AIG Asking for More Gov`t Assistance

American International Group is reportedly in talks with the U.S. government on additional assistance, including the possible nationalization of the biggest American insurance company.

This follows the move of Citigroup to offer Washington a bigger share in the financial group in return for financial aid.

The U.S. government is considering converting preferred shares held by the government worth 79.9 percent into common stock, reports said yesterday. When coming to the rescue of AIG in September last year, Washington took this substantial stake.

AIG, which reportedly posted a deficit of 60 billion dollars in the fourth quarter last year, the largest in U.S. corporate history, is discussing with U.S. officials measures to ride out the crisis.

Since September last year, the U.S. government has plowed a combined 150 billion dollars into AIG, including 40 billion dollars to buy preferred shares.

One measure is to convert part of the preferred shares, which now produce 10 percent of dividends, into common stock. Due to its accumulated losses, AIG is on the brink of its credit rating being downgraded. If it fails to get more state assistance, however, the insurance giant will likely go bankrupt, media reports said.

Washington has brushed off the prospect of Citigroup’s nationalization by saying it favors a privately held banking system, but officially confirmed yesterday that it is discussing additional assistance for Citigroup.

The increasing calls for state assistance for underperforming financial and automotive companies are raising controversy that they are siphoning off tax money.

General Motors and Chrysler received 17.4 billion dollars in bailout funds last year, and are seeking an additional 21.6 billion dollars.

higgledy@donga.com