AIG: worst damage yet to come
Marshall Auerback here. I have a few thoughts about AIG and what it means politically and for American banks.
The episode may have already made it much harder to get any support in Congress for bailing out more banks in the future. The Obama administration, and some outside experts, believe the economy will only get worse if big banks start to fail. Which means the worst damage that AIG’s adventures in high finance have caused might be yet to come.
We had a broadly similar type of situation in 1994, and as Lawrence Summers was one of the key actors, it is worth considering the episode in details, as recounted in “The New Republic“