To be fair, the retreat was almost certainly planned and paid for months in advance, and it's doubtful cancelling it would have recouped much of the expense. AIG, unlike Fannie and Freddie and Bear Stearns and Lehman, is more a victim than a perpetrator in this mess, and my understanding of how they went down is that it was swift and unexpected. They were losing money for some time, but positioned to handle it (they thought), until a large portion of their assets was rapidly devalued over the past month.
Also worth noting: as an insurance company, AIG falls under a lot of regulation. That was actually part of the problem. They are required to have assets in some proportion to their liabilities, and as their assets deteriorated, they were caught short.
The $85 billion "bailout" of AIG is not a no-strings cash transfer, either. It's a loan, and the Fed has an 80% ownership stake in the company as collateral, in the form of preferred shares. So the taxpayer stands to lose very little on AIG. Shareholders, however, got pillaged.
Obviously, it doesn't look very good, but I think AIG is in a different category than much of the other stuff going on.
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Date: 2008-10-08 12:33 am (UTC)Also worth noting: as an insurance company, AIG falls under a lot of regulation. That was actually part of the problem. They are required to have assets in some proportion to their liabilities, and as their assets deteriorated, they were caught short.
The $85 billion "bailout" of AIG is not a no-strings cash transfer, either. It's a loan, and the Fed has an 80% ownership stake in the company as collateral, in the form of preferred shares. So the taxpayer stands to lose very little on AIG. Shareholders, however, got pillaged.
Obviously, it doesn't look very good, but I think AIG is in a different category than much of the other stuff going on.