Treasure Secretary Henry M. Paulson Jr. and the Fed chairman, Ben S. Bernanke, convened a meeting with House and Senate leaders on Capitol Hill last night to discuss giving AIG an unprecedented $85 billion bailout.
What does that mean? It means AIG's commercials just got really, really funny!
Each spot features precocious little urchins discussing topics like "risk management" (ha!) and their parent's perceived personal finance failures until eventually the name of AIG is invoked as a salve to soothe their worried minds. Each commercial ends with AIG's tagline "The strength to be there." We saw these running as recently as Sunday, two days before you and I, the taxpayers, bailed the company out with 85 billion of our dollars.
You know what's extra funny? The children of the kids in these spots will still be bailing out this, the Summer of Dumbass '08.
3 comments:
It's not a bail out - it's a "loan"
Part of the conditions of the "loan" is that the "government" now "owns" 80% of AIG.
Is this a backdoor way to nationalize AIG, technically it now is. What is next?
That smoke you see on the horizon is the printing presses making more dollars (therefore decreasing the value of our current dollar)s to pay for all these "rescues" of the "too big to fail" group.
AIG is a HUGE company with many product/business lines - auto insurance, life/annuity, pensions, aviation leasing, commercial property-casualty, MPL and so forth. A financial collapse of AIG would have far-reaching effects - for example it could wipe out pensions for millions of people. At root, AIG's core business lines is "business as usual," with adequate capital to cover policy exposures.
As a result of the LOAN, to use the correct terminoligy, we consumers are being protected from a shattering loss of value in pensions, annuities and other income and retirement-driving vehicles that millions of people depend on. As protection, this loan must be paid off within 24 months. In addition, the Feds as collateral own 80% of AIG for the duration. What that means is that for every dollar of profit every single day - and remember we are talking about a huge entity with core profitability - the feds take 80 cents of each dollar.
Sure, the commercials are now ironic and that makes a nice story. But it's worthwhile - and good consumer protection - to gain an understanding of the actual implications of the loan as well. As taxpayers, we would be FAR worse off if AIG and other core-stable entities began to crumble.
The insurance world of AIG is stable and not for sale, it's the mortgage-backed securities that took a dump and led to this mess.
Post a Comment