As the feds shower AIG with cash for a 4th time, investors want to know when will the bailouts end?
Once again AIG is getting bailed out, this time to the tune of $30 billion more in taxpayer money. It marks the fourth time the government has stepped in to help the ailing insurance giant since September.
This latest bailout comes after AIG, said it lost $61.7 billion in the fourth quarter, the biggest quarterly loss in U.S. corporate history, amid continued financial market turmoil.
Isn’t it just time to allow AIG to fail?
According to The New York Times, “If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.”
Then what makes the bailouts stop?
Bill Seidman, former FDIC Chairman thinks they stop when the government becomes more willing to take over the failed companies. “The administration won’t take the tough steps and until they hang tough this thing is going to get worse and worse,” Seidman says on Fast Money.
“When I ran the FDIC if a bank came to us and said we're not going to make it; we need money -- we said we’re taking you over. And we fired the management.”
Seidman doesn't think the markets will turn until then until something like that happens. “They haven’t fixed the problem,” he says. "And the markets won’t turn until they believe the financial system is fixed.”