On March 9, after the Obama administration announced it would increase the US Taxpayer subsidy of AIG to 80% by pumping in another 30 billion, I wrote in this blog:
"...With all this cash, could AIG actually lose money? Well, friends, they just reported quarterly losses of 61 billion...The appropriate action is to allow AIG to fail, and distribute their clients to well-run companies. There are plenty of healthy, responsible Insurance companies who could and would benefit from taking on AIG's clients..."
Bush and Obama have both been shovelling dollars to AIG. Why? So they could be stabilized in the face of 61 billion losses per quarter? In spite of their best intentions, neither Bush nor Obama "get it." Government intrusion into the Marketplace always creates inefficiencies, always burdens the taxpayer and consumer, and always carries unintended consequences. This time, those consequences were highly visible: Millions of dollars in "bonuses" that were 'contractually mandated.'
Of course, if AIG was allowed to go bankrupt, as I have suggested multiple times before, those contracts would have been voided...and we wouldnt have the mess we have today. But far be it for Obama to listen to an Economist like me....
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