Can someone explain what would happen if AIG goes to bankruptcy?

[Uzybone]

Serious talk please.

[LakeSamish706]

1. I don't think that AIG will go to bankruptcy provided the markets do not...

head south again. According to Liddy they have recouped 70 - 80 billion of the lost monies. The plan is to wind down the toxic divisions and attempt to keep the Insurance business (under a new name). His long range plan is to pay back the tax payers with interest in 2 to 4 years... Guess we will see.

[Uzybone]

2. Thanks, things sound like they are getting better

like you said we will wait and see.

What I'd really like to know is how much of an impact does AIG have on our economy as a whole. What would have happened if we didn't bail them out. Lots of people are saying things like "stop the bailout" I want to know what that means in real life.

[Jennicut]

4. Well AIG had many foreign entanglements

Companies:American International Group Inc
By: Reuters | 06 Mar 2009 | 03:53 AM ET


The U.S. government rescued giant insurer American International Group in part because its collapse would dramatically hurt European banks, a senior Democratic lawmaker said on Thursday.



The U.S. government has bailed out AIG three times since Sept. 16 and committed about $180 billion to keep the insurer alive and doing business.

"One of the reasons we had to rescue AIG was the fact that it was going to bring down Europe," Pennsylvania Rep. Paul Kanjorski told reporters after his subcommittee held a hearing on systemic risk.

Later, in an interview with Reuters, Kanjorski said he was told that a large number of AIG's counterparties were European.

"That's why we could not allow AIG to fail as we allowed Lehman (Brothers) to fail, because that would have precipitated the failure of the European banking system," he said.http://www.cnbc.com/id/29542948

Sounds like AIG is just entangled throughout the United States and the world. Should we have let them failed? I don't know. I need someone with a better economic background to answer that.

[LakeSamish706]

16. When Liddy was asked if AIG would be back for more bailout money in the...

hearings, he said no. Now whether or not he was being truthful is anybodies guess.

[napi21]

3. I believe Ali Belsher(?) covered this on his special on CNN last night.

It's on again on CNN tonight.

I'll give it a shot, but he did it much better.

AIG was & still is the worlds largest INSURANCE COMPANY. They are split into 4 division. Individual ins. policies (401K's, annuities, pension funds), commercial insurance, 1 I can't remember,, and financial services. They not only insure individuals , but they insure airlines againse the cost of crashes, rail companies, and many other businesses. They were a very profitable business UNTIL someone got the brilliant idea to expand the financial services div. into CDS's and the sub-prime market. The 3 insurance divisions are STILL very sound & profitable businesses, but the financial services division exploded in such a hugh way, the others aren't able to carry it.

If you look at all the other arms of this business and how many people worldwide that they "protect", I can certainly understand why many people said they can't let that happen because of the greed of the people in one of it's divisions.

Sorry, that's the best I can do. Try to catch the show on CNN tonight. I think it's on at 8EST and it;s called Fast & Fury,

[Jennicut]

7. Ali Velshi? The hairless prophet of doom?

Jon Stewart called him that once and I always think of that regarding him. I need to catch that show.

[napi21]

18. Yes the bald prophet of doom, but I've been listening to him for quite a while now, and he really

is a knowlegable guy. Knowing that they're all guessing anyway, Ali (sorry for screwing up his name) does a pretty good job.

[mbperrin]

5. Their stockholders would lose their investments, just like the 700+

companies that are delisted EACH year. You put money into a company, it does well, so do you. It goes out of business, you lose.

People buying insurance would have to call Allstate, West Coast Life, Re, or any of the other thousands of insurance companies around in order to get coverage.

Taxpayers would not be liable for trillions of dollars of paper that's worthless, worthless because of AIG gambling with money they didn't have.

Competent employees would have to go to work for the competition now getting the business.

Incompetents would have a hard time, might lose their means of living, might even face jail, depending on how much of their fiduciary responsibility they ignored or perverted.

In other words, a bigger than average version of what goes on all the time with hundreds of businesses each year.

But these guys have great connections, so...

[Uzybone]

8. So what would happen to the instituions who had thier assets insured?

would they also go under? Or is that something economists just want us to believe?

[MarjorieG]

13. We can't underestimate need to finesse European obligations. Leverages because of us.

China, others, own our country, and we need to instill good faith and actual ability to operate.

[Eric J in MN]

6. People who bought insurance from AIG would get a letter...

...saying "Your account is now at the ____ Insurance Company."

I'm glad the federal government is spending hundreds of billions to prevent that.

(sarcasm)

[customerserviceguy]

9. It may take awhile

for markets to develop for the kinds of insurance that AIG sold. And let's face it, the people who may really get stung are those with life insurance policies. You renew your fire and auto policies at set intervals of either a year or six months, and you do that with term insurance as well, but what about those who have whole life policies? You might have been a lot more insurable twenty years ago than you are now, even having the government make it good on your cash value won't fix that.

A sudden bankruptcy of AIG would have been an extremely violent blow to the world financial system if it had happened back in September, and with an election coming I'm not surprised that the political class voted for bailing them out, but we're past that now. We can have a slow winding down of AIG, as other insurers pick up the slack. But we don't need to pay anybody there more than $150K a year while it's happening.

[Uzybone]

10. Thanks

supposedly the life/auto insurance groups of AIG are sound. What ecomists are worried aout it the financial assets that they insure. What would happen with those?

[Gin]

11. the financial division was under the AIG umbrella... but is a separate

division...at least that is my understanding....if that is correct....that division is stand alone... and if it was bankrupted...it would not bring down AIG as a whole.....am I correct or not in my thinking?

[Uzybone]

12. I think thats true

so what I wonder is what will happen if the financial division goes down in smoke? What will happen to the assets they insure? I really don't understand how this stuff works.

[Gin]

14. my understanding is...that division did all the bets (swaps)....so...the holders of those

things would lose...some of those holders are from foreign countries and that may be part of the thinking that we need to cover all those bets....anyway..that is my limited and maybe incorrect understanding of it all..

if it is allowed to go belly up...the betters (gamblers) would lose...as it stands...they are being paid off by our tax dollars.

win for them...lose for us! (IMHO)

[C......N......C]

15. The USA has been through wars and survived.

Don't know if that means anything.

[Uzybone]

17. Its a salient point, but we don't willing enter a war becasue we know we will make it

I know we will make it through a total collapse of the financial system, but should we let it happen?

[C......N......C]

19. I don;t think the people that identify the problem are the ones

who should give the solution. Unfortunately they are in the position to do both.