Even as insurance giant American International Group announced the biggest quarterly loss of any corporation in U.S. history this morning, the federal government has agreed to boost it with its fourth bailout since September. AIG reported today that it lost $61.7 billion in the fourth quarter, or $22.95 a share. For all of 2008, the company lost $99.3 billion, or $37.84 per share.
Government officials say that with AIG's ties to nearly every major financial firm, including insurance protection for more than 100,000 companies, municipalities, and other groups, the company's collapse could threaten the whole economy. A ripple effect also could serve to negate any help from the hundreds of billions of dollars in aid that the government has given to other companies since the fall.
For that reason, the government released a statement this morning announcing a restructuring of the government's bailout for AIG. That includes granting the firm access to an additional $30 billion in funds from the Troubled Asset Relief Program, on top of the $150 billion that the government has lent to AIG since last fall.
Although the new funding could boost the government's stake in the company to 77.9 percent, the government's statement underscored that "public ownership of financial institutions is not a policy goal." Still, the statement said, "the potential cost to the economy and the taxpayer of government inaction would be extremely high."
Even so, the immediate impact of the news seemed to be to shake the market further as the Dow Jones opened below 7,000 points for the first time in 12 years.
The announcement may have even eclipsed the one bright spot of economic news for the day: After a six-month decline, consumer spending rose 0.6 percent in January.