Another Government Bailout

Another day, another bailout. The U.S. government stepped in Tuesday to rescue American International Group Inc. aka AIG, one of the world's largest insurers, with an $85 billion injection of taxpayer money. What this proves is that the US governement has its priorities completely messed up.

Just a few weeks ago America sent $1 billion to Georgia to help rebuild damage caused by its war with Russia. And now the "loan" billions more to a private company. What about our schools and Americans unable to afford healthcare?

There is a problem when a society socalizes losses yet privatizes gains. While every American citizen is helping to foot the bill for AIG while they are in trouble, do we all receive dividend checks when AIG returns to profitability? If so then this is a good deal. Oh by the way where did the US govt get the money from, I thought we had a trillion dollar tab that.

AIG was the second time this month the feds put taxpayer money on the hook to rescue a private financial company. AIG says it plans to repay the money in full with proceeds from the sales of some of its assets.
When one bank loans another bank money, AIG insures those loans. Without AIG banks would have to find other ways to insure those loans.

Under the deal, the Federal Reserve will provide a two-year $85 billion loan to AIG, which many believe teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.

What is important to realize is that all investments have risk and unless your a Big Boy you won't get bailed out.

The Fed's move was part of a concerted push to help calm jittery markets and investors around the world.

On Tuesday, the Fed decided to keep its key interest rate steady at 2 percent, but acknowledged stresses in financial markets have grown and hinted it stood ready to lower rates if needed.

The central bank also pumped $70 billion into the nation's financial system to help ease credit stresses. In emergency sessions over the weekend, the Fed expanded its loan programs to Wall Street firms, part of an ongoing effort to get credit flowing more freely.

The stock market, which Monday posted its largest point loss session since the Sept. 11 attacks, recovered Tuesday after the Fed's decision on interest rates. The Dow Jones industrials rose 141 points after losing 500 points on Monday.

AIG's shares swung violently, though, as rumors of potential deals involving the government or private parties emerged and were dashed. By late Tuesday, its shares had closed down 20 percent - and another 45 percent after hours.

Buy AIG, it will bounce back in the next few weeks, its dirt cheap right now.