AIG Does What It’s Supposed To – Analysts Freak
AIG is in the business of insuring firms against financial losses. Before the recession this worked quite well and the firm pretty much printed money. Since the recession began however AIG has been hit by too many claims. It turns out that AIG didn’t gauge risk properly, charging firms way too little during the boom to stay solvent during the bust. This has caused AIG to bleed cash.
Many of these firms that AIG wrote policies for are headquartered abroad. This too is no surprise since the bulk of AIG’s business comes from overseas. Now that the recession has hit, AIG has been paying claims to these foreign-based firms.
Last year American treasury officials and Congress decided that AIG was too important to fail, so they propped it up. The US government has funneled hundreds of billions of dollars into AIG, and AIG paid this money out to foreign firms.
This has caused some analysts to freak out.
The disclosure of US taxpayer money going to foreign banks rankled some analysts. “These revelations raise serious questions about the extent to which U.S. taxpayers are being asked to bail out foreign banks,” said James Rickards, the Senior Managing Director for Market Intelligence at Omnis, an applied research organization. “Why were French and German authorities not asked to pick up the tab for their portion of potential AIG losses?”
I don’t know what scares me more: the fact that AIG has turned into a rat hole or the fact that a Senior Managing Director for Market Intelligence at an applied research firm is shocked.
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