Bring AIG down to size
We can’t let anger get in the way of fiscal recovery, but no business should be “too big to fail”
Like everybody else, we’re furious at American International Group and its tone-deaf princelings of high finance—not enough to call for them to commit hara kiri, as Sen. Charles Grassley briefly suggested, but plenty angry.
But we also agree with Obama economic adviser Larry Summers that people shouldn’t let anger influence the way the country deals with the current economic crisis. The administration and Congress should do everything they can to recoup the bonuses, but the president’s plan for stabilizing the financial sector must proceed as outlined. That means one thing: buying up the toxic assets now dirtying the institutions’ balance sheets. And that’s going to cost more money, much more—hundreds of billions of dollars up front.
The good news (relatively speaking) is that, as with the money the government has already spent bailing out AIG and the other big casino operators on Wall Street, much if not most of that money will one day be recovered. Right now we have to eat our anger and spend the dough. As has been noted repeatedly, ad nauseam, these outfits are so big that their failure would be intolerable.
Beyond that, though, the government should seriously consider Vermont Sen. Bernie Sanders’ wise comment: “If they’re too big to fail, they’re too big to exist.”
The U.S. government already owns 80 percent of AIG. It should go ahead and buy up the rest, restore the company to sound footing, and then sell it off in sections. When financial institutions are so big they are able to blackmail the U.S. government, it’s time to bring them down to size.