Was AIG Worth Bailing Out?

November 16th, 2008 | by admin |

The U.S. Government has found themselves face to face with an enormous money pit popularly known as American International Group or AIG. AIG is one of the largest insurers linked to retirement held by millions of Americans, mutual funds and U.S. mortgages which made it neccessary to fund the company with an $85 billion bailout loan.

Without the bailout, the global economy would have faced a much larger scale of financial crisis. This is the only fact to ease taxpayers minds about the money spent to save the floundering insurance giant from inevitable failure.

Even after the $85 billion loan, AIG was still in need of more money so in October, the Feds added another $38 billion. Treasury has decided to pitch in $40 billion to purchase partial ownership of perferred stock giving taxpayers the opportunity to stake a claim ownership. Another $53 billion is to be given to AIG on top of this by the government who has decided to buy up mortgage backed assets and various other AIG contracts in debt. The leading question is, how will the government recover from the extra burden of debt themselves?

The Feds seem fairly confident that the money loaned to AIG will eventually be payed back to taxpayers. The lenth of repayment seems to be in the very distant future since AIG has been given the opportunity of a long term loan with a lower interest rate, therefore they have more time to pay back the money without further troubling themselves financially by having to sell off assets at firesale prices.

AIG Chief Executive, Edward Liddy, is quite pleased with the new plan and has stated that he feels as though the bailout loan will recover AIG to a more stabalized state while reassuring him that the company does hold value and importance to the American people. The question is, how do the American people feel about the bailout?

Americans across the nation are very displeased with companies being able to hold out their hand to an already misaligned government in order to get themselves out of financial trouble. This means these companies are being bailed out of the crisis they have brought upon themselves and side-stepping the repercussions of their faulty systems and frivolous spending. Instead they are being handed an easy out to the problem paid for by taxpayers dollars without questioning the people how they felt about the bailout in the first place.

Now that the AIG bailout has swelled to more than $150 billion, Americans are scratching their heads asking if it was really worth it. AIG has become so interconnected with a number of firms that it has made them the cornerstone of American finance.

Failure of AIG would lead to disruption of the economy and global devastation, leaving us even worse off than we are now. Choosing to leave AIG to their own demise was never even an option for the government or the American people considering they have become the backbone of the insured.

AIG feels confident that they will be able to turn their situation around and get back on their feet once again although there is speculation that they might still need more financing in order to keep from failing. It is the hope of Americans across the nation that AIG re-adjusts their system to better keep up with cashflow in order to prevent this from ever happening again. One good thing is the fact that there has now been restrictions put on executiving spending at the firm, ensuring the fact that company cannot continue their frivolous spending and fall under once again.

With any hope at all, the President-elect Barack Obama will have a new plan in order for the government that will better our own financial crisis and enable us to right the cash flow within our economy, prevening a number of companies from going under. Until then, AIG should be well on their way back to success with all of the government funding they have received.

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