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Politics : President Barack Obama
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To: sylvester80 who wrote (32992)9/16/2008 8:22:25 PM
From: nigel bates  Read Replies (3) of 149317
 
I disagree.

I think the Fed has made a smart move in this particular case.
AIG's subsidiaries are mainly decent businesses, with significant value. The problem was the vast losses on credit swaps. If the Fed had stood back and let bankruptcy happen, the entire financial system would be facing meltdown. There's an argument for letting that happen, but it's not one that any government is going to contemplate.

Note that the Fed has seized control in exchange for a loan. No stockholders are going to get anything unless the whole mess is wound up for a profit (which is not entirely impossible).
And the government gets 80% of that profit - so no moral hazard.

It's possible that this will end up costing the taxpayer, but it will cost a lot less than allowing bankruptcy to happen.
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