The most popular issue outside of bashing bonuses for politicians has been the notion of getting to bash saving American International Group Inc. (NYSE: AIG).  This will be an interesting week as the public and as the politicians get to re-digest the AIG buffet for about the twelfth or thirteenth time.  It is almost sport at this point.  AIG is an absolute ugly mess and a mess which we will all have to hear about for another few years most likely.  And this week we get to relive the pain and suffering all over, and over, and over.

Former Treasury Secretary Hank Paulson has noted his statements ahead of the Congressional testimony.  Timothy Geithner, the current Treasury Secretary will also be testifying.  Paulson will claim no personal role in the controversial trading partner repayments from AIG at 100-cents on the dollar, but will note that the payments needed to be made.  Paulson will also note that AIG’s sudden and instant failure would have assured a financial collapse and that unemployment could have hit 25%.  These comments are unfortunately all part truths, but are also partly open-season for the politicians who need to hunt for more votes on both sides of the aisle.

This is in response to new round of Monday Morning Quarterbacking over the AIG scandal over what many feel were secret backdoor bailouts on more than $60 billion in payments to the same leading financial institutions which are referred to as ‘fat cats’ and worse.

Paulson is supposed to praise the efforts made by Treasury to keep the financial system from collapsing.  Politicians will be using this as a chance to say they should have known better, but they now have almost 16 months worth of Monday mornings to re-quarterback the losing game.

This will likely be extra-ugly because this is the same week that Ben Bernanke has been under fire about a reappointment.  This is the week for politicians to shine and be anti-AIG and anti-bailout.  It has merit, but there was a reason the politicians went along with the AIG bailout at the time.  The alternative was just too awful to stomach.  Literally, states and municipalities could have failed while millions of mandatory or paid-in insurance policies would have suddenly been wiped out with little or no recourse.

We will not likely be running for public office, so we can just call it like we see it or tell it like it is.  Or try.  Admittedly, the difference of opinion on those two suppositions will vary wildly depending upon many factors affecting each reader.  AIG could be allowed to fail today and it would just be another huge hickey against the government’s financial position.  But had AIG failed in late-2008 or even in early-2009, we would have had a collapse that may have ultimately taken down the whole system.  Some may say that would have been good for a reset or starting-over-point, but ask yourself this… Would you want to measure your purchases in gold dust or barter for your staples and food?

Let’s just be very honest and frank here.  AIG sucks.  Even AIG employees would tell you today that AIG sucks.  Robert Benmosche, CEO, might echo this thought.  Ultimately AIG will probably be renamed a bunch of different much smaller entities after Uncle Sam decides it is finally time to part company.  But today AIG owes Uncle Sam those billions upon billions of dollars.  On top of that, there is too much political capital in letting AIG off the hook just yet…

JON C. OGG

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