Bailout in 2008

I was reading FORTUNE the other day and stumbled upon an article about how the life of  Erin Callan, former CFO of Lehman Brothers changed after the financial crisis in 2008. A thought struck me; many investment firms were taking too much risk. Take AIG for example, AIG was writing too many credit default swaps than it could possibly write. As long as everything was fine, AIG made money by just sitting there and collecting the premiums that the buyers paid for the swap. Then it happened; one company failed which caused another company to fail and the chain reaction had started. Now AIG was worried. AIG had insured more money than it actually had. Basically it is like a beggar insuring a BMW. AIG only had like 5 billion dollars but had insured over 20 billion. Where was the money going to come from? The government of course! AIG, just like many other financial instituitons got bailed out. When the US gov bailed the banks out, people got mad. I don't blame them either. Why should average people pay more taxes when they did not do anything wrong? Yet we hear people with high ranks in the banks are getting paid multi million dollar bonuses. It is not right at all. Since major financial instutuitions were going down, the stock market dipped, and people's money went down the drain. Unemployment rose since businesses were not as profitable as they were before. I think the SEC is to blame as well because the policies were not strict enough. Hopefully, many safeguards will be taken in the future to prevent  major collapses in the financial world. If you actually think about it for a while, it actually seems that it was necessary to give money to the financial sector. If the gov. did not give money to the banks, then I think we might be in a grimmer situation, since if banks are going bankrupt, then normal people lose alot of money

1 Comment

  1. Denna Dumont

    October 11, 2010 at 11:35 pm

    The mortgage boom was based on organized crime to earn fees for agents, notaries, brokers, banks and others and it seems that the foreclosures are also repeating the same crime in reverse as the only constant is more fees for hard working Americans.

Leave a Reply