The strength to be there

Where?

AIG is now in the hands of the U.S. government for a mere $85 billion. American International Group, Inc.’s tagline that remains on the beleaguered insurance giant’s website is now seemingly ludicrous. AIG, a world leader in insurance and financial services, was the leading international insurance organization with operations in more than 130 countries and jurisdictions. Fearing a bankruptcy and an ensuing global financial crisis, federal regulators seized control of AIG in an $85 billion deal on Tuesday. This touches all parts of the economy.

AIG will no longer be a part of the Dow Jones industrial average starting next week, ending the shortest term any company has spent in the blue-chip index since the Great Depression. Because of the financial sector's extremely uncertain conditions, Kraft Foods will take AIG's place.

Members of Congress and the Treasury have an exciting weekend planned. The Bush administration and the Federal Reserve have announced a new multi-faceted bailout plan that may cost at least half a trillion dollars. Yes, half a trillion dollars. In the biggest proposed government intervention in financial markets since the Great Depression, the effort could cost taxpayers hundreds of billions of dollars to buy mortgage-backed securities, and other toxic debt.

The Treasury said it would use $50 billion to back money market mutual funds whose asset values fall below $1 a share. Separately, the U.S. Federal Reserve said it would lend even more money directly to financial institutions so they could purchase certain assets from money market funds. The Securities and Exchange Commission also imposed a temporary emergency ban on short-selling.

Meanwhile, lawsuits such as the City of New Orleans Employees Retirement System, an AIG shareholder, are suing AIG for mismanagement and “grossly imprudent risk taking”.

McCain’s now repeated remark about how “the fundamentals of our economy are strong,” said in the same week of the most serious financial crisis in generations, are sounding like a thundering DJ dancehall song...'the fundamentals of the economy – of the economy – the funda-funda, are strong – strong – strong'. On Tuesday, he commented, “I do not believe that the American taxpayer should be on the hook for AIG, we cannot have the taxpayers bail out AIG or anybody else.” Oh wait. McCain quickly changed his tune, saying the government was “forced” to rescue AIG because of “failed regulation, reckless management and a casino culture on Wall Street.”

Obama’s proposals for the failing economy include protection for homeowners in peril of foreclosure and increased regulation, which is more specific than McCain’s. Obama blames the crisis on “an economic philosophy that sees any regulation at all as unwise and unnecessary.”

McCain supports George W. Bush’s idea of channeling at least some Social Security funds into “personal accounts” that individuals would invest on Wall Street. Some of that money would have been entrusted to firms such as Lehman Brothers, Bear Stearns, and Merrill Lynch.

Uh oh.