Wrap your bad-news-weary brain around this one:  AIG’s reported earnings for the 4th Quarter of 2008, the Year that Will Live On in Financial Infamy, were far, far worse than a Giant Goose Egg – AIG lost, I repeat, LOST, $61.7 Billion in three months’ time – the single biggest quarterly loss in history, according to the NYT!  This, despite three heaping helpings of your tax dollars and mine.  Now, despite this, AIG lined up for a fourth helping of Federal BailOut dollars.  What gives?  Why do we keep giving blood transfusions when we already stand hip deep in AIG’s blood?

Well, the story is not a pretty one.  The great Federal Economic Gurus – the Bernankes and Geithners, and a legion of others behind the scenes, are scared right out of their minds right now.  What are they scared of, you might ask?  They are scared of the downside of Globalization.

People like Tom Friedman and so many others have been telling us for some years now that Globalization has wired our whole world together.  This has given us the wonderful benefit of instantly knowing early this morning (amid the 5 AM sound of newspapers being thrown from newspaper deliverers’ cars, driving up and down my hill, hitting some 2 miles of driveways) that the Asian stock markets were massacred while we slept Sunday night.   Sure enough, Monday, the Dow dropped 299 points (3%) leaving us mired in the 6,000’s for the first time in 12 years – so much for the "Dow 20,000" crowd (or, 50,000 – they’re just numbers now) of just a few years ago.

Well, Globalization has a dark, scary side and AIG is living proof.  The great fear is that AIG’s global business impact and financial tentacles reach so far, and into so many countries, clear around the world, and that AIG has so many trading partners, insureds and even municipalities tied in to its products, that, if the 90-some-year old company were allowed to fail – if unbridled Capitalism was finally simply allowed to do its Darwinian Thing and kill off this giant, like the dinosaurs some 65 million years ago ("MYA" as the paleontologists say) – that all holy hell would break loose in worldwide economics.

What’s that you say – that’s what we’ve been watching since last Fall anyway; what more horribles could be coming down the pike, after all?  Well, methinks that the Federal Economic Gurus have had enough time to study this and there is a reason why AIG has now received more Federal largesse than anybody else at this point.
For those keeping count, the Feds have already blessed AIG with: "a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets." (NYT, March 2, 2009).  The latest will involve a loosening of the strings tied to some earlier BailOut dollars and handing over another $30 Billion in your tax dollars and mine.  That’s a total of $180 Billion, nearly a third of the original $750 Billion in BailOutBucks, just for AIG’s woes.

The WSJ reported Monday that the ratings agencies, including some of those folks who made all the toxic debt possible in the first place by rating those baskets-full of junky mortgage paper with A’s and A+’s instead of telling the truth when it mattered, were about to take AIG’s rating down by a single notch – that notch would require AIG to put up more collateral for its trades, loans and other financial positions – some $8 Billion more!  And, according to AIG’s Chief, Edward Liddy, serving since September 2008, that would have been the straw that broke the camel’s back.  Liddy is quoted by the NYT piece referenced above as making the following truly brilliant observations:  that A.I.G. "was in much worse condition than I thought," and also that: "The economy is worse. The financial markets are worse."  This searing insight could have come from an Eighth Grader, but, never mind, AIG is truly scaring the daylights out of the Fed’s Economic Gurus.  The same NYT article paraphrased their statements (without attribution) that: "they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system."  

So, there you have it.  AIG is now the living superlative of the Too-Big-to-Fail flavor of stumbling economic giant – the Globally "intricately interwoven" variety.  Once more, they have gone to the well for yet another, 4th helping, of your and my tax dollars.  Wall Street again hemorrhaged out its opinion of this latest development in the twisted story of AIG, and we still do not know where and when there will be a bottom – or an end to AIG’s deathbed dollar transfusions.