I have to admit I don’t know what to make of the Federal Reserve’s move to save AIG from bankruptcy. It’s unprecedented.
On one hand the government is placing taxpayer money at risk to protect a company that made bad bets on the subprime mortgage market. It also penalizes responsible citizens who didn’t gamble their money and potentially increases the odds of the problem happening again.
However, others say the government has no choice because AIG insures a large amount of securities for varying financial institutions, making the fallout colossal in nature. If AIG were to fail, the companies who have insured their investments with AIG would have to revalue their holdings, causing a domino effect around the globe.
Many economists feel the perception of the U.S. financial market screams, “OVEREXTENDED”, making foreign investors nervous, causing them to pull their money from this country.
I’m not sure that is really perception as much as it is a reality.
The Federal Reserve and the U.S. Treasury no longer appear as strong as we once thought they were.
And don’t even get me started about the CEO’s of these failing companies who thrived in astonishing wealth during the hey day of the market.
When are appropriate standards for executive compensation going to be put in place?
Honestly I don’t have any of the answers but I’d love to hear your opinions on the subject.
Unfortunately, the handbasket to hell seems to be getting very crowded.