AIG: Maurice Greenberg’s piece in modern-day Wall Street Journal almost provoked an assault of apoplexy. I’m not positive if I’ve study this sort of slanted, self-serving editorial in a protracted, long time. I’m pretty greatly surprised that the WSJ could submit such pandering drivel. Be that as it is able to, we all recognise that the Big Mo controls gobs of AIG stocks both immediately and through his control of CV Starr, so allow’s simply say that we recognize in which he is coming from. When he starts offevolved out with the bailout-inconsistency argument, he type of had my ear. But while he went directly to reward the Citigroup package deal whilst chastizing the AIG deal, I couldn’t assist but call bull$hit.

To date, the government has proven the whole thing however a steady approach. It failed to provide assistance to Lehman Brothers. But it did push for a much-publicized and now deserted plan to purchase troubled assets. The authorities additionally driven for a punitive software for American International Group (AIG) that blessings only the company’s credit score default swap counterparties. And it’s far now buying redeemable, nonvoting preferred inventory in a number of the country’s largest banks.

The Citi deal makes experience in many respects. The government will inject $20 billion into the employer and act as a guarantor of 90% of losses stemming from $306 billion in toxic belongings. In go back, the government will acquire $27 billion of favored shares paying an 8% dividend and warrants, giving the government a capacity equity hobby in Citi of up to approximately eight%. The Citi board have to be congratulated for insisting on a deal that both preserves jobs and blessings taxpayers.

But the authorities’s strategy for Citi differs markedly from its preliminary reaction to the primary groups to revel in liquidity crises. One of those groups become AIG, the organisation I led for decades.

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The protection of the fame quo will result in the lack of tens of lots of jobs, lock in billions of bucks of losses for pension finances which can be massive AIG shareholders, and wipe out the savings of retirees and thousands and thousands of other ordinary Americans. This isn’t always what the wider economic system wishes. It is a lose-lose proposition for absolutely everyone but AIG’s credit default switch counterparties, who can be made entire below the brand new deal.
The government ought to rather practice the identical concepts it’s miles applying to Citigroup to create a win-win scenario for AIG and its stakeholders. First and foremost, the authorities need to offer a federal warranty to satisfy AIG’s counterparty collateral necessities, which have consumed the massive majority of the authorities-supplied investment thus far.


The reason of any federal help have to be to keep jobs and allow personal capital to take the area of presidency as soon as personal capital turns into available. The structure of the modern-day AIG-authorities deal makes that impossible.

The position of government should not be to force a agency out of business, however rather to help it stay in business in order that it could remain a taxpayer and an agency. This requires revisiting the phrases of the federal authorities’s help to AIG to keep away from that business enterprise’s breakup and the devastating results that might comply with.