The government made a very nice profit from the AIG shares it sold, and stands to make even more when they sell the rest of the AIG holdings.
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AIG Sale Repays Bailout as U.S. Government Profits
- Thread starter Crabtownboy
- Start date
It is good news. A similar thing happened with the S&L bailout in the late 90's. Industry was saved, reorganized, and taxpayers ended up showing a profit.
BTW, AIG stock is undervalued and should see a resurgence in stock price/value. I see it is up over 1% today and over 40% YTD. Before the crash it was trading at over $1,000 a share. Today it is at $34 or so. I have a mutual fund that heavily invested in AIG after the crash and I'm reaping the rewards.
No. The action taken with AIG was necessary, no matter what. Showing a profit is a bonus.
Would you rather ---
1. The company go out of business permanently?
2. All the money lost forever?
3. Thousands upon thousands of Americans loose their retirement pensions?
4. All the AIG employees loose their jobs?
What is it you want?
Actually, from an economics standpoint, not bailing out AIG (or any of the other "too big too fail" firms) would have been better.
First of all the "money" wouldn't have been lost forever. The devaluation of the portfolio and corporate assets would have been absorbed by other firms who took over those particulars. The "funny-money" or the inflated investments would have simply adjusted back to the proper amounts. So its not gone forever, that is an erroneous economic perspective.
Secondly, yes, some people would lose their jobs. That is a short-term problem that would have allowed the high-value talent to move to other firms or simply find new work. Not everyone is guaranteed a job for life in a free market economy. While some would have lost their jobs they would have found new jobs, most of them in the proper sector, and probably found better jobs. For those who were complicit in the company's demise they would learn a valuable lesson and be moved away from the ability to harm future firms. Though the short-term difficulty would have caused stress on many, the longer term benefits would provide a more robust and stable result.
Third(ly), yes, the company should have been allowed to go out of business. Why was AIG saved and not Bear-Stearns? Guess what, I betcha almost all those folks from Bear-Stearns have found new jobs within a short period of time. I don't see people with Bear-Stearns shirts wandering around Wall-Street aimlessly looking for work. Just like with Bear-Stearns, if AIG had gone under other firms (stronger firms) would have stepped in and provided capital, jobs, and a network for the clientele lost from AIG. The world wouldn't have ended. A bunch of stuffed shirt individuals would have simply been put out on the street for a couple of months. However, AIG's assets and clients would have been passed around and absorbed. How is Bank of America-Merrill Lynch doing btw?
Fourth, you're overestimating the trouble the collapse of AIG would have on pensions and retirements. This is a common tactic in people who don't fully understand the nature of the pension and retirement systems. The pensions would have survived, though depreciated. The 401ks are pegged to a portfolio which would have rebounded. It would have been tough, absolutely. But we aren't promised a rose garden then are we? I mean what's your alternative? Controlled markets? That didn't work too well for the Marxists and Maoists. Bailing out companies is tantamount to a controlled economy. It doesn't work.
Finally, our markets would have been better off in the long run. Short term bailouts prohibit appropriate market correctives that will, in the end, provide the foundation for several decades of substantive fiscal growth. Why do you think the post-WW2 economy was so robust and so stable for three or four decades? It had a lot to do with the weak, debt laden firms being closed in the Great Depression and then a new economy was able to emerge.
The markets are harsh. They tend to get this way when corrupt people leading institutions at the foundation of the economy act inappropriately. As a result these leaders and institutions need to be culled from the herd and replaced. This is part of the process of a free market economy.
When we operate a free market economy appropriately we see significant economic benefits bequeathed upon generations of people. Think about the economic picture for the world 200 years ago...now think of it now. I think we're doing a lot better, primarily because of the advanced economics that result from the free market system.
Oh, btw, I said something similar to this in another thread you posted. Then you disappeared (probably for a good reason) so I'll bump the thread and await your reply there and here. Here's the link: http://www.baptistboard.com/showthread.php?t=81265
Actually none of these things were the real reason that AIG was too big to fail and was bailed out. The real reason was that AIG is the world's largest underwriter of mortgage insurance.
In this case it seems to have saved a lot of jobs, a lot of retirement accounts, and very possible created jobs as the company recovered and if it grows in the future will create additional jobs ... plus putting, what was it, a 12 billion profit into the government funds. Not a bad thing.
And the government has created many jobs through research developments that have been turned over to private and public industries. For instance the Internet. For instance GPS. These are just two of many.
Excellent response.
I did not agree with it then either.
Simple, unlike some, I am not a one-issue, one party, one person voter. Give credit where credit is due.
By the way, the hardest decision in investing is not when to buy, but when to sell.
I think you meant to say private sector jobs, and yes, the government does create them through the government contract bidding process.
You could not be more wrong. If it were not for government contracts Boeing would have gone out of business a long time ago as would General Dynamics and a whole host of other large and small companies.
The company I worked for and retired from existed because of government contracts.
You are propagating a myth.
True. But government can create conditions that make it possible for the private sector to grow.
Obama hasn't learned that lesson.
Those companies existed before they came to a place of dependence upon government contracts. Carpro is correct when he says that government can create conditions that make it possible for the private sector to grow.
But government itself has never produced the first public sector job- cannot happen.