More AIG Bailouts Could Add Another $200 Billion to Taxpayers’ Tab
$30 Billion over the weekend brings current total to $170 billion
An article by the Associated Press this afternoon comes the closest I’ve seen in awhile to explaining, in plain English, why the Federal Reserve and U.S. Treasury seem hellbent on propping up AIG.
AIG, the world’s largest insurer, has tens of millions of customers and operates in 130 countries. What’s gotten them in trouble is a scam the company ran over the past few years called credit default swaps. These CDSs were essentially insurance policies sold by AIG and bought by other financial services companies and banks. What they were supposed to insure were the multitude of mortgage backed securities, aka, the now toxic assets. Only AIG and other purveyors of these CDSs bet that property values would continue to rise indefinitely – meaning they would never have to pay out on the “insurance” of the underlying investments. We know today that the bubble burst and AIG didn’t have the cash reserve to come even close to making good on all of its CDS obligations.Why was this a scam? Because they were selling insurance but calling it something different – a credit default swap – which was apparently enough for our government and others to turn a blind eye on the practice and not regulate it as insurance. If you talk to any honest insurer, you’ll find that in accordance with state and federal laws there are rules about keeping enough cash around to take of your potential liabilities. There are formulations for what these reserves should be.
Now, the question members of Congress and citizens of the United States have to ask themselves is how much money thrown at AIG is enough? On March 3, 2008, AIG closed on the NYSE at $46.69. Today, it closed at 42 cents per share. In the past 3 months, the company lost $61 billion. During the first AIG bailout, the company’s CEO said the taxpayers would be paid back within two years. It doesn’t look like that’s going to happen.
The argument, from the federal government goes like this: AIG is so intertwined in so many ways and so many places that if the government did not keep the company propped up, the fallout would be worldwide and would lead to a longer recession, more job losses and further loss of value in pension funds and 401ks.
One expert today was quoted in the AP article linked above saying that at least another $200 billion will be needed to finish restructuring AIG. I think it’s time for Congress or Treasury Secretary Tim Geithner to come clean about what more will be expected from honest taxpayers to bail out the greedy and reckless at AIG. I also think the argument needs to be made that the people behind the curtain at AIG did this to all of us — not some faceless corporation. There needs to be some measure of accountability for the people behind the scams at AIG.
The Feds should send flowers to every mother in the world on Mother’s Day. That would create a lot of jobs. Maybe $100 billion for Frito Lay and $200 billion for Budweiser and maybe $300 billion for…
Congress needs to stop this continous bailout to AIG etc.
and quit giving aid to other governments until the United States get back on track.
What congress needs to do is give each taxpayer that has worked 20 plus years 500 thousand dollars, 15 plus years 300 thouand 10 years 200 thousand 5 years plus 150 thousand and 1 year plus 100 thousand. ( no adding on more for families ). This way the taxpayers may decide on what businesses they want to uphold and what business that have become greedy to the point that they can continue getting bailouts and use excuses to line their pocket.
I would also say with the AIG bailout that the company CEOs will take a pay cut to the tune of no more than 3% above the wages of the lowest paid employee in the company that includes their bonus or awards (whatever they decide to call it) and benefits.
Great website, I enjoy reading your posts!
Great post! I can now actually understand the logic behind bailing them out in the first place. That being said, I don’t think the non-stop bailouts should continue. I don’t support the nationalization of banks and I feel like that is effectively what is taking place by having bailout after bailout for AIG. When will it stop?
Watched a video the other day and it noted that to date, “AIG’s total bailout– $180 billion dollars, Citigroup– $50 billion dollars, and Bank of America– $45 billion”. That’s a lot of money to have to pay back eventually.
Here’s the link: http://www.newsy.com/videos/aig_gets_another_30_000_000_000/
My husband (this author) is this cat’s meow.
(See–I do read C & C!)
AIG’s all just the world’s biggest Ponzi scheme! And Treasury is in on it. Of course there’s no transparency. The people who claim to be fixing it were all in positions to have had something to do (or look the other way) with the making of the Wall Street debacle.
I was opposed to the bailout from the very start. While I knew there would be consequences with AIG’s failure, I figured at least the executives would have to take their lumps, too. And I figured my share would be less. Instead, we’re all paying and the executives are pocketing it. With no end in sight.