US Dollar Weekly Chart with Commitments of Traders

AIG Lays an E-G-G

Shares of AIG will be on sale in the lobby at discounted prices for all you Sovereign Wealth Funds (SWF) during NYSE intermission this evening.

See the CFO for special Volume Pricing.

AP
AIG posts 1Q loss of $7.8B, plans to raise $12.5B in capital
Thursday May 8, 5:32 pm ET
By Stephen Bernard, AP Business Writer

AIG loses $7.8 billion in 1st quarter on credit default swap and investment portfolio losses

NEW YORK (AP) -- American International Group Inc. said Thursday that it swung to a first-quarter loss of $7.81 billion because of losses tied to credit swaps and mortgage-related operations and that it plans to raise a total of $12.5 billion in new cash to shore up its capital base.

AIG, the world's biggest insurer, will raise $7.5 billion through an offering of common stock as well as equity units. The equity units will consist of subordinated debt securities and contracts that require the holders to purchase AIG stock at a future date.

An additional $5 billion will be raised through the offering of fixed-income securities at a later date.

No pricing for the offerings was disclosed.

AIG lost $7.81 billion, or $3.09 per share, during the quarter ended March 31, compared with earnings of $1.58 per share, or $4.13 billion, during the year-ago period.

Analysts surveyed by Thomson Financial, on average, forecast a loss of 76 cents per share.

Like so many other financial services firms, AIG has been hit hard by deterioration in the credit markets. As defaults sharply increased on mortgages beginning in the middle of 2007, investors shied away from purchasing all but the safest debt. Because of the illiquidity in the credit markets the value of risky debt has plummeted, forcing firms like AIG to reduce the value of their investments in products such as credit default swaps and mortgage-backed securities.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," Martin Sullivan, AIG's president and chief executive, said in a statement.

New York-based AIG lost $9.11 billion in its credit-default swaps portfolio during the first quarter. The swaps promise to cover losses on $579 billion in bonds or other kinds of debt. AIG recorded an $11.12 billion loss on the swaps portfolio during the final quarter of 2007.

Losses in its investment portfolio, which includes debt backed by troubled mortgages, totaled $6.09 billion. It booked a $3 billion loss on the portfolio a quarter earlier.

Much of the charges in the investment portfolio were tied to losses on mortgage-backed securities -- investment instruments backed by pools of residential mortgages or other residential loans.

AIG says it lost $352 million in its mortgage insurance business, United Guaranty. The losses were mostly tied to increased claims incurred on both first- and second-lien businesses. Premiums written in the division did increase 14 percent from the year-ago period, but were unable to offset the spike in claims.

Overall, the insurance writing business at AIG was relatively flat compared with the first quarter last year.

Net premiums written fell less than 1 percent during the first quarter to $12.08 billion. AIG's net premiums written totaled $12.11 billion during the same quarter last year.

AIG's combined ratio increased to 96.86 during the first quarter, compared with 87.52 during the year-ago period.

Combined ratio measures the amount of money an insurer receives from writing premiums compared to how much it spends on claims and other expenses. A ratio above 100 means the insurer is spending more than it earns.

Separately, the board of directors approved a 2-cent per share, or 10 percent, boost to its quarterly cash dividend, to 22 cents. The dividend will be paid Sept. 19 to shareholders of record on Sept. 5. (We hear they terminated the stock buyback program immediately though LOL - Jesse)

The company also appointed Steven Bensinger vice chairman of financial services. He previously served as executive vice president and chief financial officer at AIG. He will continue in his current role until a replacement can be found, the company said.

Shares of AIG tumbled $2.70, or 6.1 percent in after hours trading to $41.45, after closing at $44.15 in the regular session.

Wall Street Gags on SEC Ruling for Investment Bank Capital Disclosures

SEC to Make Wall Street Banks Reveal Capital, Liquidity Levels
By Jesse Westbrook

May 7 (Bloomberg) -- The U.S. Securities and Exchange Commission will require Wall Street investment banks to disclose their capital and liquidity levels, after speculation about a cash shortage at Bear Stearns Cos. triggered a run on the firm, SEC Chairman Christopher Cox said.

The disclosures will be ``in terms that the market can readily understand and digest,'' Cox said today during a speech in Washington. The SEC will require the disclosures ``later this year,'' he said.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: May 7, 2008 14:05 EDT

Housing Slumps in the US - Half of 2006 Buys Now Underwater

We are far from an end to the bursting of the housing bubble. The declines in home prices are NOT particular to a few areas like California and Florida either.

The predictions of a bottom in housing and the financial crisis in the US are a mix of hope, government jawboning, and traders trying to pump the market while they unload losing positions in collateralized debt obligations and equities which are functionally insolvent despite the best efforts of the Fed to cushion the impact of massive defaults and debt failures with a rain of paper money.

The Recession in the US is just gaining momentum.

The Credit Bubble leverage will amplify and spread what should be a reasonable price adjustment in housing into a major banking crisis.


More Than Half of 2006 Vintage Now Underwater, Zillow Says
By PAUL JACKSON
Published: May 6, 2008

Home prices posted their worst quarterly performance in over a decade during the first quarter, according to a report released Tuesday morning by real estate information Web site Zillow.com. More than half of those who purchased a home in 2006 now owe more on their mortgage than their home is worth, the company said — surely ominous news for mortgage execs fretting over the potential for so-called borrower “walk-aways.”

Home values in the first quarter of 2008 fell 1.6 percent from the fourth quarter and 7.7 percent from the year-ago quarter, marking the most significant year-over-year decline in the past 12 years, Zillow said.

The company’s own index of median housing values fell to $213,000 during the quarter, the lowest median price estimate recorded by the firm since the second quarter of 2005. Zillow’s home value report is based on data from 160 metropolitan statistical areas.

With the exception of Dallas, which returned a one percent year-over-year gain, 30 major markets tracked by Zillow declined from a year ago, with the majority falling back to the median values of three to four years ago. For example, first quarter home values in the Boston area were the equivalent to levels last seen in the second quarter of 2003, down 16 percent from the peak, which occurred in the third quarter of 2005. Values in the Los Angeles MSA have declined to 2004 levels, down 19 percent from the market high recorded in the second quarter of 2006. The Detroit area has been hardest hit, retreating to value levels of 1998, down 24 percent from the market peak in the fourth quarter of 2005.

Stunning numbers, but perhaps more troublesome is what these sort of price declines in key housing markets mean for millions of borrowers.

Of homeowners nationwide who purchased when U.S. home values peaked in 2006, one out of every two (51.6%) now owes more on their mortgage than their home is currently worth, Zillow said. For those who purchased in 2005 and 2007, the situation is only modestly better with nearly 42 percent and 45 percent, respectively, facing negative equity. By comparison, 16 percent of those who purchased in 2004 have negative equity, as do 7 percent of those who purchased in 2003.

“While the high rate of negative equity has little consequence to owners staying in their homes, it can be devastating to those who need to sell immediately or refinance to avoid ARM resets,” said Dr. Stan Humphries, Zillow’s vice president of data and analytics. “The inability to secure refinancing is ultimately contributing to the growing rates of foreclosure in many parts of the country.”

For homeowners who purchased in some of the most volatile markets, such as many parts of California and Florida, as well as Phoenix and Las Vegas, rates of negative equity can be twice the national median and, in some cases, as high as 95 percent. For example, in the first quarter, Zillow said that Las Vegas home values fell 25 percent year-over-year and nine out of 10 (89.9%) homeowners who purchased in 2006, when the median down payment was 2 percent, now owe more than their home is worth.

Despite the incredible price drops in many key markets, Zillow also said Tuesday that nearly 3 in 4 borrowers believe their home has increased in value over the past 12 months — yes, really — which means that many homeowners clearly have not yet come to terms with market reality.

Housing-Wire