Why is the government bailing out AIG but refusing to do the same for GM?

[thewiseguy]

This is tax payer money. Why do we keep bailing out AIG? If I am not mistaken this is the third time that we have been bailing them out.

Why is the government not bailing out GM and other manufacturers? :shrug:

[Lint Head]

1. Why isn't the govt. bailing out the average person?

:dem:

[BobRossi]

2. Why does GM need bailing out?

They got themselves into this mess, why should I help them out?

[thewiseguy]

4. and why should we help AIG out?

Did someone else get them into this mess?

[BobRossi]

7. We shouldn't.

I am sick of rewarding incompetent assholes.

[Romulox]

14. You say that in the future tense. But we ARE. As in the present tense. nt

[liberal N proud]

9. When GM fails, the other two will follow, then we are looking at 1 million

jobs lost in this country really fast. That million out of work will soon grow to 2 and 3 and more as the collapse snowballs.

Granted the auto industry needs to get its act together but letting them fail will not solve American financial woes.

[Median Democrat]

3. I Can See GM & Ford Resisting Government Stake and...

Also being resistent to conditions such as the development of fuel efficient cars. Remember that the AIG bailout was done with the condition that the U.S. essentially take an ownership interest in AIG. I can't see the auto industry agreeing to that sort of control, and such control is probably not something the Feds want.

It is better to get the auto industry to agree to develop and sale cars with certain fuel efficiency requirements. However, the auto industry will probably vigorously fight such conditions.

[liberal N proud]

5. The chairman of AIG is good buddies with Paulson or Bu$h?

That was my thought.

This whole $700 Billion looks like a big cash grab thing to me. They get the funny money and continue to party while the rest of America crumbles.

[phantom power]

6. Because AIG could impact the entire economy. Not just automotive.

[Romulox]

12. 1 in 10 jobs in the US is tied to the auto industry. Try again. nt

[phantom power]

16. Yes, I'm aware automotive is very big. However, AIG could take down everything.

I was speaking with my financial advisor, and her opinion was that if they had let AIG go down like the did Lehman, it really would have collapsed the economy. She thinks it was that close. Until recently they were a trillion dollar company.

Of course, you can find people with many other opinions. I'm mostly just relating the logic for bailing out AIG, as I understand it.

[Romulox]

18. Tenuous logic, at best. 1 in 10 jobs is not tied to AIG. nt

[phantom power]

20. Yes, those jobs are tied to AIG. Via investment and credit.

I assume you are aware that the credit freeze is bankrupting companies right and left. In every single sector of the economy. That's the connection to companies like AIG and Lehman.

[Romulox]

23. The difference being: credit is FUNGIBLE. Companies would survive with foreign credit.

On the other hand, manufactured goods are not fungible in the same way.

So no, the comparison is not valid.

[phantom power]

26. AIG is world-wide. Our credit-market problems are also world-wide.

So I'm not at all sure about your claim that companies can get fungible foreign loans. From who? Seriously, if you know, tell me because my CEO is on the ropes trying to get credit right now.

Tangentially, I'm not exactly sure what you mean when you say manufactured goods aren't fungible. People have been buying foreign cars for decades. I think the fossil fuel decline is going to put more business back on local manufacturing, which is a good thing, but the domestic auto industry is probably going to be smaller going into the future. Part of what's currently happening is that the world is discovering that it does not have as much money as it thought it did. From the individual level all the way up to the international level. What it really had was an enormous interconnected system of over-leveraged IOUs.

I hope fervently that starting Jan 20, we see some major investment programs in railroads and domestic energy infrastructure. I hope that jobs like that can employ the people that the auto industry is currently shedding. I do not think that the auto industry can survive in it's current size. It will have to either diversify into other kinds of manufacturing or downsize more or less permanently.

[Romulox]

27. There is no such thing as "AIG brand credit". That's what 100% fungible means.

"So I'm not at all sure about your claim that companies can get fungible foreign loans. From who? Seriously, if you know, tell me because my CEO is on the ropes trying to get credit right now."

Sounds like your company is a bad credit risk. Perhaps it deserves to fail? :hi:

[phantom power]

29. I'm getting the impression you don't understand what's going on here.

Our company has a fine credit rating. Lots of companies (and people) with good credit ratings are being denied credit. And they are going bankrupt. And people are losing jobs.

Furthermore, "fungible" has nothing to do with branding. Fungible means, that a good or service is easily replaced. American cars are easily replaced with foreign cars, in the sense that if American cars are not available, a customer can buy foreign.

Right now, credit isn't very fungible, because nobody is lending. Hopefully that will change soon, before too many people lose their jobs because of it.

[Romulox]

30. LOL. No, disagreement with you is not the same thing as not understanding you.

"Our company has a fine credit rating. Lots of companies (and people) with good credit ratings are being denied credit. And they are going bankrupt. And people are losing jobs."

OK. The Big 3 are subject to the same credit crunch.

"Furthermore, "fungible" has nothing to do with branding. Fungible means, that a good or service is easily replaced."

Actually, according to Merriam Webster, "fungible" means "being of such a nature that one part or quantity may be replaced by another equal part or quantity in the satisfaction of an obligation."

Notice that the word has nothing to do with the ease of replacement, but rather as to the availability of a direct equivalent.

"American cars are easily replaced with foreign cars, in the sense that if American cars are not available, a customer can buy foreign."

In the absence of a domestic auto industry, the manufacturers who make the components that make up cars will be unable to sell these parts to others. Dashboards are most certainly NOT fungible in the way that corporate financing is.

"Right now, credit isn't very fungible, because nobody is lending."

This is simply not part of the definition.

[phantom power]

21. Yes, those jobs are tied to AIG. Via investment and credit.

I assume you are aware that the credit freeze is bankrupting companies right and left. In every single sector of the economy. That's the connection to companies like AIG and Lehman.

[Romulox]

25. Let them borrow from Deutsche Bank, then. There is no such thing as "American credit". nt

[Wilms]

8. Because Goldman Sachs would have taken a big hit if AIG went down. n/t

[indepat]

17. Because Goldman Sachs and those of its ilk would have taken a big hit if AIG

went down. It's let free enterprise run wild unfettered by government regulation or interference so their ill-gotten gains can be privatized their losses can be socialized (eaten by the taxpayer): i.e., that's just basic 'puke ideology. :P

[Wilms]

19. Bingo! n/t

[TexasObserver]

10. Because AIG is "favored" by the sleaziest forces in and around government.

AIG and its owners/managers have a curious history, and it often intersects the nefarious forces many of us consider fascist - those who create and love to foist things like The Patriot Act.

Dr. Debug, DU poster, has posted extensively on these guys, but I think it's ended up in the dungeon.

Bottom line: AIG has friends in high places, because AIG is and has been involved in helping certain off the books operations maintain insurance and do other things they need to do.

There is no good reason why AIG is saved and no other insurer is.

[NoodleyAppendage]

11. Because AIG is tied heavily to European banks and if it goes down so does the UK. n/t

J

[Karenina]

28. They're the ones who BURIED the bodies.

;-)

[Romulox]

13. Because this is CRONY CAPITALISM, where your bailout depends on influence.

Nothing more sophisticated than this.

[TahitiNut]

15. GM workers have dirt under their fingernails. AIG workers just have shit under their fingernails.

:shrug:

[grantcart]

22. Two points

The current administration has already provided $ 25 billion for the auto manufacturers for bridging finance. Additional aid will be forthcoming but the automakers need more than just money - they virtually need a new product line.


AIG - no question its a shocker but apparently their role as the central re-insurer means that if they went down that this would cause an instantaneous domino effect that would bring down hundreds of financial institutions in a matter of a few days.

I think it also means that municipalities and states would not be able to obtain short term financing because their bonds could not be insured. Millions of state and city employees would have to be temporarily laid off until other financing was invented and made available.

These are just guesses but I think illustrate the differences that you asked.

[Romulox]

24. Your first point is just flat out wrong. No funds have been disbursed to the Big 3.

[Mike 03]

31. Because the failure of an AIG has global implications.

AIG doesn't deserve to be bailed out, but if we don't bail it out, we could bring down the world economy. They originated so many reckless, irresponsible derivatives (credit default swaps, in particular) that were falsely and inappropriately given triple A ratings by S&P, Moody's and Fitch, that if AIG were to collapse, institutions all over the United States and Europe would collapse. Liquidity would freeze up. Money would no longer be lent.

It would be a disaster, not for AIG, but everyone they contaminated.