would you buy AIG sahres??

downs523

would anyone buy shares in this company? its really low even though they have been given $85 billion by the us government

Old_Slaphead

In exchange for an 80% shareholding !!

dunstonh

You have to be fair to people. The average member of the public doesn't understand the the financing of these deals and the media is very quick to present it almost as tax payers giving them money. You have to blame the media for misrepresenting the facts and presenting the money as almost gifts rather than in exchange of equity or ownership.

edwinac_2

How the bankrupt financial system insures itself...

A.I.G. and the Folly of Credit Derivatives

September 17, 2008 (LPAC)--After initially refusing a request for a $40 billion loan, the Federal Reserve capitulated and agreed to lend insurance giant American International Group (A.I.G.) a whopping $85 billion late last night.

The deal is not really a bailout of A.I.G., but of the credit derivatives market, in which A.I.G. was a major player. That is, A.I.G. did a thriving business in providing guarantees to its customers that it would cover their losses should Wall Street firms default on their securities.

The credit derivatives business is conceptually insane, because the financial system is essentially insuring itself, and thus in a systemic crisis, at the time the protection is needed the most, the providers of the insurance vaporize at the same time as the financial paper they nominally insure. Thus it is no coincidence that A.I.G. melted down at precisely the same time as Lehman Brothers and Merrill Lynch (and others!). The Fed supplied the money because had A.I.G. failed, all the financial instruments it nominally guaranteed would have been unprotected, setting off a chain reaction of losses among already bankrupt institutions and speculators. (The losses are already there, but the fig leaf provided by credit derivatives is a key part of the accounting fiction that Wall Street's paper still has value.)

Another reason why the Fed moved to keep A.I.G. from failing is that A.I.G. has a large consumer business, and its failure would spook the public in a way that the failure of Lehman would not. The financiers are trying very hard not to "stampede the cattle" while they restructure the financial system, fearing that large public disruptions could cause the public to pressure the government to act, and break up the tenuous control the financiers have over the upper levels of both political parties. The last thing the financiers want is an FDR-style reflex, in which the public forces the government to defend the rights of the population.

Finally, it should be noted that this whole affair reeks of corruption, and of the absolute failure of deregulation. People pay premiums to insurance companies so that they can collect on their policies when necessary; the money in a very real sense belongs to the public, and the insurance companies have a moral and legal responsibility to safeguard it. A.I.G. should never have been allowed to engage in such risky activities, yet it was. This is the real scandal.