Sunday, November 9, 2008
AIG's new bailout
The troubled insurance company is close to a deal that would have the government supplying them with a third bailout plan to help out their struggling finances. The government is changing their current $123 billion plan and increasing it to a $150 billion plan. This deal could be reached as soon as November 10, because that is when AIG is to announce their third quarter results. With this being the third deal that the government is offering to AIG, is it possible that they will ever recover from their debt? The government with this new deal is exchanging $40 billion for preferred stock to recover some of the funds that they are just giving away. This is good because the government will need a lot of help if they expect to get all of their bailout money back from all of the banks and financial instituions that they have helped out over the past few months.
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4 comments:
The bailout plan is currently crucial to companies as they are facing capital losses, and credit crunch. Giving such huge bailouts to companies may help the economy as they will be filling their gap with the subsidy, which would have an effect of trickle down theory, but I believe that this effect would only work for a short time. As companies like AIG are considered as "to big to fail", I believe that increaing the bailout plan, will increase the risk of the investments of those big companies which may bring more negative effect in the economy.
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