In its infinite wisdom, our government has once again decided to bailout AIG by giving them billions more in tax payer money.
The government had already spent $150,000,000,000 [$150 billion] bailing out and nationalizing AIG before this latest bailout was announced. But, now, the governments newest plan has loaned AIG an additional $30,000,000,000 [$30 billion]. That of course gives us a total of $180,000,000,000 [$180 billion], yet many analysts are saying that AIG will probably “need” another bailout and that total money “loaned” to AIG could top $250,000,000,000 [$250 billion]!
Even if the loans were to stop now, AIG would have immense difficulty ever paying them back. $180,000,000,000 [$180 billion] even without interest is a substantial sum to have to pay someone back. Even if AIG’s profits were to return to what they were before this whole mess started, it would take AIG over 20 years to pay back not including interest if they were to take every penny of profit and throw it at their debt.
Joseph Stiglitz, a nobel prize winning economist who has advised both President Clinton and President Obama has spoken out against these bailouts of AIG and the banks–he argues that not only will throwing this kind of money at the banks will create an investment bubble even bigger than the one that just burst, but doing so could also downgrade our standard of living for the next 20 years.
Enough is enough!
We should let this company fail, rather than continue to subsidize its failures and stupidity.
The real free market solution here is not to continue to throw unfathomable sums of money at AIG hoping that this money will eventually stabilize it. Rather, the real solution here is to let AIG fail. AIG’s assets should be auctioned off in the open market under the guidence of a bankruptcy court. No, their assets and businesses wont get anything enar their “book values.” Investors and business, however, will pay something for AIG’s name, businesses, real estate assets, and receivables. In a real free market solution, investors would put up their own money and buy these pieces of AIG at a low enough price that they will believe that they have a good chance to make a profit. This price would probably only be pennies on the dollar, but repricing “bad” or overvalued assets is a very important aspect of the free market system.
Under this solution, AIG’s pieces would probably become parts of other insurance and financial companies, or they would end up being owned by large investors. With assets and receivables being bought at rock bottom prices, AIG’s new owners would be able to operate with confidence that good decisions will lead to profit, as they wouldnt be saddled with such an enormous debt.
This would also prevent the credit markets from further locking up by allowing AIG and its parts to continue to operate, although most likely as parts of other companies. And, most importantly, all of this is accomplished without creating a new “bubble” that will inevitably burst in the not so distant future, causing yet another financial crisis and risking our future.
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