AIG: Too Big to Fail?

Accountable · Post by **Accountable** » Wed Sep 17, 2008 3:48 am

AIG's the world's largest private insurance company. Are we (the USA) so dependent on them that we have to bail them out for their poor decisions and practices?

Post by **spot** » Wed Sep 17, 2008 4:09 am

It's an extraordinary decision. If AIG falls then other companies fall across the world and stock values tumble. The head honcho of capitalism evidently wants capitalism to survive so he stops laissez-fairing for a few days. The side effect is that all his friends and relations stay rich beyond the needs of even the most avaricious while the downtrodden poor work a few extra hours a week to make up the difference.

Post by **Bryn Mawr** » Wed Sep 17, 2008 4:41 am

Whilst my heart tells me (4) my head says (2) but it's not an answer I like so I'll not vote.

Galbally · Post by **Galbally** » Wed Sep 17, 2008 6:36 am

From an ethical point of view, of course they should go to the wall, as should probably every major Wall Street investment bank for their folly. Though that folly is also shared by the US Federal Reserve, the UK FSA, and ECB and the Bank of England and almost every institution involved in modern global capitalism.

However, unfortunately the repercussions of allowing AIG to fail would be devastating for the global financial system (which has already been rocked to its foundations) and to be honest if it goes down, then a lot of the major US and European banks will collapse and we will really be into a 1930s situation within weeks.

Therefore, despite the smell, I think that the bail out is the right decision; however, what needs to happen is that the entire executive structure needs to be sumarily dismissed without further ado, and this goes for the executives in several of the world's leading financial institutions. Once stability has been restored AIG should be broken up by the US Government, (at a profit to the government and hence the tax payers). Also, its worth noting that many investors are not speculators but long-term people who help keep the system running, the system needs to change to be more weighted in favour of long term serious investors, and against the short term speculators who tend to cause an awful lot of trouble.

A lot of supposedly clever people have a lot of questions to answer now, and given the gravity of what is happening, I can't see them getting away with it this time.

sunny104 · Post by **sunny104** » Wed Sep 17, 2008 7:07 am

I voted for 4. Why are we dependent on them? Shouldn't they be dependent on us??

CARLA · Post by **CARLA** » Wed Sep 17, 2008 7:10 am

I agree and get it done fast.

[QUOTE]I voted 4, let the whole rotten structure fall down. It's time for this fantasy to end, bring back the regulators and don't ever allow taxpayer money to be put at such risk again.

Get the CEOs too, the boards of directors and toss them in the pokey also.[/QUOTE]

Post by **spot** » Wed Sep 17, 2008 7:14 am

Do you realize that single injection of tax revenue, that $85,000 million they just flippantly handed over, would cover the cost of establishing a permanent manned lunar colony? Let the Chinese do it instead, why not. All that matters is keeping the rich rich.

Post by **spot** » Wed Sep 17, 2008 7:57 am

I thought that's what I'd typed.

Mars is more costly. Still less than "liberating" Iraq, mind. I think the permanent lunar colony's more important than visiting Mars and it's around $85 billion.

guppy · Post by **guppy** » Wed Sep 17, 2008 8:06 am

A few days ago..the Bush administration announced no more bail outs and then turned around and bailed out Aig..that makes me think they dont have a clue how to save the sinking ship. I have read that US banks have pooled their recources so they can all stay afloat as long as possible..i have also read that the government has at their disposale something like forty two billion dollars to shore up the collapsing economy just to prevent a major depression from gripping america again..and beyond that they have a thirty billion credit line they can tap into. Will we survive? or sink into depression again..it looks bleak to me..we are on the verge of collapse. i hope it doesnt happen. At what point did the government not see this coming? surely they knew.

If the government has had this so called billion dollar reserve held aside for years to upshore the economy..where did it come from and when they spend it.who is gonna replace it? The very people that worked for a living and borrowed to build houses..that they lost..thats who. I smell a rat..a very big rat...

Patsy Warnick · Post by **Patsy Warnick** » Wed Sep 17, 2008 8:26 am

I say #4

They're crooks & abused the system

The CEO's here in this mess will receive a severence pay - Billions.

just like Fanny Mae CEO - after that bail out, that CEO will receive Billions for LIFE.

Same with ENRON - Fanny Mae now AIG.

Why, after a so called Bail Out - They should be in jail & wait for their Bail out ..

why don't they have to instantly pay back?

No they walk away very very wealthy.

what a mess

Patsy

Post by **spot** » Wed Sep 17, 2008 8:29 am

Capitalism's going to survive a while longer, guppy. All it's doing is queueing up unavoidable debt repayments into the future. The next few generations of workers are being sold into bondage in exchange for the excesses of the stinking rich today and unless there's a revolution it'll be the children of those same stinking rich who will hold the whips. People get what they deserve.

flopstock · Post by **flopstock** » Wed Sep 17, 2008 8:33 am

No one here was complaining when our retirement fund portfolio was increasing in value at an outrageous speed... everyone just kept congratulating themselves for their clever investment choices. Now that it's going down the toilet though... boy, someone ought to have to pay... so long as it aint me...:rolleyes:

QUINNSCOMMENTARY · Post by **QUINNSCOMMENTARY** » Wed Sep 17, 2008 8:34 am

Accountable;986117 wrote: AIG's the world's largest private insurance company. Are we (the USA) so dependent on them that we have to bail them out for their poor decisions and practices?

I voted # 4, but let's keep this in perspective. We throw around the word bailout, but in fact it is a buyout and as strange as it may seem the federal government or more accruately us stockholders could actually make money on this deal.

With the govenrment owning 77% of the AIG and with assets of over a trillion dollars and still some very lucrative money making operations over time it is quite possible that the value of the shares will grow and thus a profit be generated.

But the botom line is that the federal government has no business being a shareholder in a private corporation. I feel like I am Russia or Venezuala for Pete's sake. :-5:-5:-5

Lon · Post by **Lon** » Wed Sep 17, 2008 8:46 am

With the government now owning 85% of AIG I guess we could say that we now have NATIONALIZED INSURANCE--------------what else could you call it?

Patsy Warnick · Post by **Patsy Warnick** » Wed Sep 17, 2008 8:51 am

Government Bail out ??

It's the TAX PAYER'S - us, the small people paying for crooks decision .

We're all invested now

I / We just don't receive a dividend check or a stock certificate.

Patsy

Galbally · Post by **Galbally** » Wed Sep 17, 2008 9:17 am

There is no question that what has been allowed to happen in Wall Street and elsewhere has led to a catastrophe, and its also true that many commentators have been warning for a long time that something like this was inevitable, particularly in the United States.

However, its not just an American issue as the system is a global one and all the developed countries are involved, though the regulatory structures are generally stronger outside the US.

I think the country in the deepest problems now is actually Britain, as its so dependent on the City of London (which in turn is dependent on many of the major wall street players and the Eurobond market in order to earn a living), and whats happening now is going probably going to wreck the UK economy, with repercussions for us in Ireland (and we have our own problems already) and the rest of Europe, as well of course as the ordinary British people.

Certainly people are going to get very angry, and there are going to be direct and rather dire consequences for the big companies, for financial instiututions and for national governments themselves. A lot of the people leading these companies and institutions may well end up in jail (or worse) considering the backlash that is sure to come once ordinary people start to loose everything. I think what is certain is that we are about to enter a new financial and political period that will be quite different to the one we are used to. It will be in general a far more financially difficult time for ordinary people, and one where more or less everyone is going to have to take a drop in living standards.

I think its certain that laissre faire global capitalism based on the model of the last 25 years is more or less finished for the time being, and that the class of rather arrogant, shrill people that have promlugated it are going to loose the leading position they have had (particularly in American society). We will enter a period where national governments become much more important once more, as they are probably the only institutions with the resources and the authority to get our countries through the problems are being unleashed upon us.

Its history you see, seems we didn't reach the "end of history" in 1991 at all. Interesting times indeed.

gmc · Post by **gmc** » Wed Sep 17, 2008 9:53 am

I'm with bryn mawr on this one. As well as the bankers the speculators making a mint on the turmoil need sorted as well. My heart says no my head says the knock on effect would be tremendous.

Looks like in the UK the govt are going to overturn the competition rules to allow lloyds to take over hbos. I hope the labour MP's finally rebel.

QUINNSCOMMENTARY · Post by **QUINNSCOMMENTARY** » Wed Sep 17, 2008 10:06 am

flopstock;986428 wrote: No one here was complaining when our retirement fund portfolio was increasing in value at an outrageous speed... everyone just kept congratulating themselves for their clever investment choices. Now that it's going down the toilet though... boy, someone ought to have to pay... so long as it aint me...:rolleyes:

Good point, nobody asked how that was happening (nor were there many people who even understood the complications). The next thing you will see is that employer and union pension funds are in trouble as their pension assets drop and they are required to make extra funding payments to keep the required level (not to mention all the State pension funds that you pay for as well).

On top of that many, many people will panic and screw up their 401(k) plan by shifting out of stocks and thus locking in their losses for good.

QUINNSCOMMENTARY · Post by **QUINNSCOMMENTARY** » Wed Sep 17, 2008 10:10 am

Isn't it interesting that we really got into this mess as a result of greed in the financial markets that was able to be fulfilled by the stupidty of the average person who either tried to own a house they could never afford or used their home equity as an ATM.

You simply cannot separate the two issues.

Galbally · Post by **Galbally** » Wed Sep 17, 2008 3:18 pm

I certainly think that our Western societies have become obsessed with trivial things and basically wasted our national wealth on mostly pointless individual luxury, while the actual things that have made our societies strong in the first place have been neglected as they are not "sexy" enough (you know, like basic maths or adult literacy).

Perhaps this moment of financial nemesis will finally make people wake up to the lunacy of our current way of life. Its unlikely that the Asians and the Arabs are going to agree to keep funding our desire to wallow in luxury, so we will have to come up with a new trick anyway.

Perhaps if as a society we stopped blaming everyone but ourselves, take life a bit more seriously, and stop basing our lives worth on the amount of useless gadgets we own (sold to us by the snake oil men of pointless advertising); devoting endless amounts of newspaper space about about the fanciness of the restaurants we eat in; the number of people we sleep with; or the football results.

Imagine public discourse not based on which celebrity is screwing which other moronic (but beautiful) celebrity, the glorification of the random violence of the poor and ignorant as being something glamourous, or the lionization of how many SUVs the latest inane, know-nothing Rap star has; and perhaps instead lets switch off the TV and (for a change) teach our children ourselves about how to behave properly like human beings, and not little potential economic units sponsored by Nike, and maybe by the next generation we will stop pandering to our desire for instant gratification. Who knows, it might be a start.

Patsy Warnick · Post by **Patsy Warnick** » Wed Sep 17, 2008 4:40 pm

Oh, I so agree that society has been so involved with material things.

bigger & better - the latest and the best, all on payment plans.

Not me - never could afford the latest - the keep up with the Jones attitude.

who here feels the CEO's should be prosecuted or should they just be sent home and rewarded with their billions severance package?

Patsy

Accountable · Post by **Accountable** » Wed Sep 17, 2008 5:00 pm

Lon;986445 wrote: With the government now owning 85% of AIG I guess we could say that we now have NATIONALIZED INSURANCE--------------what else could you call it?
Good point, Lon. They cover health insurance too, don't they? You'd figure there'd be dancing in the streets.

Galbally · Post by **Galbally** » Thu Sep 18, 2008 4:25 am

I think by the end of the month there won't be one major investment bank left, and probably a couple of the retail banks are going to go under as well. The truth is that the US Fed cannot bail everyone out, as they don't have enough money. Already there is a threat from the Standard and Poors Credit Rating Agency that they are going to downgrade the US's Governments own credit rating as they have taken on so much liability, the US government might then find its not in a position not being able to borrow any more money from foreign governments, as no one will want to throw good money after bad.

Once that happens the Asians will start selling their US treasury bonds; should this happen wholesale then ineivatbly the US Dollar will completely collapse, and we are really into a doomsday scenario for the United States economy. This will of course have enormous knock on effects for everyone else as well, particularly us in Europe (and above all Britain, which will get decimated by this unless the City of London can change its misson statement and become the banker and insurer of choice for the Chinese and Arabs).

At that point the US is going to have either find a foriegn creditor very quickly (China maybe?) or go under completely for a generation, without much of a manufacturing base left to get itself back up on its feet, a collapsed currency, no social provision for its citizens, and into a debt-to-GDP ratio round the 70 to 80 percent mark, thats Latin American bananna republic economics at its finest that makes Columbia look good.

The worrying thing is that this unprecedented set of circumstances is becomming increasingly likely, if not rapidly unavoidable. What a mess, what a great idea it was to deregulate banking and the financial markets.

gmc · Post by **gmc** » Thu Sep 18, 2008 6:43 am

Course it's all a clever saudi plot to bring down the americans, if terrorist attacks by your citizens don't work then get them to invade a country that had nothing to do with it- but who also happens to be one of the countries potentially powerful enough to be a problem in the region- and embroil them in a costly war of attrition. Next bump up the price of oil, then lower it, encourage speculation on the oil and share markets refuse to pump more oil and the coup de grace will be to stop trading oil in dollars.

Post by **Bryn Mawr** » Thu Sep 18, 2008 9:37 am

gmc;987263 wrote: Course it's all a clever saudi plot to bring down the americans, if terrorist attacks by your citizens don't work then get them to invade a country that had nothing to do with it- but who also happens to be one of the countries potentially powerful enough to be a problem in the region- and embroil them in a costly war of attrition. Next bump up the price of oil, then lower it, encourage speculation on the oil and share markets refuse to pump more oil and the coup de grace will be to stop trading oil in dollars.

No, OBL couldn't possibly have know how well the US Administration would do his job for him