AIG The Sacrifice: The Reflection Of America’s Political Risk

I agree quite a few points of this article in regard to the AIG episode.

Of course, nothing is perfect.  I would change a word here:

“It will certainly make Mr. Obama’s task much more difficult when he tries to sell the public [my version would be:  investors] on his administration’s ability to manage the rest of the bailout, and when he tries to sell private firms on the public-private partnership that will be needed to make the recovery work.”

Obama will have more difficulty to convince investors his future plans work (already stated in the article).  Also, Obama will have more difficulty to get troubled entities to take the bailout.  Look at AIG.  This bailout actually bites! 

AIG was politically insensitive.  This story alone will make firms in the future to invest more to mitigate political risk or at least reputation risk (branding), which is not a good news.  

In addition, a good portion of the reason for these companies to require a bailout is that their valuation (capitalization) fluctuated so greatly they were literally worthless.  So, some companies may realize taking themselves off the exchange is not a bad idea, at least they can insulate themselves from the volatility.  Is that what we want: fewer choices for mutual fund managers and pension fund managers?  If they have fewer options and social security is running out, then what are to do?

Fewer choices on the exchange also means quicker wealth concentration.  Gini coefficient will spike up very quickly.  Is that what Obama wants?