Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

The U.S. Govt Now Owns 80 % of AIG

Published 03/03/09 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

American taxpayers will once again be forced to foot the bill for yet another bailout of the failing insurance giant American International Group after the company reported the largest quarterly loss in U.S. corporate history.

AIG, the world’s largest insurer, posted a one-quarter loss of $64.1 billion, or about $465,000 a minute. On the year, the company has lost a total of $99.3 billion while its stock has lost 73 percent of its value.

The company has already received $150 billion in taxpayer money to avoid failure. The government will invest another $30 billion in the company in the form of preferred shares. The U.S. government now owns roughly 80 percent of the world’s largest insurance company.

AIG, more intertwined in the global financial markets than even Lehman Brothers was, is believed to be a company that is simply too large to fail. The government said the effects of a failure of the company would result in worldwide economic calamity, dwarfing the current crisis. AIG operates in more than 130 countries, has over 30 million American policyholders and insures more than 100,000 entities - pension funds, etc. - including operations that employ more than 100 million Americans.

"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the US Treasury and the Federal Reserve said in a joint statement.

The latest infusion of government cash will allow the company to keep its credit ratings from being downgraded. If that did happen, AIG would be forced to come up with billions in cash that the company does not have.

The independent research firm Gradient Analytics, predicts that A.I.G. is going to cost taxpayers at least $100 billion before all is said and done. In fact, it is highly likely that the government will be forced to step in with even more money to keep the beleaguered company afloat. Which is all the more difficult to stomach knowing that the company’s greed and shady business practices got it into this mess in the first place.

However, the company is simply too big to fail. The domino effect would be too great and could destroy the financial system as we know it.

“Here we are now, fully aware of how these scams worked,” The New York Times reports. “Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would “blow up,” and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed.”

Click Here For Solutions To America's Economic Problems

Click here to contact your Representative in Congress.

Unless the above article is already copyrighted, this article is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License, EIC grants permission to use this article in whole or in part provided attribution is given, preferably in the form of a link back to EconomyInCrisis.org.