The Case for Saving A.I.G., by A.I.G.

The New York Times ^ | 3/2/09 | Andrew Ross Sorkin

[marshmallow]

Inside the corridors of power in Washington, a 21-page document has been getting a lot of attention. It is marked confidential and titled “A.I.G.: Is the Risk Systemic?”

The report, prepared for regulators by the American International Group, examines the economic apocalypse that would follow if A.I.G. failed.

This document may help explain why the federal government just rescued the insurance giant for the fourth time in six months — and why the government was willing to spend $30 billion more of taxpayers’ money for very little return. The government, which owns nearly 80 percent of A.I.G., not only did not take more equity in A.I.G., but it also converted its preferred shares, which paid a 10 percent dividend, into shares that don’t pay a dividend at all.

“Systemic risk” is a phrase often used to describe the domino effect of one business’s failure on the rest of the economy. We saw the dangers of systemic risk in action when Lehman Brothers failed in September. And we’ve heard a lot from Detroit automobile executives about the systemic risk they say the nation would face should General Motors teeter.

But those failures look like summer thundershowers compared with the financial hurricane that a collapse of A.I.G. would represent, according to the document, which was presented to Treasury Secretary Timothy F. Geithner and Lawrence H. Summers, head of the National Economic Council, in recent weeks.

One of the biggest worries, besides the considerable collateral damage to the banking system, is a risk that most people aren’t talking about, perhaps because it’s too scary. This one is probably easier to understand than any kind of financial chicanery: the dangers lurking below A.I.G.’s seemingly stable, highly regulated life insurance business. In the United States, A.I.G. has more than 375 million policies with a face ......

[Enterprise]

Feed me Seymore

[Hoffer Rand]

“Why everyone in the bar should buy me another drink”

—by the alcoholic

[rednesss]

I want to see some of these people hauled off to jail. Where the hell is the outrage that was all over the place when Enron collapsed?? I want some perp walks on Wall Street, now.