AIG Conservatorship by the Feds
Definition:
- A person in charge of maintaining or restoring valuable items, as in a museum or library.
- One that conserves or preserves from injury, violation, or infraction; a protector.
- Law One that is responsible for the person and property of an incompetent.
Okay, that sounds pretty harsh to me. I don’t see the benefit of placing AIG in that situation.
How can it be positive for the Government to seize control of the largest insurer in the world? The best thing to do is allow the company to fall into liquidation, part out the elements which are valuable, let the shareholders take the loss rather than the government (citizens) and then the new owners of those elements can put them back to work again to help get the economy going. By the way, that is what shareholders are for! They accepted the risk in the company, but taxpayers did not. Why reduce the risk of the stockholder and spread it out to the taxpayers?
It would take FOREVER for the government to fulfill the task of protecting and reissuing the assets of the firm. In a much shorter period of time the assets can be producing again, maybe even return some of the previous share price to stockholders. This would allow the failed management to exit into the work pool where the belong, and take losses along with the responsibility.
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Update: As it turns out the Fed did take control of AIG and it is going to take a long time… Two years! That may not sound like a lot but since they are planning to sell off portions of the company and attempt to put it back in shape, this will take much longer than Barclay’s will to utilize the assets of Lehman Brothers. It would seem that in the end AIG had no choice. They had to either sellout to hedge funds for let the government take over.
This is a sad state of affairs. And we thought the war in Iraq was expensive.