The AIG horror show

Ben Bernanke says he is very angry about bailed-out insurance giant AIG, said Scott Jagow in Marketplace, which is the most emotion the Fed chairman, who usually testifies before Congress “like a zombie,” has ever shown. Still, his Senate hearing Tuesday was like “watching a bad horror movie”—Bernanke said the government had little choice but to “defang” AIG so it doesn’t take down the entire banking system. I guess that makes AIG a “vampire”?

With all the taxpayer infusions, it sure seems like the federal government is “trying to breathe life into a corpse,” said the Peoria, Ill., Journal Star in an editorial. After $180 billion, at some point shouldn’t taxpayers cut their losses and let AIG die? And if it’s other companies, not just AIG, being propped up, “don’t taxpayers have a right to know whom else they’re bailing out?”

Certainly the bailout is preventing “collateral damage” at banks worldwide, said Andrew Ross Sorkin in The New York Times, but there’s another “systemic risk” that’s perhaps “too scary” to contemplate: the collapse of the “entire insurance industry.” AIG holds 375 million U.S. life insurance policies with face value of $19 trillion—if policyholders cash out en masse, the chain reaction would take down more than just AIG.

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