Sunday, April 19, 2009

AIG Pleads Their Case

AIG's memo to legislators, humorously labeled 'strictly confidential', has made it to the internet (see here). It highlights the play book for anyone seeking federal money. The key is to note the huge cascading implications of letting them fail, with special emphasis on 'the middle class', cities, states, everyone. It's a great strategy, because then any legislator has to face the fact that if AIG's failure can conceivably be linked to any poor schlep losing their job, you can be sure his opponent will highlight that they were warned. You can't prove them wrong, and it seems imprudent to take chances, but basically any large organization could make this kind of argument, and you can't afford to buy into it.

I would just tell them that if it is this bad, their normal business is clearly a public hazard. Therefore, I would guarantee their obligations during a liquidation where all their businesses are sold to the highest bidders, with minimum bids at some measure of fair value as defined by consultants in the field.


Patrick R. Sullivan said...

Arnold Kling has a piece up that has some relevance to the 'too big to fail' argument.He's saying that it would be better to have more frequent failures, but easier to fix when they do, firms.

BMO AIG said...

AIG executives clearly need to be sent to jail. The mess they caused is just huge and the consequences of their actions are terrible. It's just wrong to let these people wander around freely and wait till they do the exact same thing in few years again. Very disturbing...