AIG Bailed Out By Governent for $85 Billion; U.S. Embassy Attacked in Yemen
HEIDI COLLINS, CNN ANCHOR: It's a financial lifeline tied to your wallet. "Issue #1" always your money. And this morning it is our top story once again. The federal government saving insurance giant AIG from possible collapse with an $85 billion loan. All of it, your tax money. The Feds say doing nothing, though, could have cost a lot more. It could have delivered a crushing body blow to the nation's fragile economy and further undermined confidence. AIG, the world's largest insurer is the latest casualty of the nation's worst financial crisis in decades. Less than two weeks ago, the government guaranteed $100 billion to mortgage giants Fannie Mae and Freddie Mac. So there's an awful lot going on once again this morning. And our CNN Money Team is all over it. CNN senior correspondent Allan Chernoff in New York right outside the AIG headquarters. Christine Romans is at the "Issue #1" help desk just beginning today and waiting for your financial questions. And on Wall Street, CNN's Susan Lisovicz is watching the market. So we want to begin with Susan and investors' reaction now to the rescue of AIG. If we look at the big board and look at the number, I know we're down triple digits.</s>SUSAN LISOVICZ, CNN CORRESPONDENT: Well, and what it's telling you is that this dramatic move to rescue AIG is not enough, at least right now, to rescue investor confidence. You know, the "Wall Street Journal" is calling these extraordinary moves by the government over the last ten days, ten days that reshaped U.S. Finance. The government's bailout demonstrates just how important AIG is not only to this economy, the world's biggest, but to the global economy as well. AIG Ag shares right now continue to collapse. They're down 41 percent, trading at $2.00. This is a stock that was trading at $70 at its high over the past year. Small investors were at risk if AIF failed because so many mutual funds and money market funds invest in it. AIG is also a Dow 30 stock. It pulled the Dow down 400 points on its own this year. The Feds are fearful that AIG's problems could spill into the global economy. And that's why it took this action that it really, really did not want to do. We also have other news that is out in this financial sector. Morgan Stanley moved up its quarterly earnings to try to calm down the markets. They were better than expected. It made money. Its profits were better than expected. But its stock has plunged right now down 10 percent on dread that there'll be some news from Morgan. There are some reports that you know Morgan may not want to stand alone either. And that is certainly that we've seen this year where we now only have a couple of independent investment banks. Oil prices are up nearly three bucks. We do get a weekly inventory report at the bottom of the hour. Heidi.</s>COLLINS: All right. CNN's Susan Lisovicz, thank you for that. I want to go over now to Allan Chernoff. He's outside the AIG headquarters in New York this morning. Allan, last we checked with you, you said a lot of people going into that building this morning with big smiles on their faces?</s>ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Yes, absolutely. So at least there is some relief over here. But let's put this in perspective. This is just an extraordinary move by the government to put $85 billion and get 80 percent of AIG in return. I mean, the U.S. government did this simply because it was worried that the financial world would suffer a collapse because AIG is so important to so many different companies providing insurance and also, it had provided insurance for these risky investments in mortgage securities that banks and investment firms around the globe had basically piled their money into, and these investments turned out to be real rotten. As you said, at least this morning we are seeing some relief from employees here at</s>AIG. COLLINS: Allan, I got to ask you --</s>BILL VELTO, AIG EMPLOYEE: In existence, so to speak, for another two years. So we're happy about it.</s>CHERNOFF: Yesterday must have been pretty stressful?</s>VELTO: It was. But a lot of us had a very positive attitude looking at the best.</s>CHERNOFF: And everybody is hoping that this works out for the best. This, as I said, is an extraordinary move by the government, and we're certainly going to be hearing plenty of calls for more regulation because those insurance contracts that AIG wrote to protect those investments, there's no regulation at all for them. Heidi, you had a question?</s>COLLINS: Yes. I did have a question. Sorry about that, Allan. You know, there are some analysts out there that I was watching that said the government actually took a while to decide on this. If they had done it a few days earlier, it might not have been near $85 billion.</s>CHERNOFF: Well, you know, the government didn't want to do this. The government only did this because -</s>COLLINS: They said no first.</s>CHERNOFF: Oh, yes, oh, yes. The Treasury Secretary even just a few days ago said he does not want to use anymore taxpayer money. He did it only as a last resort because the private sector, bankers were not willing to take the risk. They're already suffering billions in losses. They didn't want to assume the losses of AIG, the risk of AIG. That's the only reason that at the last minute the government stepped in. They do not want to make a habit of this. Although it is becoming a habit. So we've got a real problem here. That's one reason the confidence of the markets right now has been shaken badly.</s>COLLINS: No question about that. Interest rate on this loan very, very high. So I know they're trying to ward off other companies from going this direction, at least right off the bat as AIG did. All right. Allan Chernoff, sure appreciate that, outside the headquarters of AIG in New York this morning. One of the two Wall Street icons that crumbled earlier this week has a new lease on life now. At least in part, a British bank has agreed to buy key parts of Lehman Brothers, Barclay PLC will shell out $1.75 billion for chunks of the company. Lehman Brothers collapsed under the weight of bad mortgage related investments. That deal still has to be approved by the bankruptcy court. Your money, your concern. The "Issue #1" help desk is open. Next hour our CNN money team will be answering your questions. CNN's Christine Romans is the panel's moderator. She's joining us now from New York. Christine, you've done such a great job handling all of these questions as they come in from people. Most of them coming in from us, other correspondents. But now we are able to talk to the public. And they have a lot of concerns out there.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: That's right. Wouldn't you like to have a money coach and a certified chartered financial analyst all to yourself to answer the question specifically about your situation?</s>COLLINS: Yes.</s>ROMANS: Well, we're going to have that for you in about 54 minutes for the hour. We're going to go back and forth and talk to some folks and try to get some specific advice for people who have questions. And you can go and ask your questions to us at twitter.com\issue1cnn. Or you can e-mail me at issue1@cnn.com. We've already been starting to get some of these questions from a young woman who is switching jobs right now and needs to move her 401(k) and really wants to know what to do because she's going to be moving all of her stuff to something new. We've got a lot of questions about, are taxpayers going to foot the bill for this? That's an interesting angle to look at. A lot of people are concerned about that. We'll explore that a little bit further. We're going to talk about a little bit of politics and what the next president can do about this. Specifically your questions about your money and what this all means for you and what you can do about it. So hopefully giving people something that they can work on, some actionable information for your own portfolio.</s>COLLINS: What did we used to call that? News you can use?</s>ROMANS: I think so.</s>COLLINS: All right. Christine Romans, we look forward to it. Great ideas, really want to try to help people out with all of this.</s>ROMANS: Sure.</s>COLLINS: Once again, an $85 billion bailout funded by taxpayers. That's you. How is it all going to work exactly? Our Josh Levs is figuring out what it means to you. We'll talk to him in just a moment. Meanwhile, the nation's mortgage crisis is the focus of a hearing now on Capitol Hill. Happening right now. You see Barney Frank there. Happening this hour, the House Financial Services Committee will demand answers from the nation's mortgage industry, specifically whether foreclosures are being delayed for Americans enrolled in a new federal assistance program. You remember this, the hope for homeowners program designed to find affordable mortgages for Americans struggling to make payments on an abusive loan. Still talking about political moves and an oil change. The House passed an energy bill last night that now clears the way for more offshore drilling. That vote, 236 to 189. Under this measure drilling would be permitted in areas between 50 and 100 miles offshore. The Senate could vote on similar legislation as early as this week. Bloodshed in Yemen. The U.S. embassy, target of a dramatic and deadly attack. Authorities say attackers, dressed as Yemeni forces, initially opened fire outside the building in the capital of Sana'a. Then it was rocked by multiple car bombs. Ten police officers and civilians are dead. So are the six attackers. No embassy workers were killed. Yemeni officials blame Al Qaeda. Media report say a group affiliated with Al Qaeda did claim responsibility. We're following that story for you very closely. In fact the White House condemning the attack. In a statement, a spokesman says "we offer our sincere condolences to the loved ones of the Yemenis lost in today's violence. This attack is a reminder of the continuing threat we face from violent extremists both at home and abroad." Midwest misery. It is no walk in the park after heavy rains trigger flooding. We got some new pictures to show you, coming up.