Can anyone see how this is going to end? If you can’t, let me tell you. AIG, despite fleecing us taxpayers for billions, will file bankruptcy and close. If you look at the business that you have left, then you quickly realize that they lack the capacity to remain viable. They only have a couple arms that remain profitable, and the profits generated by those are small and continue to dwindle. When you factor in public sentiment towards the company, the efforts made by other businesses-as well as their partners- to distance themselves from the company, it doesn’t take much to realize that this is a sinking ship.
There is one other large factor in all of this: the work force. Don’t think for a second that the employees at AIG are unaware of the future of the company. Many, including some of those that received million-dollar plus bonuses, have already left, and many that remain have put out feelers on Craigslist, Monster, and Twitter.
The real problem at AIG is that the cat is out of the bag. The company was making so much in hedge funds that it focused all of its efforts there at the expense of its legitimate businesses. Due to the enormity of the collapse and how much they leveraged, they have, in effect, dug themselves a hole that they can never get out of.
Therefore, there remains two possible options: we either let them fail and we take our lumps, or we continue to shovel money towards them in order to delay the inevitable. The bottom line is that they do not possess the means to repay the government loans. Continuing to fund them is both asinine and irresponsible. Yet we will continue to do so. Why?
Because it is political suicide to do otherwise. Look at all of the flack Obama and his administration has taken from the media already for telling people the truth about the economy. There is a thought process that believes he has to lie to the people and tell them that everything is fine; that we are on the road to recovery; things aren’t as bad as they seem; that they have the answers to fix this…that belies the fact that this doesn’t serve anyone. If people begin to invest again, based upon false information, then all we are doing is returning to the status quo. A status quo that got us here in the first place.