The Bailout Drug

[girl gone mad]

The Bailout Drug
Henry Blodget, http://www.businessinsider.com/the-bailout-disease-2009-2">Clusterstock

The once admired company known as AIG has become a black hole--losing more than $100 billion in 2008, vaporizing $150+ billion of taxpayer bailout money, and now threatening to suck in all the wealth in the western world.

(Okay, we exaggerate: A reader assures us that the loss on AIG credit default swaps can't exceed $440 billion. Of course, now all of AIG's other assets are plummeting in value, too, and it has a $1 trillion of them).

Even now, AIG and the government are in talks to fork over more taxpayer cash and ease the burden of AIG's bailout interest payments (Surprise! All those priceless divisions that AIG promised to sell last fall to pay off the debts can't be sold).

One planned solution is for AIG to sign over to the taxpayer stakes in the plummeting Asian subsidiaries that AIG can't sell. The Treasury will no doubt accept AIG's argument that these assets are worth the same as they were in 2007 (preposterous), and, thus, the AIG bailout cost will soar well over $200 billion. Worse, the government will then own and operate Asian insurance subsidiaries that it can't sell, either.

Sickening. But here's worse news: AIG is only the beginning.

Until we bite the bullet and do what we should have done in the beginning--make shareholders and bondholders of insolvent companies pay for their own stupid mistakes--our running bailout tab (and ownership of the economy) will continue to soar.

http://www.businessinsider.com/the-bailout-disease-2009-2">More...

[CrispyQ]

1. Nice finish on that!

;)