This editorial appeared in The Kansas City Star. Keeping the American International Group on government life support – while infuriating to many taxpayers – is preferable to letting it collapse.
When the federal government got into the business of bailing out AIG, the plan was that the troubled insurer would sell off assets to repay taxpayers, and do it sooner rather than later. Now it's evident that will take much longer than anyone thought.
This week AIG reported a $62 billion, one-quarter loss – the largest in corporate history. To stave off a default threatened by a looming ratings downgrade, the government shoveled in $30 billion on top of the $150 billion already committed.
The problem with AIG is that the global economy fell off a steeper precipice than anyone expected. Much of the company's insurance business is sound, but the losses on its investment side have been staggering.
Federal Reserve Chairman Ben Bernanke told a Senate panel Tuesday that nothing about the financial crisis made him angrier than the mess at AIG. The company's investment division, he said, operated as an unregulated hedge fund attached to a "large and stable insurance company."
To read the complete editorial, visit The Kansas City Star.