Wednesday, March 18, 2009

Is AIG to big to fail?

YES, AIG is that big. They are also to involved. I mean they have their hands in the most crucial elements of our financial industry. They are an insurance company for banks . What AIG does is insure loans and loans and loans on more diced up loans. A bank can take more than 1 loan and divide it into 3 4 5 or more parts. Mix the loan parts with other loan parts to create a new Frankenstein loan. That's the loan AIG insures. Now the bank borrows 40 dollars for every 1 dollars and invest it in to the housing market. If AIG goes under the the loans go under and not just the bad loans. A lot of the them are mixed together these loans are securities. So when the housing bubble burst AIG had to pay more than they had so they couldn't meet their debts. this is when Bush gave them 150,000,000,000 dollars. the problem with this is there was no strings attached a blank check. So far they have taken more than 200,000,000,000 dollars. Obama isn't going to let them keep operating business as usual. I expect massive change in the way we do business. This is not his fault but is his problem. And he will correct the problems, they cant continue to operate this way.
In one year AIG's stock has dropped from the high 70s, to a buck, although it's been moving up the last day or two. Look for this stock to continue to rise for at least while. I don't believe it will top 15 dollars any time soon but who knows anymore. Its probably a good time to buy, AIG stock is worth more than 2 dollars.
Here's the kicker AIG also sets the credit ratings.