Wednesday, September 17, 2008

AIG Also Too Big to Fail

The U.S. Govnerment just became an owner of AIG, in an $85 billion bailout.

Look, I didn't like the Fannie Mae/Freddie Mac bailout, but at least I could justify it to a certain extent that the government was cleaning up a mess it made by failing to regulate entities created by the government.

But there is no such justification for the bailout of AIG. AIG could have gotten a buyer (maybe) and certainly could have declared bankruptcy.

AIG has 24 months to pay off the loan (like that is going to happen) and the loan is secured by other subsidiary assets, read stock and other assets of AIG companies.

I really don't like the idea of the government become what amounts to a commercial lender. That is what banks are for.

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