Maybe I don't fully understand but Why is the government is bailing out AIG and not Lehman?

[redirish28]

To me it just doesn't seem right. What makes AIG okay to bail out and not Lehman. Didn't they make the same risky investments yet the American people are basically bailing out One company and not another?


Is it right to start asking what ties some of these companies have to hire ups in the Bush/GOP administrations?

[hobbit709]

1. Cui Bono?

That is the question.

[Solly Mack]

9. That....yes

[RollWithIt]

2. AIG is insurance...

Lehman is investment....

[spinbaby]

3. I'm baffled, too

When they didn't bail out Lehman, the explanation seemed to be that they had to draw the line in the sand somewhere to send the message that they couldn't bail out everyone. Then the next day they bail out AIG. Maybe they're schizophrenic?


:shrug:

[cali]

4. AIG is a much, much bigger outfit and it's collapse would have

far greater- and more disastrous- ramifications for the average American and the global economy.

[mrJJ]

5. Lehman was off the radar... Fed took care of it

NEW YORK (Reuters) - The New York Federal Reserve intervened aggressively to shore up the U.S. financial system this week, providing at least $87 billion to help underpin trades with bankrupt Lehman Brothers, court documents show.

The Fed's action is the latest sign of how U.S. authorities have been seeking to prop up financial markets following the failure of Lehman and as big insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) fights for survival.

While the government had pledged not to fund a rescue of Lehman, the disclosure on Tuesday showed authorities that were taking other financial steps to prevent markets from descending into chaos.

<snip>

Lehman and the New York Fed had requested the advance, known as a "commencement date advance" and the New York Fed repaid it, according to filings.

In effect, the New York Fed lent Lehman the funds.

A representative for the New York Fed declined to comment.

"This expansion of the Fed's credit program is unprecedented," said David Pauker, a managing director with restructuring adviser Goldin Associates.

Read more: http://www.reuters.com/article/bondsNews/idUSN16464004

The American taxpayer is NOT on the hook for the bailouts. The American taxpayer is the Main Course at the Corporate Dinner Table. What color parachute would you like with your taxpayer meal?

[Clovis Sangrail]

6. I'm guessing AIG has more friends in the administration

I'm curious to see how many execs bail out of AIG with golden parachutes in the next 2 years.

[cali]

11. I doubt that has much to do with it. AIG collapsing would

have a catastrophic impact on the economy. It's much, much larger than Lehman Brothers. It's intertwined with the economy on level after level. Lehman's assets are far smaller than AIG's. It has less than a quarter of the employees, etc, etc.

[Virginia Dare]

18. I agree. They were going for a lesser of two evils scenario...n/t

[KharmaTrain]

7. To Stop The Market's Bleeding

Some here were predicting the market to tank another 500 plus points yesterday...it didn't. And that was due to the government shoveling money in to stabilize things. Those who have watched these things in the past have seen Helicopter Ben fly in with money at "critical times" that prevent the markets from nose-diving further.

AIG is a widely held company...insurance, pensions and many portfolios that would wipe out a lot of what equity it still has. Just like in Freddie Mac & Fannie Mae, throwing the money was the better bad alternative than not doing anything at all.

It's definitely in bounds to discuss the close ties many of these large banks have had with this regime...and with the GOOP in general, who have championed financial "de-regulation" since the mid 70's. Its even more pertinent to shine the light that these crooks are the same people that are expected to find a "solution"...especially if Gramps is elected.

[Xipe Totec]

8. Why IAG matters

(From the Boston Metro)

* AIG is the biggest insurance company in the world

* It insures $307B of business and domestic mortgages, and business loans.

* There is hardly a major bank anywhere that does not buy insurance from AIG

* If AIG filed for bankruptcy, those banks would have no protection against their debtors defaulting.

* Those defaults would appear as liabilities on bank's balance sheets - and they would be forced by their national banking regulators to find fresh money to remain viable.

* The demand for capital from the banks would be enormous - so AIG's demise would directly pose a seismic threat to the global financial system.

End of quote.

In other words, AIG is too big to fail; the entire house of cards would collapse immediately.

[notadmblnd]

10. leman didn't qualify for welfare benefits?

maybe she had a man living in he house with her? Maybe she owned out right a junk car that put her over the poverty limit that disqualified her? Maybe she didn't want to give up her baby's daddy's names so welfare could go after them for child support?

[Jim__]

12. On Monday they said they weren't going to bail out AIG.

On tuesday they bailed out AIG. And your looking for their rationale? They don't have one. They're reacting on a minute by minute basis. They don't have a plan. They don't have a clue.

[mrJJ]

14. Good ole boy network.. The rest is cover..

This past July, AIG gave its failed CEO a $47 million severance package for his troubles:
Poor fellow. I hope that he will be OK though he does have the advantage of having an office and secretary until the end of the year. This is a new era, where record losses are ignored and multi-million dollar golden hand shakes are given along with a nice peck on the cheek. Let's be honest, corporate America would do this for any employee, especially after years of being treated so well with no luxury too much. Just because he was paid massive amounts based on bad business and now is being paid yet again despite the company writing down billions doesn't mean he didn't deserve it. Hey, he had a contract! Legal wasn't able to find any of those famous loopholes despite AIG losing billions upon billions.

What's that? Your company won't even pay for all of your family health insurance after working there for 10 years? Well, you people are always so greedy and just ask for too much. Shouldn't you be working now anyway?

He was CEO for a little over 3 years. He was also an advisor to bushy.

http://www.portfolio.com/views/blogs/daily-brief/2008/0...

[DisgustipatedinCA]

13. I am one of the fundamentals of our strong economy

McCain says that I'm one of the fundamentals of our strong economy, since I'm a productivity-infused worker, but I'm having a hard time with the electric bill this month. I made some risky investments with my coke dealer, and, well, I hate to admit it, but I'm kind of out of money. Clearly, a bailout is in order. We can't sit idly by and let me fail.

[HamdenRice]

15. Several factors: 1. counterparties; 2. liabilities; 3. scale of assets to be dumped; 4. viability

The main thing to understand is that they are different kinds of firms. Lehman is primarily an investment bank. Investment banks are very big, but they are replaceable by each other. There are other investment banks and the thinking is, if Lehman goes what happens? Is there no one who can replace them? The answer is there are plenty of other firms that can do what they do. The same is not true with AIG which is an insurance company that has a commanding amount of the insurance market business. It's not really replaceable.

Look at their counterparties -- who they do business with. Lehman worked primarily with big corporations, other investment banks, and other financial companies. AIG's counterparties are the general public, industrial and operating companies, and state and local governments and bond issuers -- the real economy.

Also important was the level of liabilities, compared to their assets which determines whether they were viable. Lehaman was hopeless because of the scale of its liabilities in the interest default swap market. I've heard wildly varying estimates of up to $750 billion in potential liabilities. No amount of infusion would save Lehman, while an infusion could save AIG.

Lastly, what seems to have changed is that the Treasury and Fed became terrified of the prospect of the unwinding of AIG's assets. When firms like Lehman or AIG go bankrupt, their assets are sold. That means dumping hundreds of billions of dollars worth of bonds, including mortgage backed securities on the market. But no one is buying. That would cause a further catastrophic decrease in the value of debt, which would mean another round of bankruptcies as financial institutions further marked down the value of their assets.

[gblady]

16. my question is....

where do WE get the money to bail out these companies?

...from China?...print more bills? This makes no sense to me

[Virginia Dare]

17. Failure of AIG would have been a bigger disaster than Lehman..

my guess is that they felt the loss of Lehman could be absorbed better, and had less far reaching implications.