Friday, September 19, 2008

Where AIG went wrong

For a brief description of where AIG went wrong, read this article on Businessweek.

I should note that Hank Greenberg presided over AIG when it set itself up for this mess. As the article notes, he maintained that all AIG needed was a short term loan to get through its liquidity crisis. It is at least partly his fault that AIG is where it is now and he deserves no sympathy.

U.S. taxpayers should note that they effectively own an 80% stake in AIG. The Federal Reserve is loaning them up to $85 billion at around 11% interest. If AIG survives most of the upside in its share price will accrue to the U.S. taxpayer. Let's hope, then, that AIG makes it.

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