AIG meltdown could affect millions in Ohio

Michael O'Mara
wkyc.com
9/16/08

BRECKSVILLE -- "Abigail do you want to try to show us how to write the letter 'h' on the smartboard?" asked 3rd grade teacher Elena Kucharski.

Far from Wall Street, at Highland Drive Elementary School in Brecksville, Mrs. Kucharski is teaching her young students how to write in cursive. The veteran teacher is also worrying about her retirement funds.

Kucharski is tracking the health of the nation's largest insurer, the American Investment Group. AIG controls more than one trillion dollars in assets. Almost every major bank and retirement fund in the country has investments tied to AIG.

Teachers like Kucharski wonder if their retirement plans could be affected if AIG goes bankrupt and the markets melt down.

The State Teachers Retirement System has been the safe haven for educators in Ohio for years. Both Elena and her husband Don, also a teacher, have their retirement funds in STRS.

Joseph Granzier, managing partner for Thomas McDonald Partners in Cleveland understands the frustrations of investors like Elena.

"With STRS the teachers are kind of handcuffed because they have no say and they have no flexibility to change things inside the fund," said Granzier. "Teachers can't do anything about that, but they have to understand that those funds are being managed by professionals as well. The fund managers are dealing with this mess and they will make some adjustments hopefully as well."

Said Kucharski, "If my husband and I can't rely on that money being there when we retire we'll probably be working until we can no longer work. I hoped to retire in 15 years. Now I am not so sure."

The bizarre fact in this new Wall Street shakedown is that AIG has more than one trillion dollars in assets. The company has 74 million customers worldwide, most of them Americans. It employed 116,000 people in 130 countries at the end of 2007.

AIG, through its aircraft leasing group, owns more than 900 planes, is worth about $50 Billion, and is the largest customer of both Boeing and Airbus.

Analysts say AIG's current troubles arise because it doesn't have liquidity, or cash, on hand to cover guarantees it wrote on mortgages. If it can't find the short term cash, it may have to declare bankruptcy this week.

Back in Brecksville, Elena Kucharski's students have questions about their handwriting assignment. Meanwhile, the third grade teacher now has questions about her financial future.