What to do about AIG?
Barry Ritholtz of The Big Picture wrote an excellent post about what the US Government should be doing with AIG. Basically, he describes separating the company between its legitimate, healthy, regulated, life insurance writing business, and its unregulated, insolvent, derivative business. Of the former:
This half of the company held the most important insurance in many families’ financial lives: Their life insurance. When an AIG policy holder passed away, the company paid off the policy, providing monies that get used to pay off mortgages, kids’ colleges, and surviving spouse’s life time living expenses. Given the importance of this payment, one can see why it is crucial to make sure there are sufficient reserves to make good on the promise of the life insurance policies. The actuarial tables used are conservative, the accounting transparent. The policy payoffs rock solid, utterly reliable.
AIG, this insurance company, was well run. It made a steady income, provided a valuable service to its clients.
It was also very solvent
And of the latter, his misspellings express the frustrations that we all feel as we wonder if the government might be throwing good money after bad.
You as a credit default swap gamblor have no reasonable expectation that anyone other than the incompetent firm you placed your bet with is going to make good. You had as your xounter party another hedge fund. Tahatwas the risk YOU — not the yaxpayer — assumed. That is was under the roof of a legitimate insurance company is irrelevant.