That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation.
Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States.
The government used the assets of AIG for it's own purposes and did not compensate the shareholders, the government was perfectly at liberty to let the institution collapse, but instead chose to prop it up.
I guess I don't follow how the government used AIG's assets for it's own purposes. AIG owed money to other people (specifically Goldman), and when they got the bailout money were instructed to do what real businesses do (pay their debts). Receiving a bailout sounds like reasonable grounds for not defaulting on obligations. AIG had 2 options, the first was to take the bailout money and pay back their debts, and the second was to go into bankruptcy. There wasn't a third option where they got to decide not to pay back what they owed, and instead just kept all the bailout money for themselves.
I happen to have had a Bloomberg terminal on my desk the day AIG was bailed out. Lets just say I have a pretty good idea of what AIG meant to the economy.
For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.
> For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.
Around the same time US Treasury Secretary Hank Paulson was begging people on his knees for the rescue of Wall Street (http://www.guardian.co.uk/business/2008/sep/27/wallstreet.us...) and no-one generally had any idea if the Western financial system as it was right then had much to live. I say that AIG depending on (private) third parties for its rescue would have meant certain bankruptcy.
"For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity."
So why didn't they? Maybe because they were BROKE and people were wondering which bank would collapse the next morning. AIG gobbled over $100 billion in a month or so, otherwise they would have defaulted and everything would've been toast.
That same week even the mighty Goldman Sachs kissed Buffet's ring and got $5 billion from him, yet you expect dozens of top banks, with different exposures and interests, getting together to put up $150+ billion in a few hours. This is recent and I remember it really well.
Given the fiscal situation I'm sure they would have seen the error of their ways. AIG being liquidated would have been possibly the worst thing for AIG's creditors and the best outcome possible for the people of the United States.
The government used the assets of AIG for it's own purposes and did not compensate the shareholders, the government was perfectly at liberty to let the institution collapse, but instead chose to prop it up.