Since I work in the insurance industry I’ve been following the recent financial problems of AIG and Lehman very closely. Being in the industry and doing a lot of business with AIG, I completely understand the ripple effect on the economy, and the insurance industry in particular, if AIG would have been allowed to go down. From an economic theory standpoint I understand why the Fed did what they did. However, since when is it the federal government’s responsibility to bail out a company in financial peril due to their management’s incompetence?
I realize it’s been done before, i.e. the S&L’s in the 80’s. But if the government is willing to bailout AIG, why not all the small businesses that go under everyday in this country? The founding fathers are surely rolling over in their graves. It's not as if there was some natural disaster and the government is helping them get back on their feet. Their problems were solely caused by poor management decisions, nothing else. Yes, it would have effected the economy in the short run, but in the long run the market would have adjusted and been in a much stronger position than it is now.
Don’t get me wrong, I feel for the people on the front lines who could lose their jobs in cost cutting measures because of their management’s inability to understand their own business. But it’s sickening to me that the CEO’s and senior management of these companies will leave with multi-million dollar “golden parachutes.” What exactly are they being rewarded for, running their company into the ground? If we did our jobs that poorly, we would be fired and certainly not receive a bonus on the way out. In addition, now the American taxpayer has to foot the bill to the tune of an $85 billion loan. Do you suppose if AIG becomes profitable and pays back the loan and interest that we’ll see some of those profits? I’m not counting on it.