The AIG solution: nationalization

US Socialist Party leader Eugene Debs (1855-1926): he wanted to nationalize stuff, too

That's what the Cheney-Bush administration agreed upon, nationalizing the failed insurance giant to taking an 80% equity stake in it, as reported in US to take control of AIG by Francesco Guerrera, Aline van Duyn and Krishna Guha Financial Times 09/16-17/08:

The US Federal Reserve announced that it will lend AIG up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company - an extraordinary step meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system.

Under the plan, the latest dramatic intervention by the US government to combat the global credit crisis, the existing management of the company will be replaced and new executives - as yet unnamed - will be appointed. It also gives the US government veto power over major decisions at the company.

The authorities will receive equity giving them a 79.9 per cent stake in AIG. In return, the insurer would receive a bridge loan of $85bn to keep it afloat until it could dispose of billions of dollars in assets. The Fed said the loan was expected to be repaid by the proceeds of selling AIG operating companies. A senior Fed staffer said the most likely outcome was an orderly liquidation of AIG, though it was possible that the firm could survive as an ongoing business.

Another scandal to watch for: Bush family cronies using the financial crisis and the nationalization of AIG, Freddie Mac and Fannie Mae to make a bundle, by means fair and/or foul.

Tags: predator state, us economy