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Will taxpayers be forced to give more money to AIG?

December 12, 2008 by  

Another bailout in the future for AIG?The $85 billion bailout of AIG in September may have frustrated many taxpayers, but the government insisted that the move was necessary to prevent further economic turmoil.

Now, a new article in Reuters suggests that taxpayers’ role in funding the insurance giant may not be over, as the company’s recent behavior has not been in line with what it needs to do to survive.

According to the news provider, AIG has been aggressively cutting its rates to win business, even though experts agree that prices should be increased in order to ensure they are commensurate with risk.

Former CEO of AIG Maurice Greenberg told Reuters that the company is still playing dangerously.

"Cutting rates at a time when rates should be strengthening is a quick way to going out of business," he explained.

Meanwhile, others in the industry, such as Liberty Mutual CEO Edmund Kelly, have accused AIG of doing "some very stupid things in the market" that could eventually have even more of a destabilizing effect.

The article even suggested that if AIG’s tactics result in losses, the government may be forced to pledge further taxpayer funds to rescue the firm again.

AIG’s problems originated with its insurance of risky debts, such as mortgage-backed securities, against default.
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