Well many, many people are criticizing the Administration for throwing so many billions after this so called insurance company. While I suggest you read this well written article by the NY Times about the bonuses, I think you really ought to figure out how important AIG is to the total economy. That actually is a debate in itself.
Wikipedia, does a wonderful job of showing you the way Credit Default Swaps (CDS) are absolutely crazy. AIG’s exposure to CDS represents possibly a $100 billion loss. CDS exposure often exceed the total value underlining asset being protected by CDS’s. In September the bankruptcy of Lehman Brothers caused a total close to $400 Billion to become payable to the buyers of CDS protection referenced against the insolvent bank. However the net amount that changed hands was only $7.2 billion. So what would happen if the largest writer of CDS’s failed?
To view the bonus issue, click on the following citation:
A.I.G. to Pay $100 Million in Bonuses After Huge Bailout - NYTimes.com
To read about CDS’s, the crazy market which might bring down the entire world market, click on the following citation:
http://en.wikipedia.org/wiki/Credit_default_swap
A new article concerning which firms and countries are benefiting from the federal loans (or the secret nature of whom they are) has just be posted at the New York Times. Click on the following:
Fair Game - At A.I.G., Good Luck Following the Money - NYTimes.com
The LA Times also has some interesting comments regarding AIG. It's not just the size that would matter. AIG's interconnectedness with other companies, markets and economies is so huge and convoluted that it's almost impossible to foresee what all the consequences of collapse would be. To read the full story click on the following: http://www.latimes.com/news/la-fi-nofail9-2009mar09,0,3753751.story?page=2&track=rss
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