AIG (AIG) Ramps Higher On Hope For Easing of Govenment Stranglehold

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AIG Hot Sheet

Shares of bailed-out insurer AIG (NYSE: AIG) are having a wild day of trading today on various reports about its fate in the hands of the U.S. government. So far, while the data is conflicted, investors are cheering the news - sending the stock 20% higher on the session.

First, reports came this morning from Bloomberg that U.S. representative Edolphus Towns (Democrat) is urging a House committee to look at a proposal from former CEO Maurice "Hank" Greenberg to restructure the company's debt. In an e-mail statement Towns said, "I've directed the committee staff to take a look at Hank Greenberg’s proposal to restructure the debt, because I think it is something to which we should give serious consideration." Congress should help AIG recover "and that means looking at a number of options, including restructuring the federal loans," Towns continued. The U.S. rescue of AIG has already been revised three times in the past year.

Later in the day, the U.S. Government Accountability Office provided an report on the status of government assistance provided to AIG. The GAO found that while federal assistance has helped stabilize AIG's financial condition, indicators suggest that AIG's ability to restructure its business and repay the government is unclear at this time.

The GAO said, "indicators of AIG's financial risk suggest that since AIG reported significant losses in late 2008, AIG's operations, with federal assistance, have begun to show signs of stabilizing in mid 2009. Similarly, after a declining trend through 2008 and early 2009, indicators of AIG insurance companies' financial risk suggest improved financial conditions that were largely results of federal assistance. Indicators of AIG's repayment of federal assistance show some progress in AIG's ability to repay the federal assistance; however, improvement in the stability of AIG’s business depends on the long-term health of the company, market conditions, and continued government support. Therefore, the ultimate success of AIG’s restructuring and repayment efforts remains uncertain."