Feds dig $30 billion deeper for AIG
The U.S. government poured another $30 billion into AIG this week, seeking to shore up the troubled firm that has insured vast amounts of toxic debt held by U.S. and European financial institutions.
The U.S. government poured another $30 billion into insurance giant AIG this week, seeking to shore up the troubled firm that has insured vast amounts of toxic debt held by U.S. and European financial institutions. With this week’s bailout, the fourth for AIG since September, the government, which already owns 80 percent of AIG, has committed $180 billion to the company. “The systemic risk of doing nothing was simply unacceptable,” said White House Press Secretary Robert Gibbs.
The bailout was initiated by the Treasury Department in response to AIG’s loss of $61.7 billion in the final quarter of 2008—the largest quarterly loss in corporate history. The government also eased the terms on previous loans to AIG to help the firm avoid ratings downgrades. The government hopes to recoup some of its investment by spinning off salable AIG businesses.
Taxpayers are stuck paying for a massive “scam,” said Joe Nocera in The New York Times. For years, AIG exploited regulatory loopholes that enabled it to insure risky mortgage-backed securities while setting aside no money to pay off eventual claims. AIG also dipped its clients’ toxic assets in the “holy water” of AIG’s triple-A credit rating, providing risky junk with the appearance of prudent investments. Through this “extreme hubris, fueled by greed,” the company became too big to fail.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
And too big to tell the truth, said The New York Times in an editorial. We keep hearing that “major financial institutions” depend on AIG’s survival, yet we still don’t know which companies are involved. Taxpayers deserve to know the identity of AIG’s toxic partners and what roles they played in the crash. If possible, they should be “made to pay for the bailouts.”
Unfortunately, bailouts of AIG aren’t over yet, said The Wall Street Journal. The company will need additional cash infusions. But “instead of an open-ended commitment to pour money as needed into AIG, the Fed and the Treasury should be offering taxpayers an exit strategy.” AIG needs a plan to attract private capital; the government’s takeover is only making that harder.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Create an account with the same email registered to your subscription to unlock access.
-
'Make legal immigration a more plausible option'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
LA-to-Las Vegas high-speed rail line breaks ground
Speed Read The railway will be ready as soon as 2028
By Peter Weber, The Week US Published
-
Israel's military intelligence chief resigns
Speed Read Maj. Gen. Aharon Haliva is the first leader to quit for failing to prevent the Hamas attack in October
By Justin Klawans, The Week US Published
-
Arizona court reinstates 1864 abortion ban
Speed Read The law makes all abortions illegal in the state except to save the mother's life
By Rafi Schwartz, The Week US Published
-
Trump, billions richer, is selling Bibles
Speed Read The former president is hawking a $60 "God Bless the USA Bible"
By Peter Weber, The Week US Published
-
The debate about Biden's age and mental fitness
In Depth Some critics argue Biden is too old to run again. Does the argument have merit?
By Grayson Quay Published
-
How would a second Trump presidency affect Britain?
Today's Big Question Re-election of Republican frontrunner could threaten UK security, warns former head of secret service
By Harriet Marsden, The Week UK Published
-
'Rwanda plan is less a deterrent and more a bluff'
Instant Opinion Opinion, comment and editorials of the day
By The Week UK Published
-
Henry Kissinger dies aged 100: a complicated legacy?
Talking Point Top US diplomat and Nobel Peace Prize winner remembered as both foreign policy genius and war criminal
By Harriet Marsden, The Week UK Last updated
-
Trump’s rhetoric: a shift to 'straight-up Nazi talk'
Why everyone's talking about Would-be president's sinister language is backed by an incendiary policy agenda, say commentators
By The Week UK Published
-
More covfefe: is the world ready for a second Donald Trump presidency?
Today's Big Question Republican's re-election would be a 'nightmare' scenario for Europe, Ukraine and the West
By Sorcha Bradley, The Week UK Published