Workin’ it: The AIG bailout

Late Tuesday, the Federal Reserve loaned $85 billion to financially ailing insurance giant AIG.

Late Tuesday, the Federal Reserve loaned $85 billion to financially ailing insurance giant AIG.

Ah, it’s open season here my friend
It always is; it always has been

Welcome, welcome to the U.S.A.

Don Henley’s lyrics to Workin’ it” jumped out at me today as I read the worrisome news of the $85 billion U.S. government bailout of insurance giant AIG.

We’re partying fools in the autumn of our heyday
And though we’re running out of everything
We can’t afford to quit
Before this binge is over
We’ve got to squeeze off one more hit
We’re workin’ it
Workin’ it

The Federal Reserve Board confirmed it would authorize the Federal Reserve Bank to lend as much as $85 billion to American International Group Inc.. The New York insurance company is the largest in the world and verged on collapse from mounting losses and credit downgrades that forced the company to raise billions in capital.

Don Henley

Don Henley

We’re so busy covering our asses, we just can’t commit
“Oh, back off, don’t bother me, baby
Can’t you see I’m workin’ it”
Workin’ it

“Bailing out a private company not under its direct purview is an extraordinary and historic move for the Federal Reserve,” wrote one news organization.  It is a big departure from the Fed’s primary role of setting United States monetary policy, banking supervision and regulation.  The AIG bailout is the latest glacial meltdown on Wall Street. It’s a meltdown that’s now leaked onto Main Street America where individual investors are taking losses in their own mutual fund and money market investments.  On Monday, David Weidner, who covers Wall Street for MarketWatch wrote about the $600 billion Lehman bankruptcy:

“But the death of Lehman and the panic it has ignited on Wall Street underscores another truth: When it comes down to it, you’re on your own, suckers. Investors have always been the ones to take on risks. Wall Street firms just like to profit from them.”

Harvard's Samuel Hayes says "Without having the heavy hand of government regulation carrying that role" the market failed."

Samuel Hayes, Harvard Univesity

Webster interviewed Samuel Hayes, the Jacob H. Schiff chair of investment banking at Harvard Business School, who called this a “watershed” moment in the history of Wall Street.

“The mantra we’ve operated under since the Reagan administration has been allowing deregulation to flower and counting on the marketplace to discipline players in that marketplace,” Hayes said. “Without having the heavy hand of government regulation carrying that role” the market failed.

Soon you will be dancing face-to-face
With the limits of ambition and the scars of the marketplace
Welcome to the land of flame and fizz
Where you will learn that packaging is all that heaven is

If you do the math, the latest AIG federal bailout, should it fizzle, will cost every American man, woman and child $283. It’s fair to ask about the accountability of the people who managed the private U.S. financial companies that have lost billions of investor dollars.

But, the barons in the balcony are laughing
And pointing to the pit
They say, “Aw look, they’ve grown accustomed to the smell
Now, people love that s#@t
And we’re workin’ it.”
Workin’ it
Workin’ it
Workin’ it

What remains uncertain at this point is the U.S. government’s view on these huge economic collapses. On Sunday, the Fed refused to rescue Lehman Brothers. On Tuesday, the Fed agreed to rescue AIG.

Company man
“Eight for me, one for you”
(Workin’ it)
“Very fair”
Business as usual, business as usual

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About Bernard McCoy

My views are my own and not a reflection of my employer. I'm a professor of Journalism at the University of Nebraska-Lincoln. I've also been a working journalist for the past 29 years. I have covered news stories in war zones, reported on human and natural disasters, presidential conventions, a presidential inauguration and the September 11th, 2001 attack on the World Trade Center in New York City. My career experiences include work as an award-winning documentary producer, television news reporter, photographer, producer, and anchor. I worked at WIBW-TV, Topeka, KS., KCTV, Kansas City, MO, WKBD-TV, Detroit, MI., WILX-TV, Lansing, MI. and WBNS-TV, Columbus, OH. I have also worked as a contributing reporter for The Columbus Dispatch, Associated Press, CBS, CNN, the Ohio News Network and lecture at the Kosovo Institute of Journalism and Communications. I have a bachelor’s degree in journalism from the University of Kansas and a master’s degree in telecommunications management from Michigan State University.
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