One hardly knows where to begin.
In the span of about a week in mid-September, natural and man-made disasters came hurtling at us at the speed of sound bites.
Hurricane Ike wiped out Galveston, then swept up to Illinois, Ohio, and Kentucky where it plunged millions into darkness. The storm completely bypassed Florida, providing a potential new marketing slogan for myflorida.com: Escape the Hurricanes — Visit Florida.
The man-made disasters hit everywhere, with the force of a Category 5 — or higher. Lehman Brothers Holdings filed for Chapter 11 protection in the biggest bankruptcy filing ever. Troubled Merrill Lynch rushed to safe harbor by offering itself to Bank of America.
The Dow Jones industrial average lost more than 500 points in a single day, its steepest drop since the day the stock market reopened after 9/11. Some $700 billion evaporated from retirement plans, government pension funds, and other investment portfolios.
And the final (we can only hope) coup de grace: AIG, the world's largest insurance and financial company with more than $1 trillion in assets, needed a bailout from the government to survive.
AIG was yet another "victim" of the sub-prime collapse, caught in a financial black hole of its own creation. When its share price dropped 79 percent this year, Moody's Investor Service, Standard and Poor's, and Fitch Ratings lowered AIG's credit ratings, forcing it to post $14.5 billion in collateral to support its trading contracts. AIG couldn't sell its assets off quickly enough to get the money, and turned to other financial institutions for loans. When that didn't work, the government had to cowboy up to prevent a total collapse.
In a press release, AIG said it was "a solid company with more than $1 trillion in assets and substantial equity, but it has been recently experiencing serious liquidity issues. [The loan] will give AIG the time necessary to conduct asset sales on an orderly basis."
The plan will go through because choices are easy when there are no options. However, within days of the bailout announcement, AIG's major shareholders made it known that they would try to come up with a plan to pay off the debt ASAP and keep the government from maintaining the huge majority ownership.
To prevent further deterioration of America's economy, President Bush and his financial advisors have now proposed the biggest government intervention in financial markets since the Great Depression. When asked the approximate dollar size of the government intervention, Treasury Secretary Henry Paulson responded, "We're talking hundreds of billions." In government-speak, that's probably about a trillion.
Looking at the disarray, I am reminded of a long-ago quote from Stewart Alsop. At the height of the Vietnam War, Alsop famously likened the Pentagon to a log with 30,000 ants, tumbling down the rapids, with each ant believing he was steering.
Substitute "government" for "Pentagon," and hang on.
One final note: Because of the long production schedule associated with a monthly publication, feature articles are written and sent to layout well ahead of the print-and-mail date. This editorial is the last document sent; it gets plugged into the space reserved for it. I mention this lest you think that the industry experts who so generously contributed to this special legislative issue ignored the elephant in the room — AIG. They didn't. It hadn't crashed through the floor yet.
To the probable dismay of these experts and other insurance people, the AIG situation will almost certainly have legislative repercussions. "Companies have operated unfettered compared to what is going to happen to the financial services market," said Ellen Carney, a senior analyst at Cambridge, Mass.-based Forrester Research, in a media interview. "In terms of regulation, they haven't seen anything yet."
As I said, hang on.
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