Pretty Much Sums It Up

I link a very well written piece at Rolling Stone that does a more than apt job of describing where we are and how we got there, focusing on the AIG bailout. As the piece notes well, these _____ (supply your own four, five or six letter word) gambled their own fortunes away and now have convinced the U.S. to spend our taxpayer dollars to bail them out. Mind you, we are bailing out AIG because it gave CDS protection to a ton of EU banks and they are able to use the AIG obligations to support their capital positions and stay solvent. This is a house of cards - a despicable house of cards.

The attached is a bit long, but trust me, worth the read. Lest you need more temptation to go to the link, here is a small bit of what you will find:

"The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses)."

That does give a smidge of perspective. Let me add a bit of perspective myself. I am in the insurance industry and few here are sorry to see AIG having problems. Let us just say that it could not happen to a nicer guy. They were not well liked by their brethern. I cannot resist giving a few more tidbits from the article, though I recommend reading it whole. Here are a nice couple of lines:

"The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror."

This is good stuff. As the article notes, AIG spent the better part of a century building itself to the largest property and casualty insurer in the world, only to allow a small shop of people in the financial products division take the house down. In fairness, I have read that other investments drove the first nail in the coffin before the financial products division took them down, but do you get bonus points for having two independent divisions in you company able to deal you the death knell?

Disclosures: None.