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Why AIG Gets Billions, GM Gets Scorn
Key Excerpts from Article on Website of U.S. News & World Report blog
Posted: December 26th, 2008
http://www.usnews.com/blogs/flowchart/2008/12/12/why-aig-get...
AIG, the huge insurance company, has so far gotten $173 billion worth of federal aid, because traders at one small division made bets on exotic securities that were so calamitous they threatened to bring down the whole company. So far, the amount of money the feds have pledged to this one firm equals nearly one-third of the nations defense budget. General Motors, Americas biggest automaker, has asked for a $10 billion federal loan, equal to one-seventeenth of what AIG has gotten and Congress has said no. There were no rogue traders at GM, and the companys problems have intensified in plain view, over several months, instead of coming from out of nowhere in a single, cataclysmic episode. Make sense? Doesnt to me. So maybe if we look at each company a bit more closely, it will be clearer why the government favors companies like AIG over ones like GM. Does have AIG have friends in high places? You could say that. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both support the AIG bailout, and theyve steered money to the company without Congressional approval. GMs most important friends in Washington have been the Michigan Congressional delegation, which obviously doesnt have the clout it used to. Paulson has actually argued against using part of the huge $700 billion financial bailout fund to help the automakers, because they cant pass a viability test proving theyll stay in business long enough to pay back the loans. But AIG hasnt passed a viability test either, and without federal help theres little doubt it would be in bankruptcy.
Note: At least someone is asking the right questions! For many highly revealing reports from reliable sources on the realities of the Wall Street bailout, click here.
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