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AIG failed. A team in London trading CDS broke the company. The only reason why the corpse of AIG was kept alive was because AIG owed Goldman Sachs a lot of m

by yapcguy 13y ago

AIG failed. A team in London trading CDS broke the company. The only reason why the corpse of AIG was kept alive was because AIG owed Goldman Sachs a lot of money. Taxpayer bail-out funds that went to AIG passed straight through and into the bank account of Goldman Sachs. I recently saw an ad by AIG. It's actually sickening. This company failed. Their assets should have been taken over by good insurance companies who managed their risks properly and did not engage in speculative instruments. By rewarding bad actors like AIG, moral hazard has been introduced into the markets. Anybody who says they support free markets and capitalism must surely agree that AIG should have been allowed to fail. Yes, it would have caused chaos but that's why lawyers and bankruptcy courts exists. With politicians picking the winners and losers, it's no wonder lobbying is such a popular business.

protomyth 13y ago
AIG should have been allowed to fail, and I don't think it would have caused as much chaos as we actually got. The insurance parts of AIG (regulated by the states) were good, it was the financial products division (regulated by the feds) that double dipped and failed. The states would have dealt with the insurance parts in a better manner than the fed. GM should have been allowed to go into bankruptcy (given the Feds wanted to kill Buick, the best seller for GM in China) and dig out themselves. [edit] although Iceland's bank and AIG are totally different scenarios
- hessenwolf 13y ago
  The insurance part needs to run collaboratively across the whole country at least for the economies of scale to kick in. AIG are still a recognisable brand, and an insurance company of that scale is an incredible asset for a society to have (as are Allianz and AXA, etc...) Also, large insurance companies are incredibly complex, and take a very long time to build up. It would be very silly to let something like that go under for short-sighted reasons.
  - icelancer 13y ago
    >Also, large insurance companies are incredibly complex, and take a very long time to build up. It would be very silly to let something like that go under for short-sighted reasons. I agree. AIG shouldn't have been so short-sighted. But since they were, they deserve to fail like every other business who doesn't adequately plan for the future. Oh wait.
  - protomyth 13y ago
    "insurance company of that scale is an incredible asset for a society to have" Not when it means keeping the ill-handled, tax payer killing investment company. It failed and we did a massive disservice to the tax payers by keeping it open.

by yapcguy 13y ago

protomyth 13y ago

AIG should have been allowed to fail, and I don't think it would have caused as much chaos as we actually got. The insurance parts of AIG (regulated by the states) were good, it was the financial products division (regulated by the feds) that double dipped and failed. The states would have dealt with the insurance parts in a better manner than the fed. GM should have been allowed to go into bankruptcy (given the Feds wanted to kill Buick, the best seller for GM in China) and dig out themselves. [edit] although Iceland's bank and AIG are totally different scenarios

hessenwolf 13y ago
The insurance part needs to run collaboratively across the whole country at least for the economies of scale to kick in. AIG are still a recognisable brand, and an insurance company of that scale is an incredible asset for a society to have (as are Allianz and AXA, etc...) Also, large insurance companies are incredibly complex, and take a very long time to build up. It would be very silly to let something like that go under for short-sighted reasons.
- icelancer 13y ago
  >Also, large insurance companies are incredibly complex, and take a very long time to build up. It would be very silly to let something like that go under for short-sighted reasons. I agree. AIG shouldn't have been so short-sighted. But since they were, they deserve to fail like every other business who doesn't adequately plan for the future. Oh wait.
- protomyth 13y ago
  "insurance company of that scale is an incredible asset for a society to have" Not when it means keeping the ill-handled, tax payer killing investment company. It failed and we did a massive disservice to the tax payers by keeping it open.