed for early withdrawal.
Members of the Senate com- Bernanke, reappointed as chair- Tarullo, Fed governors include
APY* accurate as of 3/1/10 and subject to change without notice. $100 Minimum
merce committee are expected to man. Both have led efforts to Bush appointees Kevin Warsh, a
deposit to earn this APY*. Individual Retirement Accounts (IRAs) only.
bear down on the question of make the Fed’s bank oversight former investment banker, and
whether the company has fully more effective and focused on Elizabeth Duke, a former com-
diagnosed what has caused some broad risks to the economy that mercial banker. Ask Us About Our
of its cars to speed out of control, arise out of banks’ decisions. Ber- Newly appointed governors
and whether Toyota has dealt nanke has said he wants to keep will probably have even more
25th Anniversary Special!
fairly with consumer complaints. interest rates low for an “extend- power than usual to influence
But as the third hearing ap- ed period” and to move cautious- economic policy. When the time
proached, some in the industry ly in removing Fed supports for comes to end the extreme sup-
were questioning whether Con- the economy. port for growth, Fed leaders in-
AcaciaFederal.com 1-800-950-0236
gress would get very far in explor- Kohn, 67, has been a crucial tend to use an unconventional
Friendly Service. Favorable Rates. No Hidden Fees.
ing this basic dispute. figure in the Fed’s response to tool — raising the interest rate
“No matter how hard the ques- the financial crisis and recession paid on bank reserves — to pull
tioning at [the] Senate hearing,
Member FDIC 7600 Leesburg Pike, East Building Suite 200, Falls Church, VA 22043
what won’t be forthcoming is the
answer we all need to hear: What
is behind this malady of unin-
HERITAGE
tended acceleration affecting all COMMITMENT
TEAMWORK
manufacturers and of such con- STRENGTH
cern to consumers?” Jeremy An-
wyl, chief executive of Ed-
munds.com, an automotive Web
site, wrote to Transportation Sec-
retary Ray LaHood.
Let your home
The first two hearings on the
subject, held last week by the
House Oversight and Govern-
ment Reform Committee and the
work for you.
House Energy and Commerce
Committee, alternated between
members of Congress who closely
Ifyou’replanninganaddition
questioned Toyota’s top execu-
tives and those who suggested
toyourhome,newkitchen EquityReserve
that the world’s largest automak-
er has faced unfair criticism,
appliances,oranymajor
ginned up by trial lawyers and
the United Auto Workers union.
purchase,whynotputyour
Home Equity Line
The National Highway Traffic
Safety Administration has linked
home’sequitytoworkforyou?
of Credit
unintended acceleration in Toyo-
tas to at least 34 deaths.
Youcantakeadvantageofour
The automaker says it has re-
solved those problems by chang-
rateofPrime-.50%(currently
ing floor mats and replacing
sticky accelerator pedals. But
4.00%APR),noclosingcosts,
Prime
some safety advocates have sug-
gested that the problem lies in
andapossibletaxdeduction.*
the car electronics that now oper-
ate accelerators.
Plus,wemaketheapplication -.50
%
APR
“If driver error is the issue, let’s
say so once and for all,” Anwyl
andapprovalprocesseasy.
wrote. “If design issues are in-
volved, let’s identify and fix them.
If there is a workaround, let’s find
it.”
LaHood and NHTSA adminis-
trator David Strickland are also
scheduled to appear before the
800-399-5919
personal small business commercial wealth management insurance
commerce committee.
sandyspringbank.com
Critics have said federal reg- Since 1868
ulators too willingly accepted
Toyota’s insistence during years
*ThequotedregularAPRofPrime-.50%assumesanapprovedlineof$20,000ormore,aloan-to-valueof80%orless,anoutstandingbalanceof$75,000ormore,andhavingpaymentsautomatically
deductedfromyourSandySpringBankcheckingaccount.Asof3/1/10theAPRis4.00%.Otherratesandtermsareavailable.MinimumAPRis4%.MaximumAPRis24%.Ratesmayvaryeverymonth
of investigations that there was
basedonchangesinPrime.Closingcostsarewaived,exceptforPrinceGeorge’sCountyTransferTax,ifapplicable,aslongaslineisopenforatleastthreeyears.Closingcostsrangebetween$270and$570
no problem. forcreditlinesof$20,000.Adequatepropertyandfloodinsuranceisrequired.Ratesquotedarefor1-4family,owneroccupiedresidences.“Prime”isthehighestratepublishedinTheWallStreetJournal’s
whoriskeyp@washpost.com
“MoneyRates”sectiononthefirstbusinessdayeverymonth.Pleaseconsultyourtaxadvisorregardingtaxdeductibility.
C M Y K A11
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