Bail out working, AIG soon won't be too big to fail
By: Scott Ott
Examiner Columnist
March 3, 2009
News fairly unbalanced. We report. You decipher
The Treasury Department announced today that the bail out of AIG Insurance, which began in September under the Bush administration, is working better than expected.
Encouraged by the company's loss of nearly $62 billion in the 4th quarter of 2008, the Obama administration injected another $30 billion into AIG this week.
"The government stepped in last year with $150 billion because AIG was too big to fail," said Treasury Secretary Timothy Geithner. "The stock was trading in early September at more than $20 per share.
Today it's worth less than 50 cents a share. If we keep pumping billions of tax dollars into it, I'd say we'll soon reach the point where AIG won't be too big to fail, and then we can stop giving them money."
Mr. Geithner explained that President Obama is using a similar principle in the housing bail out.
"By forcing banks to cut payments for irresponsible homeowners rather than foreclose, the value of all mortgages will continue to decrease until many banks will cease being too big to fail," Mr. Geithner said.
"In addition, millions of other homeowners will realize that a mortgage contract is binding only on the federal government, allowing them to reduce their monthly payments as well. Finally, we'll have affordable housing for everyone," he said.
This latest infusion of taxpayer cash will increase the federal government's stake from 80 percent of AIG, to roughly 127 percent, Mr. Geithner said.
"This is a good investment for the American people," he said, "because AIG is the company that insures thousands of other companies against the risk of a global financial meltdown. What would we do without AIG?"
Examiner columnist Scott Ott is editor in chief of ScrappleFace.com, the family-friendly news satire site, and anchor of ScrappleFace Network News (SNN), seen on YouTube.
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