AIG: Overdramatized?

I'm a little nervous about our financial situation, but more because everyone else is getting so worried rather than it actually being an issue.
The credit crisis is definately causing some problems for consumer spending power. But I think that all the recessionary actions done by most businesses is in preparation for possible issues, not necessarily reactions to actual problems that have already developed. I'm not starting to think that the panic and tension that's forming from the AIG incident is unnecessarily being linked to the credit crisis. Yes, the AIG issue was probably caused by the credit crisis, but saying that the AIG issue is a crisis itself, is totally unnecessary.

This article says that these issues are things that are so bad they haven't been seen since 2005!!!!! .....
Am I the only one who thinks that may be somewhat dramatic? That was only 3 years ago and this issue has only been developing for a few months. The fact that the government is so proactive in addressing these issues just shows that they will not be issues for much longer.

A couple of my professors made some good points. The economy goes up and down. It rises and falls. It peaks, and valleys. Every low point is not depression, it is simply slower growth. Still growth, jsut slower. Since the 9/11 tragedy, every time the economy slows it's a "recession leading to tragedy."

Businesses go in and out of business on a regular basis. As Wal-Mart was rising, it was retail stores bottoming out. Today, it's financial institutions in response to the consumer credit crisis. What people don't seem to realize is that this is a crisis that is being resolved. Even the government openned a financial debt support organization within their social services. I've seen commercials for it. I'm sure this isn't the first time an investment bank has been bailed out by the government, and I'll be that the other ones that have been bailed out were in much worse situations.

This issue will definately take much more research to really understand, and I hope other people may someday register on to this site and shed some light on the issue...

We'll see.
http://www.cnn.com/2008/POLITICS/09/17/aig.explainer/index.html

Just a quick FYI:

I found a small article in a local paper. It was about the panic of AIG and how some agents from other insurance agencies were telling their clients that AIG would not be able to cover their claims. AIG said to not listen to any agents who may say that A: Because it's wrong and B: Because it's illegal for them to say that. According to them, AIG has enough assets to cover every legitimate claim that could be made.

Whether I believe it, I'm not positive. I do think that it's not as big an issue as it's being made, but I wouldn't take AIG's word for it. There is a huge chance that they are lying to keep the clients they have. The fact that anyone is planning on switching companies is a little silly considering the government is planning on buying it up. To me... It would seem smarter to stay with the company that is going to be saved by the government, rather than the ones that will be competing with it .

"I support the steps taken by the Federal Reserve tonight to assist AIG in continuing to meet its obligations, mitigate broader disruptions, and at the same time protect the taxpayers."

The fed gave $85 billion to AIG. It's a loan that will half to be paid within 2 years, and at 79.9% equity interest. I'm not sure what the difference is between equity interest and regular interest, but I'll look that up later. Apparently, by spending $85 billion, they are saving the taxpayer. Because we will never have to pay that back will we?

If it is a loan, that means that AIG will have to pay it back. So, the government will be getting the money back. But wasn't the issue that they couldn't pay anything in the first place? How are they going to pay back a loan of that size at the percent interest? The government says they can sell their assets to cover it, but then won't selling their assets to pay for the loan put them out of business anyway?

"Senate Banking Committee Chairman Chris Dodd in a statement Tuesday tried to pin the blame for AIG's condition on the Bush administration."

Now.. I'm not a big fan of Bush, but I don't know if I'd go that far. I do believe in the cycle of economics, a butterfly effect if you will, but I wouldn't blame this on George Bush. I guess I do need to look into what exactly is wrong with AIG. What do they need the money for? Who/what are they paying? Then, maybe, we can see what really happened.