Another Day, Another Bailout
Another day, another government bailout.
Reports are circulating that the Federal Reserve will be providing an $85 BILLION dollar bridge loan (that's billion) to AIG and will also be taking an 80% stake in the company. The stock has not surprisingly tumbled in afterhours trading, as reports say that this deal will be "severely" dilutive to existing shareholders. That means that AIG shareholders will end up getting more than a bit, and less than a little.
Don't forget that all of these "loans" and "bailouts" are being financed by the taxpayers of the United States of America.
This means that the United States government now has major positions in the insurance business, the housing business (bailouts of Fannie Mae and Freddie Mac anyone?) and the banking business. For a capitalistic society, the US government is certainly quickly building up an enviable portfolio of businesses by nationalizing these big and important companies.
What company will need to be bailed out next? Better yet, which industry will need to be bailed out next? The automotive industry is asking for billions of dollars as well - will the US government take over Ford next?
It will be interesting to see how the markets react to this news on Wednesday. The prospect of an AIG bankruptcy (which was just around the corner) would have been absolutely disastrous for the markets, and there would have been plenty of collateral damage.
The big question is - what's the next company on the verge of imploding that will need a government bailout?
Filed under: The Economic Meltdown | General Market News