The rumoured AIG restructure should make the hardline – hit-em-where-it-hurts-and-get-rid-of-adverse-selection crowd happy.
The government is going to swap its debt in the parent company into an interest in each of the subsidiaries.
As a result it is subordinating all parent obligations to the Government’s claim.
Once you do that you can let the AIG parent company go. The parent company debt is trading above 50c in at least some maturities.
I once thought the AIG parent company debt was probably money good. I suspect it is now probably zero.
Not too bad a thing either – because the AIG parent company is not systemically important.