Monday, March 2, 2009

Can AIG take down the entire free ("capitalist") world?

Can just one company take down an entire planet’s economy? This planet’s? Well, yes, if you believe all the major media outlets. AIG’s (American International Group_ secondary bailout, and enormous $61billion 4Q loss was blamed for the free fall of all the markets today. AIG is like the black widow spider an the center of a credit default swap insurance web that runs all over the world. Europe seems to have been as guilty of the mortgage mess as we were.

So, for all practical purposes, AIG is almost already nationalized. The fear is that it will still go under, and then that means many other major banks all over the world will go with them.

All because of the credit default swaps that they insured?

Erik Holm and Margaret Popper have a story on Bloomberg, “AIG’s Liddy says Greenberg responsible for losses,” link here. Greenberg says that the company was always profitable under his reign and that unsound practices didn’t start until he left.

Is there any end to this gloom? “How low can it go?”

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