In the fall of 2007, when the U.S. economy first seemed in peril, I began answering reader queries here on the Business Desk. I still do so, but this page has expanded to include posts from eminent economists, "far-flung correspondents," and a variety of voices that have intriguing and/or useful things to say about economics, broadly defined. Please feel encouraged to respond to any and all of them.
Paul Solman: As Joe Nocera and Frank Partnoy explained on Monday's show, it's all about the "counterparties." These are the large financial institutions with whom AIG has contractual arrangements.
The fear is that if AIG goes under and thus reneges on its obligations, it will take down the counterparties and throw the financial system right back into the deep freeze it entered when Lehman Brothers was allowed to collapse. Many observers now think it was a huge mistake for the government not to rescue Lehman; that it was indeed, as the saying goes, too big to fail. AIG is bigger.
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Why Does AIG Need Yet Another Bailout?
**Question:** Why does AIG need yet another bailout?
**Paul Solman:** As Joe Nocera and Frank Partnoy explained on "Monday's show":http://www.pbs.org/newshour/bb/business/jan-june09/aigmarkets_03-02.html, it's all about the "counterparties." These are the large financial institutions with whom AIG has contractual arrangements.
The fear is that if AIG goes under and thus reneges on its obligations, it will take down the counterparties and throw the financial system right back into the deep freeze it entered when Lehman Brothers was allowed to collapse. Many observers now think it was a huge mistake for the government not to rescue Lehman; that it was indeed, as the saying goes, too big to fail. AIG is bigger.
