AIG wants more money

If economic prosperity is a shared delusion, are all our fears delusional?

Earlier tonight the U.S. government agreed to lend insurance giant AIG an additional $30 billion. AIG is expected to announce a $62 billion loss this quarter, the largest loss of any company, in any quarter, in history. This is the fourth time the government, which now owns more than 80 percent of AIG, has given them money since September. In the last year, AIG's stock has gone from $49.50 to $0.42, and they have been given $180 billion.

The reason seems to always be the same regardless of the company. "They are to big to be allowed to fail."

I am by no means an economist, but I wonder how valid that reason is? Is any company so big that they can't be allowed to fail?

If AIG, or GM, or Walmart, or Google, or Microsoft, or GE, or any other multinational corporate giant goes under, the demand for the products they provide still exists. Supply must be created in order to fill that demand. If AIG fails, how many insurance companies will be created to replace it? How much more business will insurance companies with better business models and more responsible lending practices get?

AIG and GM are bleeding money because of their own stupidity. While I am philosophically opposed to government lending money to private enterprise, I must agree that under current conditions, allowing any corporate giant to fail during the current global recession is a bad idea. The effect of the resulting job losses under current conditions would be much worse than the effect of any bailout.

That being said, the U.S. government's funds are not limitless, and as we quickly approach a national debt of $11 trillion, a 10 percent increase since Sep. 30, I have to imagine we are close to that limit.