AIG Must Not Fail! - Cramer's Stop Trading! (9/15/08)

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Includes: AIG, ALL, AMBC, CB, LEH, MBI, MET, PMIR, PRU, TRV
by: Joan Wickham

Recap of Jim Cramer's comments on Stop Trading! Monday September 15.

Failure Not An Option - American International Group (NYSE:AIG), Lehman (LEH)

American International Group, despite its present troubles, does not need to go the way of Lehman Brothers, Cramer said. It would be a tragedy if they just let AIG fail. Unlike Lehman which only had Neuberger Berman, AIG has plenty of assets that the company can sell to raise the capital needed to stay in business. Cramer urged both the company and Washington to take the actions necessary to save the firm. "I would radically have to change my view of where the market’s going if AIG fails," Cramer told Erin Burnett. "This one needs to be stopped. I don't know how to stop it. AIG is too big to fail." AIG will be allowed to use $20 billion in assets held by subsidiaries to help stay in business, New York Gov. David Paterson said in a news conference Monday. The insurer, which has already raised $20 billion in fresh capital in 2008, on Sunday turned down an offer from private equity firm J.C. Flowers & Co. that would have allowed the investor to acquire AIG for $8 billion under certain circumstances, The Wall Street Journal reported.

Unquantifiable Risk - Allstate (NYSE:ALL), MetLife (NYSE:MET), Prudential (NYSE:PRU), Chubb (NYSE:CB), Travelers (NYSE:TRV), American International Group (AIG), MBIA (NYSE:MBI), PMI (PMI) and Ambac (ABK)

Cramer explained that there are two kinds of insurance, such as property/casualty, and life, which would deal with situations such as a hurricane. But in AIG's case, financial insurance, "it's really hard to figure out what they've insured." "This is not Bear Stearns, or Lehman where all they have is Neuberger." Companies in the former category are Allstate, MetLife, Prudential, Chubb and Travelers. The other, riskier group includes AIG, MBIA, PMI and Ambac. "AIG is so opaque; they never disclosed what they own," Cramer said. "If you could just call a timeout, AIG would be able to sell a lot of different things," Cramer said. "If it's in free fall [and beaten down by the shorts], and we don't change the uptick rule. ... AIG must not fail."

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