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When the federal government agreed to a $150 billion bailout of insurance giant AIG last fall, it demanded - and got - a steep interest rate. The idea was to protect the taxpayer, and to discourage other companies from seeking government help if they could avoid it. Now, AIG is asking the government to ease the terms of that bailout. The company says that if the terms are not changed, it will have a lot more trouble surviving the current downturn. NPR's Jim Zarroli reports.
JIM ZARROLI: The bailout was supposed to give AIG some breathing room so it could restructure and sell off some of its assets. The idea was to use the proceeds from these sales to repay the federal government. But it hasn't been easy.
NICHOLAS ASHOOH: Obviously, it's a very difficult market out there for selling anything.
ZARROLI: AIG spokesman Nick Ashooh says the company has placed a lot of its assets on the table. It's already sold off parts of the company, and there was a report today - which the company wouldn't confirm - that it's even trying to sell a controlling share of its lucrative Asian insurance subsidiary. But there aren't a lot of buyers right now. And meanwhile, the company is believed to have lost tens of billions of dollars last quarter. So, Ashooh says, AIG is asking the government to ease the terms of last fall's bailout.
ASHOOH: What we're focused on is finding potential new solutions to keep AIG stable, and keep our businesses functioning properly, while we execute our plan to sell businesses and repay the government.
ZARROLI: What's happening is a kind of borrower's remorse. Doug Roberts, chief investment officer at ChannelCapitalResearch.com, says that with the economy getting so much worse than anyone expected, big financial companies like AIG are finding it tough to live with the bailout terms they agreed to just last fall.
DOUG ROBERTS: What you have to realize is the bailout package, you know, has gone through an evolution. It was done very, very quickly - kind of, almost in a panic mode. And now they're trying to figure out, you know, what to do with it after the fact.
ZARROLI: Obama administration officials didn't want to comment today on AIG's request. AIG has already received additional money once before. And any effort to give it more is likely to be unpopular with Congress and the public. Joseph Mason, professor of banking at Louisiana State University, says AIG has been badly managed for years, and needs to make wholesale changes in the way it's run.
JOSEPH MASON: That's extremely hard to do. And, of course, there's no incentive to do so, as long as money keeps flowing either via the government or otherwise.
ZARROLI: AIG officials insist that the company is doing what it can to get back on its feet - and has a plan for doing so. But they say the continued impasse in the credit markets, and the downturn in the economy are impeding the company's efforts. Again, AIG spokesman Nick Ashooh.
ASHOOH: It's important to maintain the focus on the fact that if we don't help AIG work out of this situation in a constructive way, there's a lot of potential negative impact for everyone globally, given AIG's interconnectedness with the world economy. So, it's really about helping everybody avoid further damage to the economy.
ZARROLI: And this fear of further damage ultimately could force the hand of federal officials, just as it did last fall. AIG still has ties throughout the financial markets, and if it fails, it could drag down a lot of other players. After the Lehman Brothers disaster, that's something U.S. officials want to avoid at all costs.
Jim Zarroli, NPR News, New York.
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