BROOKLYN - With the federal government bailing out another former Wall Street stalwart, an old debate has reemerged: Should taxpayer money be used to save private companies?
American International Group Inc., or AIG, one of the world?s largest insurers, received an $85 billion emergency loan from the U.S. government Tuesday. The government also recently took control of giant mortgage finance companies Fannie Mae and Freddie Mac.
The logic behind the bailouts is to try and stave off a larger debacle in which the companies go bankrupt and the effect reverberates throughout the economy. In the case of Freddie and Fannie, the companies own or guarantee about $5 trillion in home loans, about half the nation's total.
Gov. David Paterson has said the bailouts help everyone weather the financial crisis. Jobs can ostensibly be saved by the government?s intervention, and the economy?s recovery can be sped up.
Bailouts also help groups such as the United Federation of Teachers, which has invested in AIG to backup pension funds. New York also has a big stake in the bailouts because it gets a large portion of its revenue from Wall Street.