Today the markets closed at their lowest levels because, among other things, a once-storied insurance company announced the largest loss in U.S. corporate history:
We will never stop paying for AIG. Never. This bankrupt insurance giant is slowly bankrupting the United States Treasury. Whatever assets AIG has promised to transfer to the Treasury's balance sheet are undoubtedly worthless. The second paragraph hints at the backdoor nature of this bailout: an outright AIG bankruptcy would force its counterparties (Goldman Sachs et al.) to immediately write down the value of swaps they hold with AIG. Those firms would then be just as insolvent, forcing the U.S. government to choose between immediate nationalization and liquidation of the affected firms or acquiescence to a global systemic collapse.
The U.S. government has taken nationalization off the table. Its creditors in Asia will not tolerate a repudiation of the debt and equity they hold in U.S. banks. The Sovereignty Crunch is crushing the United States of America. Uncle Sam is responding with inflationary measures, including throwing money at AIG that will eventually be spit out of the Fed's inflationary printing press.
Nota bene: Anthony J. Alfidi holds no position in AIG, except indirectly in his role as taxpayer to the U.S. government.
A new definition of desperate times: Even as the government threw a stunning new $30 billion lifeline to American International Group on Monday, the beleaguered insurance giant confirmed it had lost more than twice that much, $62 billion, in a single three-month period.
And many more billions of federal dollars are almost sure to be shoveled into the company for a simple reason: Officials fear its collapse would cripple financial markets in the U.S. and around the world.
We will never stop paying for AIG. Never. This bankrupt insurance giant is slowly bankrupting the United States Treasury. Whatever assets AIG has promised to transfer to the Treasury's balance sheet are undoubtedly worthless. The second paragraph hints at the backdoor nature of this bailout: an outright AIG bankruptcy would force its counterparties (Goldman Sachs et al.) to immediately write down the value of swaps they hold with AIG. Those firms would then be just as insolvent, forcing the U.S. government to choose between immediate nationalization and liquidation of the affected firms or acquiescence to a global systemic collapse.
The U.S. government has taken nationalization off the table. Its creditors in Asia will not tolerate a repudiation of the debt and equity they hold in U.S. banks. The Sovereignty Crunch is crushing the United States of America. Uncle Sam is responding with inflationary measures, including throwing money at AIG that will eventually be spit out of the Fed's inflationary printing press.
Nota bene: Anthony J. Alfidi holds no position in AIG, except indirectly in his role as taxpayer to the U.S. government.
