Troubled insurer American International Group Inc. (AIG) is facing $10 billion in losses on trades, reported the Wall Street Journal. The company reportedly owes this money to Wall Street's biggest firms for speculative trades that turned bad. The losses total less than $10 billion of the company's $71.6 billion exposure to derivative contracts on debt pools called collateralized debt obligations as of September 30.
The insurer is seeking to recover under a U.S. government rescue plan, but the newly surfaced losses are not covered by the terms of the current $150 billion rescue package for AIG. The Federal Reserve reportedly has no immediate plans to help AIG pay off the speculative trades. The report added that details of the trades go beyond what the company has explained to investors about the nature of its risk-taking operations.
The latest trades to be disclosed were engineered by the insurer's financial-products unit AIG Financial Products Corp., which placed billions of dollars at risk through speculative bets on the direction of various mortgage pools. The unit that employs only a miniscule percentage of the company's workforce is now responsible for most of its problems.
AIG closed Tuesday's regular trade at $1.93, flat with the previous close, on 38.47 million shares.
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