Bernanke tells Congress -- had they ...

...not recently bailed out AIG: "it would have hurt the governments chances of recovering the initial investment ".

It was not an investment, you stupid shit. It was a handout.

Bernanke also expressed concern about the growth of entitlement
programs -- like Medicare and Social Security. They waste government
money on medicine and food for old folks -- when it could be better
spent giving corporate executives bonuses.

You tell 'em, Benny boy !

but it was not a handout. It was an investment.

Have you been following the actual proceedings? The details are not exactly a secret:



What that means is that the Federal government owns 80% of AIG. It is effectively nationalized. If it goes bankrupt, it will not only disrupt the financial sector (the investment was made to prevent that), but the initial investment will be worthless. That is what Bernanke was saying.

I don't get 'investing' more billions than I can type zeros for in a company worth so little.

:shrug:

They're hiding something from us.

The government didn't commit the money in order to make a profit. Bernanke, in fact, said that AIG operated more like a hedge fund and that the rescue was a bitter pill to swallow.

Utlimately AIG was rescued because it is so interconneted to the financial industry that a bankruptcy would likely take down a large portion of the financial industry. Keeping AIG afloat was a silver bullet that affected much of the industry. However, it was done in such a way that the government will benefit financially from any future recovery.

Last May, the market value of AIG was about 100 higher than it is now. The extremely low current value reflects the liklihood that (1) the company may still fail and the shares will be worthless, or (2) that the government eventually takes 100% ownership and the shares will be worthless.

If the government holds on long enough for AIG to right itself, taxpayers should at least be made whole and probably come out well ahead. I wish all of the TARP funds had been invested on the same basis.

take down a large portion of the financial industry

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I see the point you're making though.

do you think the economy can operate without a financial sector? Do you think any of us would have jobs or income? Doing anything to bring that about amounts to economic terrorism.

People are crying and moaning about a 6% decline in GDP. That is a lot, but it's nothing compared with the alternative. That's why it has to be done even if it's a bitter pill.

At least the government (and ultimately the taxpayers) can eventually benefit from the partial takeover depending on how the investment is structured.