If the “official” (read: “press release”) reaction frominsurance industry trade groups about the Fed's $85 billion-dollarbailout of AIG is any indication, the controversial move is quitesimply a Very Good Thing. They point to the fact that thereare safeguards — AIG has 24 months to pay off the loan withinterest, most likely by selling off substantial portions ofits business to who knows what investors. They say it willstabilize the markets and willnot lead to the domino effect of morebailouts.
|Then why am I so bothered by the principle of thething?
|We all work within the insurance industry, and we all wantit to do well. But above and beyond our connection toinsurance, we're also consumers and taxpayers. And this latestfinancial fiasco should infuriate anyone who pays taxes,has a 401(k) and is watching their investments go down thecrapper.
|And the price tag is a lot more than $85 billion. According toblogger Hale Stewart:
Between the $29 billion the Fed pledged to swing the BearStearns sale to JPMorgan in March, $100 billion apiece to rescuemortgage finance firms Fannie Mae and Freddie Mac, up to $300billion for the Federal Housing Authority, Tuesday's $85 billionloan to insurer AIG and various other rescue deals and loans,taxpayers are potentially on the hook for more than $900billion.
Make no mistake, the suckers footing the bill for all of thisare you, your children and your grandchildren.
|We've been hearing for years about how free trade, unfetteredbusiness dealings and minimal regulation can only benefit theeconomy — and in turn, you. Big businesses have hammered thedoctrine into our heads that too much government is bad. In thepolitical arena, these same opponents of big government arealso fond of the term “personal responsibility,” at least whenit comes to welfaremothers, broke homeowners defaulting on theirmortgages, and underinsured property owners who get hit with adisaster. (After Katrina, some of the comments made anonymously oninsurance forums about hurricane victims byso-called ”professionals” made my blood run cold.) It'sfunny how these same opponents of “handouts” for ordinary citizensdon't mind heading to the dwindling government trough whenthey're in trouble themselves.
|The big brains at AIG, who make a living specializing in risk,should have had an inkling that adequately insuring somethingas risky as mortgage-backed securities might be a problem. Evenformer AIG helmsman Hank Greenberg has blamed management'sfailure to practice sound risk management as the reason for themeltdown.
|At this point, the big question is, who's next? The pundits aresaying that AIG's loss will be its competitors' gain.Unfortunately, the bottom-line losers in all this fiscalsleight-of-hand are the insurance buyers, who end up with fewermarkets and more uncertainty. Oh, and the insurance agents andbrokers who have to explain it all to them.
|Want to take a survey on the AIG meltdown? Clickhere:
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