AIG financial difficulties are not due to it being insolvent, (eg insufficient assets to cover its liabilities). AIG's problem had to do with liquidity, (eg being in cash or easily convertible to cash; debt paying ability). AIG used the money paid by those it insured to make long term investment in stocks, bonds, annuities, and other financial instruments like sub-prime home mortgages.
The last eight years of the Bush Administration have been hard on insurance companies with all manner of disasters including hurricanes, tornadoes, floods, droughts, tsunamis, etc. I am at a loss to explain why there have been so many natural disasters during the year of the George W Bush Presidency. Perhaps its because of climate change, or perhaps it God's wrath on America for having elected a neo-conservative executive branch LOL, or perhaps someone has learned how to control the weather, but who knows? Anyway, AIG didn't have the liquidity to pay for the unexplained increase in insurance claims that have occurred during the past several years, especially considering the tightening of credit from leading institution, the upheaval in investment portfolios due to the credit crisis, bear market, and the general shaky confidence level throughout the economy. The government's 85 billion dollar rescue of AIG came in the form of a loan, which AIG will repay with interest. The debt instrument was structure to give the government 80% ownership of the company. I don't like the idea of the government taking a controlling interest in a public company; because, it sets a dangerous precedent. The government should not be in the insurance business, or any other business, that can be provided by private enterprise, and the government has the power to create money. Theoretically, the government could take ownership of all private business, while inflating everyone else into poverty. Regards, LelandJ [EMAIL PROTECTED] wrote: >> What do you think would happen if they did not step in? >> > > It would not be pretty, but we have become a nation that rewards failure and > punishes success by making the taxpayer pay for failures. You have to keep > in mind that this situation was precipitated by the opinion of a rating > company... rightly or wrongly... determining that the credit of AIG was not > as good as they had thought earlier. The ability to pay did not change, just > the opinion of the prospects of paying... which increased equity requirements > and probably interest rates. > > AIG was not without assets and it is unlikely that everything would have gone > away. What has happened is that the CEO that screwed up will continue to get > his inflated paycheck. Personally, if you overextend yourself... you loose, > but if a company like AIG, etc. overextends itself, we all loose, but if they > make a profit we get nothing. Something seems kind of unfair about that... > privatizing the profits and socializing the losses. > > If AIG were managing assets, the assets are still client assets, unless there > was some sort of fraudulent conversion, so the customer would loose nothing > except maybe a little sleep. If they can't meet their insurance obligations, > it would behoove the insured to switch carriers. > > Sure there is inconvenience, but not the major meltdown you fear. > > The problem of not letting companies fail is that no one ever learns the > lessons that can be found in the failure. Beyond this, while rating agencies > are useful, their opinions should be advisory, not absolute. If the company > is still basically solid, there is no reason a bankruptcy court (if > necessary) could not help them work out an arrangement with their nervous > creditors. > > On the other hand, if you had some reasonable business persons (how's that > for pc?) they could probably work out arrangements without going through a > court. It's called restructuring debt. > > -- > Larry Miller > > > > --- StripMime Report -- processed MIME parts --- > multipart/mixed > text/plain (text body -- kept) > message/rfc822 > --- > [excessive quoting removed by server] _______________________________________________ Post Messages to: ProFox@leafe.com Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[EMAIL PROTECTED] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
