Banks that have emerged from government bailouts are making all the news, but four bailed out companies continue to suffer.
Those are American International Group, Fannie Mae, Freddie Mac and GMAC. These firms are likely to need further government handouts for years.
That’s obviously bad news for taxpayers. But if the government wants to get back any of its investments in the troubled giants, it has to prevent them from going belly up.
“The irony is, for the government to recoup its value, it has to keep its support behind AIG,” a former company executive, who requested anonymity, told The New York Times. “The thing is a total Catch 22.”
The four firms are suffering from their involvement in mortgage loans. The total risk they impose on the government dwarfs that of the banks, according to The Times.
And ironically, because many of the troubled mortgages were issued or are owned by banks, a lot of the government money given to the four firms will essentially be used to fund banks that also were bailed out.
Another ironic twist to the story is that some of the new money the companies draw from the government will be used to pay back earlier bailout loans.
Some of the banks are still in trouble too. Superstar bank analyst Dick Bove told CNBC that Citigroup’s beleaguered stock offering is “a terrible deal for shareholders.”
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