U.S. Federal Reserve Chairman Ben Bernanke Tuesday defended the government's latest bailout of insurer AIG, telling irate lawmakers that he, too, was angry, but that failure to act could have triggered an economic disaster...
Pressed by the Senate committee to justify the latest in an expanding series of bailouts for American International Group, Bernanke said there was no alternative, even though the company had been irresponsible.
"We know that failure of major financial firms in a financial crisis can be disastrous for the economy. We really had no choice," he told the panel.
The U.S. government threw a fresh $30 billion lifeline to AIG (AIG, Fortune 500) on Monday, as part of a restructured bailout that had earlier swelled to about $150 billion. AIG, which reported a record $61.7 billion quarterly loss on Monday, has been slammed by losses on its credit default swaps that guarantee mortgage-linked securities.
read the CNN story
My thoughts: Let them fail. They are not too big to fail. The market system is one of profits and losses. The profitable succeed, the unprofitable fail. It is a waste of resources unsupporting an unprofitable company. It creates moral hazard that spreads to the entire economy.
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