Lots Of Anger Toward AIG But What Were People Expecting
There is a lot of outrage at the moment toward AIG for distributing more than half of the funds from the government’s bailout to a group of banks as well as the ongoing backlash toward executive compensation. AIG reported over the weekend that it sent $93 billion in payments to banks to meet obligations on credit default swaps it wrote.
It’s not like AIG has a choice to not make these payments, they are after all an insurance company. The government should have also known what it was getting into since they have revised their bailout package a number of times.
There have been calls to revise AIG’s bailout and the government may be regretting their decision to intervene but it’s far too late for them to do anything about it now. The original bailout terms would likely have protected taxpayer’s from significant loss but as the scope of AIG’s predicament unfolded, the government’s involvement as well as it’s risk has more than doubled.
For all intents and purposes, the government is married to AIG now and they control 80% of the company’s equity. Many analysts have predicted that the government will have to pour even more money into the company if they want to continue to facilitate a smooth sell off of it’s assets.
Being impatient would be the wrong move at this time. It’s a terrible time to sell off assets and if the government attempts to rush things, taxpayers could end up losing a bundle.
