Use Offers AIG $30 Billion More in Aid
Insurer AIG will receive more aid from the government than it did several months ago, the New York Times reports:
The federal government agreed Sunday night to provide an additional $30 billion in taxpayer money to the American International Group and loosen the terms of its huge loan to the insurer, which is preparing to report a $62 billion loss on Monday, the biggest quarterly loss in history, people involved in the discussions said.
The intervention would be the fourth time that the United States has had to step in to help A.I.G., the giant insurer, avert bankruptcy. The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.
Federal officials, who worked feverishly over the weekend to complete the restructuring, said they thought they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system.
These are the only bailouts I can generally support. Insurers and banks are a too important part of the U.S. economy. If AIG would collapse, it could truly create a lot of problems.
Having said that, there’s a limit to what the government can and should do to help failing financial institutions out. If AIG has so many problems that it needs tens of billions of dollars every couple of months, bailing it out is probably unwise; after all, its problems are systematic, not caused by the current crisis.
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