Tuesday, February 24, 2009

The Bailout Worked!

"Wealth gotten by vanity shall be diminished, but he that gathereth by labor shall increase" (Proverbs 13:11, King James Version).

"Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time" (Proverbs 13:11, New Living Translation).

Yet more evidence that welfare, corporate or otherwise, is a great idea that has a positive economic impact:

From CNBC reports by journalist David Faber --

American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.

Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.

That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn't have.

In addition, if AIG's book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.

All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG.

Full article at http://www.cnbc.com/id/29353282 .

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