AIG and the Government’s New Line in the Sand
EmailABC News’ Betsy Stark reports: As the government re-draws the line in the sand — managing this financial crisis the only way it knows how at the moment, in an ad hoc fashion — the American taxpayers’ exposure to the risks that have brought down some of Wall Street’s giants in recent days continues to grow. The "bailouts," it will be argued by the government, are not sweetheart deals. AIG is turning over warrants — notes to purchase stock in the company — that would give taxpayers an opportunity to own 80 percent of a company with some very healthy businesses, exercisable at a very advantageous price. While it sounds hard to believe, this particular "bailout" could turn out to be a good deal for taxpayers in the long run. Of course, it could also turn out to be an $85 billion loss. The bigger concern it raises, of course, is who’s next? And how long can the government keep using taxpayer money to rescue firms that took foolish risks? And where is the fairness in the inevitable choosing of winners and losers by Washington officials? It’s not just Lehman Brothers that’s been overlooked for rescue. As others have pointed out, Detroit would like a "loan" from the government, too. And how about all the American families whose 401ks and jobs and home values have been hurt in this crisis? Where’s their bailout? The conversation in Washington is now turning to the need to manage this crisis in a more disciplined fashion. That could mean the creation, as some are advocating, of a Resolution Trust Company-like agency, reminiscent of the days of the savings and loan crisis, which would take over sick institutions and sell off the healthy parts of them to capture whatever value they can for the taxpayer. This part of the process is just getting under way. And the FDIC may need shoring up if Washington Mutual is the next big bank to fail, sucking up most of that agency’s insurance fund. All of this will be complicated by the fact that there will be a change of power in Washington, making it an awkward time to restructure a financial regulatory system that was built for another century. For now, we’re likely to see the government continue to move that line in the sand.
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its time to bail out before the train wreck
Posted by: kola | September 17, 2008, 10:36 am 10:36 am
This is not a very good thing to have happen. We’ve now done it twice. Government bail-outs to try and shore up a failing economy will not be good for any of us in the long run. These are mismanaged businesses with problems that will have to be worked out themselves or fold. Even if they fold, there are others in better shape. We’ve allowed this corporate greed to breed this stuff for a long time now and it needs to be weeded out. Too much “business” is really only existing on paper and nothing else. I believe in the “olden days” they called this stuff “Junk Bonds”. I think everyone’s going to have to fess up to this and ride it for all its worth. I’m looking for two more major players in the finance markets to become insolvent, as well as two more major insurance institutions to do likewise. If the government steps in to “shore it up” like it’s doing with AIG, I can only see this whole process being greatly accelerated. I quiet literally see a coming time, when the value of a penny will once again be worth a penny if that gives you any clue. IMHO
Posted by: J Kline | September 17, 2008, 10:41 am 10:41 am
I feel it is time to open the “BLIND” trusts of our ruling elite and see if their decisions regarding the bail out of some companies and the scrapping of others is motivated by their own self interests. The only thing Bush has done while in office is to expand the hierarchy that has existed since we became a nation. Enough is enough it is time to imprison those who would allow a nation to fail due to greed.
Posted by: Larry | September 17, 2008, 10:42 am 10:42 am
Our government has 3 branches, the Executive, judicial, and legislative branches. No where is there a corporate or business branch. These loans are the rich and powerful making sure their friends do not lose too much. I am a disabled vet who lost my home 2 months ago and i only had 9 more years of payments till it was free and clear. The government did nothing to help me so why should they help companies that are miss managed if they will not help their citizens. They also cannot manage themselves so what makes them think they can manage corporations.I have read the budget and no where in it is there money set aside for these deals. nor has congress or the senate been called in to approve these in emergency sessions. So who made these deals if anyone can provide the actual name of the person or group of people. If not approved congress and the senate or in the budget then it is theft of public funds which is illegal and they should be prosecuted. Also AIG is a publicly traded company owned by many people, Did they have a share holders meating to approve giving away 80% of the company? The answer is NO. That violates the corporate bylaws. Their are also SEC and FTC regulations being violated By this loan/buy out. I have called the FBI, secret service, SEC, FTC, homeland security, my states congressman and senator. I was told that they make the laws and can do what they want. NO SIR THEY CANNOT, THIS IS AMERICA NOT A COMMUNIST COUNTRY. We have laws and regulations here to prevent this from going on and it is time that the citizens and law enforcement agencies stand up and and uphold the laws. No person in our government is allowed to do what they want without regard to the laws. If they are allowed to violate laws with no worries then so shall all citizens be allowed. I CHALLENGE ANY LAW ENFORCEMENT AGENCY TO DO YOUR JOB,ALSO ANY NEWS AGENCY TO REPORT THE TRUTHS AND REPORT THEM NOT JUST WHAT YOU ARE TOLD TO REPORT. Jeff White Monett, MO
Posted by: Jeff White | September 17, 2008, 11:18 am 11:18 am
I for one and RELIEVED by the bailout. I currently am EMPLOYED BY AIG! Again I am very uncertain myself about the wrong decissions made by corporate, however I KNOW what kind of services we give to people worldwide and the trust they have in us. I am on the insurance end of AIG and you wouldn’t believe the faith that our insured have in us, and the wonderful things we provide our clients on a daily basis. If AIG were to fold under the impact would hit the market and taxpayers on a higher level not only in the US, but in Canada, Asia, all of Europe, Australia,Latin America, and far more countries. The ramifications would be disasterous. I am only a speck of dust in the employee base of AIG as well as our division of AIG that is NOT based in New York City. Folding up could destroyed not only my position, but others, and the city I live in that already is facing hardships based on the economic crisis.
Posted by: Ellsaho | September 17, 2008, 1:52 pm 1:52 pm
The cycles of our human made economy.
Gets select few really stinking rich.
And, the poor pay the price tag. Suckers caught in the drama.
Hopefully not many families have to pay the price.
For a lost family is a loss in many generations to come.
Posted by: jac | September 17, 2008, 3:41 pm 3:41 pm
Who’s winning?
Posted by: babaor | September 17, 2008, 4:53 pm 4:53 pm
Is there any way to find out how much income tax any of these companies I’m bailing out now paid in the last five to ten years? That’s if they paid any at all….
Posted by: jausti | September 17, 2008, 7:03 pm 7:03 pm
Why the Government pass the bailout to the corporate and not the individual house holding sufferer? The interfering loan may moderate the crisis by modifing it into a welfare fund – home loan, home purchase scheme etc. Which could ease the market for 2 to 3 years time or more, a period enough for the market to rectify itself.
Posted by: Clement Kung | September 18, 2008, 5:26 am 5:26 am