AIG Being Forced to Pay back the Bonuses

US is forcing the ailing insurer AIG to pack back the highly controversial bonuses it awarded after taking public bail-out money.73 AIG executives - including 11 who no longer work for the company - were each last week given bonuses worth more than $1m.

Geithner Faces Heavy Censure:
US treasury secretary Geithner is already facing heavy criticism for his handling of the increasingly controversial issue.Geithner in a letter to congressmen said that $165m would also be taken from $30bn the firm is due to get as part of its government bail-out. Also promising that a contractual commitment will be imposed on AIG to pay the Treasury from the operations of the company the amount of the retention awards just paid.



"Outrageous" Bonuses:
Obama called the AIG bonuses "an outrage" on Monday. Obama is trying to channelize the public frustration without himself becoming the object of anger.
Republicans have raised questions about when Obama was told about the bonuses - and also criticized Mr. Geithner for not preventing the payments before they were paid. The US Treasury plans to renegotiate the deal.

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Standard Chartered defies Pessimism

Standard Chartered bank which focuses on Asia, Africa and the Middle East, has defied the gloom afflicting the banking sector by reporting a rise in profits. The bank said its pre-tax profit for 2008 was $4.8bn (£3.4bn), up 19% compared with a year earlier.

A spokesperson for the Standard Chartered said that it was on a "firm footing" for 2009.It warned, however, that its core markets, which have so far proved more resilient to the credit crisis, have begun to feel the heat.

John Peace, the acting chairman of Standard Chartered, said last year's turmoil on the financial markets had been "truly extraordinary" and an extreme test for the banking industry. He warned further the uncertainty and the contraction of economies will continue this year and the situation can worsen.

The company said its focus on Asia and its sensible attitude to liquidity and costs had helped it to weather the storm.

The bank’s chief executive remarked that the over-leverage and over-complexity of the banking crisis in the UK and the US are not present to nearly the same extent in Asia. Asian banks, even while they are feeling the stress of dollar liquidity drying up and credit environment deterioration, are in much better shape than many counterparts in the West.

U.S. has raised its stake in Citigroup. The government has also already extended its aid to AIG this week as part of a new government rescue bid.

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Forex and global stocks fall sharply on fears financial sector could worsen

Forex and financial markets have been gripped by fears the global financial sector may perform worse than calculated. Investor confidence has already been hit by talk that US insurance giant AIG will need a further injection of government cash with its report due to be released today.

In Europe, the UK's FTSE 100 fell by 3.2%, while Germany's Dax was down 2.76% and France's Cac 40 lost 2.67%.Earlier in Asia, Japan's Nikkei 225 index closed down 288.27 points, or 3.8%, at 7,280.15. In Hong Kong, the Hang Seng fell 3.9% to 12,314.5 points.

China's manufacturing sector had declined further last month. South Korean imports and exports slumped to a record as well. Japan reported a steep drop in car sales. Weak economic data from China and South Korea has also underscored fears about Asia's export-dependent economies.

Monday morning slide in forex and stock indices was followed by a poor performance on Wall Street on Friday last week after data showed that economic growth was even weaker than thought.

This is turning out to be one of the most tumultuous times on record in the global financial markets. "You're seeing the U.S. is sinking lower and lower, and we're still desperately searching for a bottom," remarked an analyst.

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U.S. to Raise Stake in Citigroup

The U.S. Treasury Department reached a deal late Thursday to take a stake of 30 to 40 percent in Citigroup as part of a third bailout of the embattled bank, according to several people close to the deal. Vikram S. Pandit, the chief executive, will remain at the helm, but Citigroup will have to shake up its board so that it has a majority of independent directors, a move that federal regulators had already been pursuing.

The Obama administration will probably come under intense pressure to take a much larger role in shaping the bank’s direction. Taxpayers, after pumping more than $45 billion into the bank, have become Citigroup’s single largest shareholder. The government will not put in any additional money for now, but some analysts believe Citigroup may require more down the road.

The move is one of the most drastic steps federal officials have taken to prevent the collapse of an institution deemed “too big too fail,” as its downfall could send shockwaves through the global forex trading and financial markets. The government also took a major ownership stake in the American International Group, AIG, which is already seeking additional funds, and seized control of Fannie Mae and Freddie Mac in September. So far, none of those deals have turned out well.

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AIG Seeking More Government Aid

Preparing to announce a mammoth fourth-quarter loss, the largest in U.S. corporate history, troubled insurer American International Group, Inc) is reportedly seeking additional funds from the government. The company is in discussions with the government to secure more funds so that it can keep operating after next Monday, when the nearly $60 billion loss is announced.

The huge loss, stemming mainly from write-downs on assets including commercial real estate, is likely to lead to downgrades in its insurance and credit ratings, which will force AIG to raise collateral that it does not have. Also, if AIG's book value falls below a certain level, which is very much likely, it will trigger default in some of its debt instruments.

AIG, which until last September was the world's largest insurer, was saved from going bankrupt, after receiving an initial $85 billion U.S. government bailout package. The Federal Reserve and Treasury have already provided over $150 billion of aid to AIG and the federal government now owns 79.9% of the company. Not helping AIG in its crisis could unfold a chain of events that could lead to problems for several financial institutions, which still rely on AIG to insure them against losses on loans and other debt.

However, helping AIG this time around is a little tricky, as the government's stake cannot exceed the current limit. The situation creates an opportunity for officials to find a new way by which value can be transferred to the U.S. in lieu of AIG reducing its debt so that it can then borrow more from the government to meet its collateral calls.

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