If I understand things correctly, and I very well may not, is that the Fed "bailed-out" AIG in order to protect customers and stakeholders, both private and corporate, from economic disaster should such a large corporation fail. Read: in order to protect your 401K, IRA, retirement, job, business.

I also wonder why the term bail out is being used; sure the Fed lent some $80 billion at 11% interest to AIG. But is that a real bail out? Sounds like a loan, but I also realize that the Fed did take control of quite a bit of equity.

The thinking is that its sufficient capital so that pieces of the business can be sold, restructured, abandoned, etc., so it's kind of understandable to me. Some of the talking heads on TV and radio make it seem like an $80 billion hand out....that the gov't has no business meddling, that one guy shouldn't have control of $800 billion in bail out money (bernake), they should help smaller businesses, etc.

Meanwhile lawmakers in Washington are playing the blame game and butt-hurt about not being involved in the decision to fund the loan to AIG. Heh, can you imagine how long that'd take?

AIG made mistakes, and rather than allow the economy to suffer more, the Fed stepped in and lent some money and took control of a company that still has some valuable assets that likely outweigh potential liability.
Doing so basically eliminates a fire sale on wall street; which is what the Fed is attempting to accomplish. No? I don't doubt that the gov't will make some money off of this deal. Hopefully they'll put it to good use...

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1982 240 D, 308,000 - 321,127 miles (sold)
1982 300 TD,166,500 - 226,000 miles
1998 E 320, 120,000 - 144,000 miles
2005 C 230 K, 26,000 - 77,000 miles (sold)

Its one heck of a nice loan, I wish the Fed made more good moves with our tax money like this. 11.5% return on that large of a loan is fantastic!

I'm under the impression that the stock holders will get hosed, and management as well. Which is how it should be.

IMHO the AIG move was a good one, the government saved a bunch of jobs, helped the economy, and is making a bit of money.

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1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

But how many jobs and for how long. A very good friend was with AIG for 8 years and was part of the first wave 3 years ago with the "doing away with your department" saga. I think it's a temporary fix to a long term problem and "jobs" are going to be the last thing on their mind, as the first thing any company goes after to reduce costs is payroll......

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Sharing my partner's 2012 Forte 5dr SX til I find my next 123 or 126..
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Do I miss being a service advisor ???

They'll cut the business lines that aren't profitable and can't be sold to other companies. Nowadays anybody with a job should be happy to have one due to the pull-back that every business has recently gone through or will go through. Did your friend find another suitable job? Is he better off now?

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1982 240 D, 308,000 - 321,127 miles (sold)
1982 300 TD,166,500 - 226,000 miles
1998 E 320, 120,000 - 144,000 miles
2005 C 230 K, 26,000 - 77,000 miles (sold)

I wouldn't go spending that 11.5% (I thought it was 10?) just yet. After the election, Congress will quietly excuse them of it I'm sure.



I believe it's being called a bailout because the government is protecting AIG from the risk they took. Or mismanagement, I don't remember if that was them or Lehmans. Either way, the company made money today they couldn't afford tomorrow, but rather than have to afford it, the government afforded it for them.

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1984 300TD

I'll call it a bail out when it turns into one, for now its a very high interest loan.

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1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

Corporate welfare. Rewards inefficiency and poor planning.

B

I worked in information systems for a large corporation 20 years ago. Even then, we built extensive what-if modelling that projected the risk and likelihood of every kind of business and economic scenario. We ran these programs all the time. I can only believe that the software and data sources are now much more sophisticated.

The executives at these companies were well aware of the risks they were taking, but they chose to ride the wave til it crashed. This is not only true for AIG, but the other giants as well. Maybe they even projected the chances for a government bailout.

Since Enron, it seems there's a new generation of corporate executives that operates in callous and brazen disregard of ethical business standards. Everything is expendable, down to their company's 150-year old logo. The only thing that matters is riding the wave of monumental short-term gains. No company is immune from this greed. It makes me have a gut distrust of executive management at all big firms.

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1985 380SE Blue/Blue - 230,000 miles
2012 Subaru Forester 5-speed
2005 Toyota Sienna
2004 Chrysler Sebring convertible
1999 Toyota Tacoma

Capitalism only works when there is a threat of loss if one assumes too much risk.

The way this game is played, the companies take all the profit, and the taxpayers get all the debt.

Bad

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1982 300SD " Wotan" ..On the road as of Jan 8, 2007 with Historic Tags

Government need not be meddling. Why AIG and not Lehman? Somebody got AIG ties? What great reward hath no greater risks?

Maybe the gummint will take over my mortgage. I find it a horrible imposition on my lifestyle.

How about what is happening to the Money Market Funds? I am sort of glad I didn't invest in one a few months back.

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1999 Toyota Corolla VE (Mine)
2006 Honda Odyssey (Wife's)
1979 300CD (sold)

And the people investing for retirement via 401Ks and such get screwed.
This is why we have, and need, Social Security.

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1985 380SE Blue/Blue - 230,000 miles
2012 Subaru Forester 5-speed
2005 Toyota Sienna
2004 Chrysler Sebring convertible
1999 Toyota Tacoma

This is quite literally the government getting involved in the sub-prime market. They've advanced money on a risky loan in return for a high interest rate.

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Jonathan

2011 Mazda2
2000 E320 4Matic Wagon
1994 C280 (retired)

Should have helped AIG, should have found a better solution than buy all of Freddie Mac/Fae, probably shouldn't have helped Bear Stearns, was right not to help Lehmann.

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- Brian


1989 500SEL Euro
1966 250SE Cabriolet
1958 BMW Isetta 600