The Economy & AIG (American International Group) – How Sour Mortgage Loans Hurt AIG

WASHINGTON  —  In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG.

Just how did AIG, the world’s largest insurance company, get into this position?

AIG, which is financially stable, is suffering from a “cash flow crisis”.

That cash flow crisis is related to AIG’s insurance of mortgage backed securities. AIG wrote insurance policies to cover a portion of the financial losses on thousands of “Liar” and ‘NINJA” Loans. 

To read more about these loans:

https://mcauleysworld.wordpress.com/2008/09/15/the-financial-services-housing-crisis-how-did-we-get-here/

https://mcauleysworld.wordpress.com/2008/09/10/senator-cornyn-seeks-criminal-inquiry-of-fannie-freddie-executives/

https://mcauleysworld.wordpress.com/2008/09/08/the-truth-about-fannie-mae-and-freddie-mac-900-billion-in-corrupt-lending-practices/

Politicians who claim that AIG’s difficulties are due to a “bad economy” are putting the “horse before the cart”. The reckless use of NINJA & Liar Loans have caused substantial damager to the economy. In short America is overleveraged – America has taken on more debt than it can afford – the security to support that debt (example: property values) was over evaluated.  

America must “tighten it’s buckle.”

The Government must reform oversight and eliminate ineffective bureaucracy, cut taxes and foster an environment of growth. Developing all available energy sources will not only reduce costs and spur economic growth, it will also strengthen American security by ending dependence on foreign energy sources.

One Response

  1. The Fed clearly did not have a choice but to intervent at AIG, but when the dust has settled, people need to be called to account in terms of these high risk strategies and further regulation and oversight is needed to avoid placing the unfortunate American taxpayer in this situation again.

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