Now that the government has bailed out AIG, we're fixing to find out. You, me and every other U.S. taxpayer will own just short of 80 percent of the ailing insurance giant.
I don't know exactly what role I will play in managing our new company. I'm not much with an actuarial table. My sales skills suck; my entire training in that area consists of watching the opening Alec Baldwin scene of Glengarry Glen Ross like, oh, 218 times.
But I'm sure that you, my fellow shareholders, will find something suitable for my unique communications skills as we work together to turn our AIG company around.
That begs larger questions: What is our government doing in the business of owning large companies? If a company fails because it has bad business practices, isn't that an incentive for every other company to improve their business practices to avoid a similar fate?
And why assist AIG, Bear Stearns, Freddie Mac and Fannie Mae while letting other companies, mainly Lehman Brothers, fail?
Call it the "Too Big to Fail" theory, as explained by the New York Times' "Deal Professor," Steven Davidoff: "Basically, A.I.G. was too interconnected — and its failure came on too quick — to let it fail. I'm going to take this for true, because everyone is saying it."
Well, if everyone is saying it, then it must be true. If the government hadn't bailed out AIG and Fannie Mae, these giants had the potential (many worried) to crash financial markets all over the globe and plunge the world into a pre-Renaissance Middle Ages in which the only music available on iTunes would be religious dirges.
The reality is that our nation has taken a dangerous swerve away from its treasured concept of the free market. Bad companies fail; good companies succeed. Good investments prosper; bad investments go under. The incentive to do good is, of course, personal wealth. The disincentive against doing poorly in business is that you lose your corporate shirt. But not if the government steps in every time you make a major screw-up and takes that risk away.
But that's pretty good news for you and me, since we know almost nothing about running an insurance company as big as AIG. If we foul it up, the government will be there to bail us out.
Again.
This article appears in Sep 24-30, 2008.
