Aig Bailout

Should the Government have bailed out AIG in September 2008?

In my opinion, the Government in 2008 made a mistake in bailing out AIG, a company that was headed for bankruptcy and financial ruin because of its own mistakes precipitated by the greed and mismanagement of its own company executives and directors.   By bailing out AIG, the Government has also set a dangerous precedent in providing the private industry the image that if your company is “too big to fail” then the American Government will step in with taxpayers money to rescue the company.   The American free enterprise system was based on a free market where well managed companies will flourish and the inept ones will go out of business.   Bad companies that go out of business will always be replaced and history has shown that while the American economy may take a temporary hit, it will survive.   In bailing out AIG, the government in 2008 in effect stepped in and halted the dynamics of a free market with the assumption that AIG was too big to fail.   What will the Government do when other big companies face such risks?   Without hindsight, as the question says, AIG should have been allowed to sink and while the world economy and our banking system may have been adversely affected at the time, it would have sent a message of responsibility and strong corporate governance to every other big company.

The article clearly informs us that AIG through its Financial Products unit headed up by Joe Cassano took advantage of “a largely unregulated world of financial derivatives” to make millions and millions of dollars and then when warning signs and red flags were raised by Federal Regulators and Agencies, AIG executives either disseminated untrue statements or failed to indicate its weakness.   The article tells us that time and time again, either by its own internal personnel or others externally, AIG was asked about “its material weakness” and often times it (through Joe Cassano) tried to dismiss this and deny...