The best part about his statement today was the fact that the President gave a wonderfully easy-to-understand explanation of why saving AIG is as important as it is. (About 11:32 into the video).
If you ever hear a Conservative say that we should just let AIG fail, remember this quote.
Last year when the Federal Reserve decided to step in, again, that wasn’t a decision that we made but I actually think it was the right decision. AIG had insured a whole bunch of losses for a whole bunch of banks that had made bad bets on subprime loans and mortgages that had been packaged and bundled up and made into securities. These were massive insurance policies. Unfortunately, because of a lack of regulation, they were able to issue far more insurance policies than they could pay out on these various instruments that these banks had issued.
And had AIG been allowed to simply liquidate and go bankrupt, all those banks who were counterparties with AIG would have experienced such big losses that it would have threatened the entire financial system.
The complete transcript is courtesy of CQ:
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