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Should feds have let AIG go bankrupt?
November 11th, 2008, 6:30 am · 30 Comments · posted by Teri Sforza, Register staff writer
This question is on many financial wizards’ minds as of late.
Yes, $150 billion or so later, some economists fear that the federal government’s rescue of troubled insurance giant American International Group may tank nonetheless.
AIG has burned through nearly $100 billion of that loan in just seven weeks - and some argue that company shareholders and taxpayers would have been better served by a plain old-fashioned bankruptcy filing. See the Washington Post’s story here.
It may or may not make you feel better to know that, on Monday, the Treasury Department and Federal Reserve announced a restructuring of AIG’s bailout - easing lending terms, replacing some government credit lines with capital investment, etc. Read details in the Wall Street Journal, CNNMoney.com and Business Week stories.
The goal here is to make it easier for AIG to sell its assets and repay its grand debts to you and me. We the People now own 80 percent of AIG.
All told, AIG will get more than $150 billion in government aid (you’ll remember that execs said the $123 billion package would not be enough). The good news: Under this restructuring, AIG must freeze bonuses and restrict severance pay for many executives.
Shortly after the agreement was announced, AIG reported a $24.5 billion third-quarter loss.
Gulp.
More Watchdog:
- High-flying AIG subsidiary gets to play with Uncle Sam’s dough, too
- Bailed-out banks ordered to reveal executive compensation
- Oops. That $123 billion may not be enough, AIG says
- AIG suspends controversial executive payouts worth millions
- Invisible sponsor of OC wine event: AIG
- AIG calls off lobbyists, cancels events totalling $80 million
- Truth or dare? AIG ordered to bare all its secrets
- AIG’s “outrageous expenditures” cause more trouble
- AIG subsidiary parties in style in OC, two weeks after bailout
- AIG’s St. Regis blowout bill: $443,344
- Saturday Night Live skewers AIG excesses
- Obama on AIG’s $400,000 party: ‘Fire the scoundrels!’
- Yet another AIG subsidiary parties hearty days after bailout
- Cartoon zinger lampoons AIG bailout
- Prez didn’t push for bailout so execs could get facials
- Behind the AIG party: A look at the St. Regis
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This is exactly what Obama wanted to do when we was asked how do you save the jobs of older Americans in the current economic climate during the second debate.
I think we need to look beyond the mere headline “AIG must freeze bonuses and restrict severance pay” and stop worrying about “junkets” that was mere pocket change.
This is a capitalist Society and Obama hit it right on when he said to fire the executives and demand the money back.
Funny how they are starting to see the light…
I am not an Obama fan. But I am with Alan on this.
Get the money back. They have proven themselves to be poor stewards.
This is not about $100k, that’s hardly a dent in $150 billion, but it is the principle.
Alan, you hit it spot on, too!
This is where a government needs to stay out of the private sector! Where was the govt when Enron collapsed? What’s the difference there? We as tax payers and voters will not forget this. AIG will long be gone and business courses in colleges and universities will use it as a wretched example of a government trying to save a failing business who needed to fail to make way for other competitors or businesses to take it over.
Alan, you hit it spot on, too!
This is where a government needs to stay out of the private sector! Where was the govt when Enron collapsed? What’s the difference there? We as tax payers and voters will not forget this. AIG will long be gone and business courses in colleges and universities will use it as a wretched example of a government trying to save a failing business who needed to fail to make way for other competitors or businesses to take it over.
AIG is already into us tothe tune of $150 billion. This number will climb as long as there are taxpayers . So far the government has spent over $2 TRILLION for these fiscally irresponsible corporations. The Federal Reserve and the Treasury has pumped over $1.5 trillion into these failures without any congressional debate or a vote. The debt monster is getting so big that it will be impossible to control soon. It will take the entire economy down. Better to let the chips fall now and start rebuilding rather than prolong and intensify the pain for the next 15 years!
Let them drown, like the rest of the businesses
YES!
This is crime. There is NO reason to keep stealing from the Taxpayers.
The only difference between Henry Paulson and an inmate with a swastika tattooed on his forehead is the amount of money stolen from our government. The inmate cost about 13k per year, Paulson’s thefts cost over 2 trillion dollars.
The goverment continually dishes out cash and then Bo-hoos about not being able to balance budgets. STOP IT!!!!!!!
@ Republicans are TRAITORS:
Just remember that, equally, the Democrats were leading this bail out as well! Look at what Pelossi is doing for AMEX! The future looks bleaker then what my parents faced during the Cold War. I guess it’s our time now to face it.
so… whens the next bailout party? im there for sure this time.
This is what scares me about rushing in to bail out General Motors and Chrysler with tens of billions of dollars in cash to fund their day to day operations. Nancy Pelosi now wants an emergency bill to be passed that would write a blank check for GM, while all the same executives who have made horrible decisions for Detroit for the last 25 years are still there cashing the big, fat checks from Congress.
The government should not be in the insurance business, nor should it be in the business of building Chevrolets. No more bailouts for private industries who can’t sell their products on their own merits!
Too late now. AIG has already been bailed out. The republicans never wanted a bail out and they also said once they do it, it will continue. Here’s a good example. But what is really the answer. I blame the uneducated congress Nancy Palosi, Harry Reid, Barney Frank and Freddie and Fannie for giving loans to individuals that couldn’t afford those high cost loans. This will eventually work out on it’s own it’s already on it’s way.
I hope the democrats have learned that they can’t give out loans to people who can’t afford to pay the loans back. Yes it’s a no brainer but sometimes kick backs come first to some corrupt folks. They all need to be fired!
Yep! I agree with NOT helping AIG, let the market take its course. No need to continue a bad precedent! What with the automotive industry (in league with the overcompensated union labor) asking for handouts after they made poor management decisions over the past decades due to their short term view for quick profits. Providing financial assistance will reward management for bad decisions.
don’t blame AIG for this, blame our stupid government who is noisy into EVERYTHING!!!! IT IS our government who tries to be some kind of hero and bailed out these greeedy firms!!!! Now, we taxpayers are seeing OUR money go into all these banks executives pockets!!!! How many times and how many of us have said, “NO BAILOUT”?!!!! Did the government listen?
Yesterday on CNBC they said if AIG goes under a long list of ogther Insurance Companies will go too. Had the Feds saved Lehman WuMu and Wachovia Corp would not had failed too. The Feds need to put terms and conditions when they bail out a company. The funds should not be use to pay bonuses, severance pay or for junkets. AIG should be considered a BK company that has the option to void ALL employment contracts.
they are to big to fail and beleive me if they do we have problems. also, the stock is cheap and its a good buy.
I added a comment so where is it? You won’t let me repeat it, so post it please.
If things weren’t so bad, I’d say let them fry and go bankrupt. But the impact is huge. Thanks to AIG and others like them we have to bail them out - we have to pay for their mistakes. AIG is being pulled of a giant black hole to keep everyone else from getting sucked in with them. Greedy bastards.
The bailout number right now for the auto industry is $50 billion. That number will go higher. GM is crushing their own share price to hasten their own taxpayer bailout. They know that if they wait too long that other industries will try to nose them out. Of that initial $50 billion did you know that $25 billion will simply fund the GM RETIREE HEALTH CARE PROGRAM that is going under? Wait until the government worker (fed, state and local) retirement funds dislocate due to healthcare costs! That is just one reason the country needs a universal healthcare system FAST! We pay about 24% of our GDP on healthcare costs, while other developed countries with UHC pay only about 12%! Healthcare in it’s current state is BANKRUPTING US! Don’t get complacent. We are in big, big trouble!
Yes we should have let this “whale” go. Take the 30 min to listen to the presentation at http://www.poptech.org/juanenriquez/ regarding how we got here and what we should do to get out of it!
I feel that they should have let them go bankrupcty. If that was a normal person like us the goverment would not help us out at all. All that money that the goverment is giving out should come to the people whose unemployment benefits have completly run out and have NO MONEY coming in at all. How do they expect the people of this country to live and pay their bills and put food on the table. The goverment should help no more big business and the big car companys at all either. Help your people first, they are what this country is all about.
Troy I agree with you, but the overall picture is not just the guys that buid the cars, its the suppliers and the restaurants, the stores, the dealers and on and on. Did they build crappy, ugly SUV’s and let anything fuel efficient rot on the vine? Yes they did. Did they outsource all they could to squash the unions? Yes they did. They can only blame themselves for the problems they are having. You should be ready to support hundreds of thousands if not millions of Americans that will be out of work because we let them fail. No one wanted the banks or AIG to fail because we would take a hit on our home equity of retirement, but if Detroit takes a dump be prepared for loss of equity, retirement and MUCH MUCH MORE. The worst is yet to come folks.
CNN just reported that AIG is spending another $300,000 on a junket in Phoenix, AZ. Lou Dobbs will report on it tonight.
Obama and the DEMs will bail out GM because of the Union support that they got to win the White House and congress.
AIG has already been bailed out. The republicans never wanted a bail out and they also said once they do it, it will continue. Here’s a good example. But what is really the answer. I blame the uneducated congress Nancy Palosi, Harry Reid, Barney Frank and Freddie and Fannie for giving loans to individuals that couldn’t afford those high cost loans. This will eventually work out on it’s own it’s already on it’s way.
I hope the democrats have learned that they can’t give out loans to people who can’t afford to pay the loans back. Yes it’s a no brainer but sometimes kick backs come first to some corrupt folks. They all need to be fired!
bailing the corps out is a liberal idea. liberal ideas never work.
BYE , BYE AIG NOTHING BUT THIEVES
They must have a brilliant marketing team. I hear for Thanksgiving they are planning an event where they burn wads of cash in front of a homeless shelter.
Give every man woman and child 1Million. We can decide who should be in business.We ALL agree this sux. We need a plan. We write the Congressman and Call in protest but we get nothing. I’m tired of it. What can be done? Count me in!!!!!!!!
Hey OCVOICE! Get a clue man,Republicans LOVE corporate Welfare,they act SO strong and full of Hubris when things are going well,Them,just oike the children they are! When things dont go quite their way,they WHINE AND MOAN,and blame liberals for their spend all- want -all ways!So give me a break! Leberals are the hard working people of society,tat play by the rules,Republicans Break them,since they hate democracy