AIG Bailout: Pro or Con?

Like nearly all conservatives, I’m not happy with government bailouts in principle, but I’m afraid that the deal the Fed made to lend AIG $85 billion in exchange for an 80% stake in the company was necessary and prudent. The ripple effects of an AIG bankruptcy would have been enormous.

This morning, I heard Larry Kudlow endorse the AIG bailout on the radio. John McCain seems to favor it as well; he said a little while ago:

Today, the government was forced to commit $85 billion to stop the collapse of AIG, another in a growing series of events that includes Bear Stearns, Lehman Brothers, Fannie Mae and Freddie Mac. These actions stem from failed regulation, reckless management, and a casino culture on Wall Street that has crippled one of the most important companies in America. The focus of any such action should be to protect the millions of Americans who hold insurance policies, retirement plans and other accounts with AIG. We must not bail out the management and speculators who created this mess. They had months of warnings following the Bear Stearns debacle, and they failed to act.

McCain advocates “effective regulation,” which may be a contradiction in terms, and an investigation. If he means an investigation by Congress, experience doesn’t suggest that anything very constructive will come of it. As for the “speculators,” I’m not sure who he has in mind, but denunciation of “speculators” seems to be mandatory these days.

In a little while, the AIG bailout will be the subject of AOL’s “Hot Seat” poll. We’ll put it up shortly, and you can express your opinion by voting.

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