Whenever a financial behemoth totters on the brink of bankruptcy, government officials start chanting the mantra, “It's too big to be allowed to fail.” Is that the case with American International Group, collapsing beneath the crushing weight of subprime mortgage loans gone bad? AIG's former top dog, Hank Greenberg, certainly thinks so. But the big question is, will anyone be held accountable for getting AIG into this mess in the first place?

As reported by our own Dave Postal, Mr. Greenberg made the case for helping his old company keep from becoming the latest domino to fall in the subprime debacle while appearing on CNBC's Squawk Box.

He made it clear that it is in the national interest that AIG survive, adding that even if Uncle Sam has to step in directly and offer a bridge loan via the Federal Reserve, that's “not a bailout.”

Basically, Hank is arguing that while AIG has “a cash problem,” it is basically sound. He's not wrong in stating that AIG has a liquidity problem, not a solvency problem.

He is also most likely correct that resolving the companys trades with counterparties if the firm filed for bankruptcy would take years, and that forcing AIG into bankruptcy would in effect mean creating a systemic problem.

There is no business like AIG, he said. It affects everything we can do in the world. It would be a loss to America. He added that the carrier he led to dominance over a period of decades is “a national treasure,” warning that “letting AIG go down would be a tragic mistake.”

One way or the other, I think AIG will get its life preserver. It will either get private financing or a federal bridge loan, or both, to keep the company afloat.

However, I would not go so far as to second Mr. Greenberg's motion to set a moratorium on rating agency downgrades for 90 days, so as to buy AIG time to do a rights offering and sell off some assets–but a bridge loan might make the point moot in any case.

Again, however, while everyone frantically scrambles to keep AIG from sinking into oblivion, I can't help but wonder whether there be any accountability for the risky investments that put the carrier into its precarious position. Somehow, I doubt it.

The Republican Party likes to call this an “ownership society,” and insist that everyone must take responsibility for their own retirement and healthcare financing. But somehow that credo goes out the window when a major company like AIG gets into trouble, mainly because the firm's collapse would hurt the economy so deeply, and ultimately hurt all those average people who depend on Wall Street and Main Street to keep them from personal poverty.

But letting tens of millions of people go without health insurance, or pushing for privatization of Social Security, or the end of defined benefit pension plans also has a consequence. It adds up to a very shaky economic foundation for individuals and corporations alike.

As Ricky always used to say to Lucy, AIG has a lot of explaining to do. That's the price you pay when you have to plead for your corporate life.

Stay tuned to this latest episode in the corporate version of “Survivor”!

Special Reports /

Is AIG Too Big To Fail?

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