The AIG Debacle

I have recently reported on human error as being instrumental in the financial meltdown and various bubbles that we have had.

In each case, there has been finger-pointing, usually by left-leaning, anti-business politicians and by bureaucrats whose immediate impulse is to blame big business, bankers; the usual scapegoats. That is the litany of criminalization in left-wing lexicon.

I have always blamed human error. Whether it be loose monetary policy of the Federal Reserve, in inflating currency, or inappropriate accounting rules for a securities market situation, to hasten the ruin of investment liquidity.

In the case of AIG, the value of its derivative insurance coverage was also being determined on the basis of fictitious existing market value. This time, not on possible claims in the future, at the maturing of company obligations, but at supposed current valuations.

That produced a condition that induced a premature bankruptcy, in a panic venue. Yet, once more a rush to judgment when cool heads and hands ought to have been the hallmarks of expertise.

Another incidence of rescuers acting in the AIG panic was evidenced by the rescuer’s paying of debts on the basis of 100 cents on the dollar to some bankers in this country and abroad. Especially after the government unfortunately decided to take over 79.9% of the business in its panic-driven haste.

Would not a government guarantee have sufficed, instead of all this taxpayer outlay?