AIG, the plot thickens
Posted by Mike Sylvester - 10/8/08 @ 9:55 pm - Filed Under National Politics
As most of you know on September 16th, 2008 the Federal Government spent 85 billion tax dollars on a private company, AIG. Basically our Federal Government borrowed 85 billion dollars and turned around and loaned that money to AIG so they would not have to fail and declare bankruptcy. In return the Federal Government has stock warrants for 79.9% of the equity in AIG. Basically the Federal Government owns 79.9% of AIG. The 85 billion is a loan that supposedly must be repaid within 24 months and AIG has to pay interest that is 850 basis points above the three month LIBOR rate.
Today, 22 days later, it has been revealed that AIG had already drawn and spent 61 billion of the allowed 85 billion as of September 30th! Meaning that AIG has drawn and spent almost 71.8% of the 85 billion in just 14 days.
So today the Federal Reserve decided to loan AIG ANOTHER 37.8 billion dollars that we do not have. So this means we will sell more Treasuries and borrow that money and increase the National Debt even further.
Brilliant.
Mike Sylvester
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7 Responses to “AIG, the plot thickens”
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The Fed has decided that AIG is too integral to fail.
Which is utterly absurd.
If the Fed is going to “decide” that companies are too big to fail then our regulators need to ensure that the companies never get that large.
Mike Sylvester
But Mike, How can you regulate and de-regulate at the same time? Doesn’t regulation go against conservative principals?
Which Washington “brain” decides who can and who cannot grow and to what extent?
John,
Then there’s no bailouts. These companies can’t have it both ways. Either we regulate them so they can’t grow too large or we de-regulate them with no bailouts. The privatization of profits while socializing the risk is ridiculous.
Mike,
Not mention AIG is spent $400k on a trip to the spa and golf course for their executives. Unbelievable…
John,
It is absurd to say that regulation goes against conservative principles.
Over-regulation goes against conservative principles.
Mike Sylvester
Mike:
Which “Brain-child” determines “Over”, “under” of “just right”? I keep hearing people say things like…. ‘just let business and industry regulate themselves’ ‘They know how to do it better than government’. Really? Do they now?
I’m not playing the blame game. I just don’t believe any politician anymore!
John,
I do not believe politicians either.
Consider the Sarbanes Oxley Act John. It put regulations in place that forced all publicly held companies to comply with various regulations concerning internal controls and accounting mainly. Most publicly held companies spend millions of dollars per year to comply with these rules.
These rules did not reveal any of the problems that brought down these financial companies.
In other words these companies had to comply with a strict regulatory environment and yet that regulatory environment failed to detect any of the problems that “broke” these companies.
We do not need more regulation, we need effective regulation.
The US banking industry is the second most regulated indutry in the United States (Nuclear power generation is first).
Mike Sylvester