Open Thread

For general discussion and debate. Possible talking point: government bails out AIG.

The U.S. government seized control of American International Group Inc. -- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system. The U.S. negotiators drove a hard bargain. Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points.

Rather than discussing either the Libertarian side of this, or the awful precedent of moral hazard, why don't we look at this from a purely capitalistic side: is this a good investment by the government (meaning WE taxpayers!), and, looked at from that perspective, with all the things government spends OUR money on, isn't it nice to see outlays that might actually produce a financial gain for US in the future? Think about it.

NB Staff
NB Staff