According to an article in the NY Times, some important folks apparently think that AIG is "financially sound," despite the failure of its "rescue plan."
You may be asking yourself, "How can this be?" Normally, sound companies don't require rescue plans, let alone "crumbled" ones. For the answer, let's go to NY Governor David Paterson. Take it away, David:
...
Okay, so he didn't give an answer. But he did tell us some other stuff:
Gov. David A. Paterson of New York said on Monday that the state would allow the American International Group, a big insurance company, to lend itself $20 billion to bolster its capital as it faces potentially disastrous credit downgrades.
Shares in A.I.G. tumbled more than 60 percent on Monday morning as investors grew concerned that the firm lacked capital to withstand cuts to its debt rating. But Mr. Paterson reiterated the state’s support of the firm and declared A.I.G. "financially sound." ...
A.I.G. has sought a $40 billion bridge loan from the Federal Reserve as a lifeline, as the three-part rescue plan it had devised appeared to crumble, a person briefed on the matter said.
Reflexive borrowing -- now we're getting philosophical! To those who rightfully wonder why the government would have to "allow" a company to borrow from itself, unless the government is (a) going around preexisting regulations or (b) actually talking about a future taxpayer-funded bailout of an irresponsible corporation, have no fear on the latter:
Mr. Paterson argued that New York taxpayers would not be put at risk by the state’s involvement.
Well I don’t know about you, but I’m reassured.
The problems we have created for ourselves and our world are getting increasingly fundamental. And that is how you know we are approaching the moment when the sh*t really hits the fan.
Cross-posted at HERE.